•' .ikMr,-. ' — -"--■■■a^; f^' B. H. F. VARI.L •TTOBNUr *T LAW L«B »HOKLM. O." THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW gCi li-* ]^ H. H. F. VARfEC i.C^ A, ',ri.e5 CAL.J7 A TREATISE OX THE LAW OF NEGOTIABLE INSTRUMENTS, INCLUDING BILLS OF EXCHANGE ; PROMISSORY NOTES ; NEGOTIABLE BONDS AND COUPONS; CHECKS; BANK NOTES; CERTIFICATES OF DEPOSIT; CERTIFICATES OF STOCK; BILLS OF CREDIT; BILLS OF LADING; GUARANTIES; LETTERS OF CREDIT; AND CIRCULAR NOTES. By JOHN W. DANIEL, OF THE LYNCHBURG (VA.) BAR. " Out of the old fieldes, Cometh al this new come." — Chaucer. " Non erit alia lex Romae, alia Athenis, alia nunc, alia posthac, sed et apud omnes gentes, et omni tempore, una eademque lex obtinebit." — Cicero. IN TWO VOLUMES. VOL. 11. THIRD EDITION. NEW YOEK: BAKER, VOORHIS & CO., PUBLISHERS. 66 NASSAU STREET. 1886. Entered, according to the Act of Congress, in the year eighteen hundred arid seventy-six, by JOHN W. DANIEL, In the office of the Librarian of Congress, at Washington. Copyright by John W. Daniel, 1S79. Copyright by John W. Daniel, 1882. TABLE OF CONTENTS OF VOL. IL BOOK IV. PROTEST AND NOTICE; AND EXCUSES FOR WANT OF PRESENTMENT, PROTEST, AND NOTICE. CHAPTER XXVIIL The Protest of Bills and Notes, Section I. The nature and necessity of protest, II. By whom and where protest should be made, III. Formal making, preparation, and authentication of protest, ........ IV. Contents of protest, ...... V. The protest as evidence, ...... PAGE X lO i6 19 Section I. II. III. IV. V. VI. CHAPTER XXIX. Notice of Dishonor of Negotiable Instruments, Nature and necessity of notice, Formal and essential elements of notice. Who may give notice of dishonor, To whom notice of dishonor should be given, Mode and formalities of giving notice when the party giving and the party to receive it reside in the same place, ..... Mode of serving notice when the party giving and the party to receive it reside in different places, VII. Time within which notice may and must be given, VIII. The allegation and proof of notice, . . . . (iii) 30 30 33 46 52 60 75 87 97 6677C4 iv TABLE OF CONTENTS. CHAPTER XXX. PAGB Circumstances of a General Nature which Excuse Want of Presentment, Protest, and Notice, . . . .107 Section I. War, interdiction of intercourse, and occupation of country by public enemy, . . . .108 II. Political disturbance, epidemic disease, and overwhelm- ing calamity or accident, . . . . .112 CHAPTER XXXI. Special Circumstances of Excuse which show an Original Absence of Right to Require Presentment, Protest, or Notice, n? Section I. Drawing a bill without a right to do so, . . .117 II. When the party is under an obligation to provide for payment, . . . . . • .128 CHAPTER XXXIL Special Circumstances of Excuse for Want of Presentment, Protest, and Notice, arising from Special Acts of Waiver, 1 34 Section I. Special written and verbal waivers of presentment, pro- test, and notice. General principles respecting waivers, ........ 134 II. Special waivers after the execution of the bill or note, 143 TIL By whom and to whom waiver of demand, protest, and notice must be made, . . . . • .148 CHAPTER XXXIII. Special Circumstances of Excuse which show an Inability on the Part of the Holder to make due Demand, Pre- sentment, OR Protest, or give due Notice, . . .151 Section I. When there is no person in existence upon whom de- mand can be made, or who is legally bound, . 151 II. The impracticability of finding the party to whom pre- sentment should be made or notice given ; or ascertaining his residence or place of business, . 154 III. Receiving the bill or note too late as excuse for want of presentment and notice, .... 163 * IV. Sickness of, or accident to, the holder, . . .164 TABLE OF CONTENTS. CHAPTER XXXIV. Special Circumstances of Excuse for Want of Presentment, Protest, and Notice, arising from the Conduct of the Party, 167 Section I. When party has received means to take up the bill or note, 167 II. When party has received securities out of which to pro- vide for payment, . . . . .168 III. When maker or acceptor has absconded, . . .181 IV. When maker or acceptor has removed his domicile to another State or a foreign country, . . .183 CHAPTER XXXV. Special Waivers of Presentment, Protest, and Notice, and of the Evidence thereof, by Promises to Pay and Part Payments after Maturity, 186 Section I. Waiver by promise of the drawer or indorser to pay, made after maturity, with knowledge of holder's default, 186 II. Promise to pay as presumptive evidence of knowledge of laches, . .192 III. Promise to pay as evidence of diligence, or waiver of proof of negligence, . . . . . .195 IV. What amounts to acknowledgment or promise to pay, 200 V. Waiver by part payment after maturity, . . , 203 CHAPTER XXXVI. Circumstances which will not Excuse Failure to make Pre- sentment OR Protest, or give Notice, .... 206 Section I. The want of injury to the party, .... 206 II. The bankruptcy or insolvency of the acceptor or maker, 208 III. The loss or mislaying of the bill or note, . . .210 IV. The appointment of the drawer or indorser as executor or administrator of maker or acceptor, . .212 V. The transfer of the bill or note as collateral security, . 213 VI. The death of the maker or acceptor, . . .214 VII. The misdating of a bill or note by a foreign resident, . 216 Vi TABLE OF CONTENTS. BOOK V. ACTION ON NEGOTIABLE INSTRUMENTS; AND DEFENCES, DISCHARGES, AND DAMAGES. CHAPTER XXXVII. PAGE Action or Suit upon Bills and Notes, . . . .218 Section I. General principles as to who may sue, . . .218 II. Who may sue when instrument is payable to an agent, 223 III. Who may sue upon instruments payable to one party and discounted by another, . . . .226 IV. Who may sue upon instruments payable to bearer, or indorsed in blank, 228 V. What constitutes the right to sue, and the evidence thereof, ...... VI. Who may be sued, VII. When right of action accrues, VIII. When right of action expires, IX. Evidence in actions upon bills and notes, 234 236 239 244 246 CHAPTER XXXVIII. The Discharge of Bills and Notes by Payment, . .250 Section I. The nature of payment, 250 II. Who may make payment, 252 III. To whom payment may be made, .... 258 IV. When payment may be made, 260 V. The effect of payment, and who may reissue a bill or note, 263 VI. In what medium payment may be made. The legal tender cases, . . . . . • .270 VII. Appropriation of payment, 275 VIII. Tayment supra J>roUsi, or for honor, . . . .279 CHAPTER XXXIX. Conditional and Absolute Payment. Taking Bill or Note FOR OR ON Account of a Debt, ..... 283 Section I. When the presumption of payment arises from taking a bill or note, .....•• 283 II. Suspension of right of action by taking bill or note for or on account of a debt, ..... 295 TABLE OF CONTENTS. Vll PAOB Section III. Rights and duties of holder of bill or note taken in conditional payment, ..... 297 IV. The effect of taking a bill or note upon a lien, . 301 CHAPTER XL. Discharges of Bills and Notes otherwise than by Payaient, 306 Section I. Discharges of bills and notes by operation of law, . 306 II. Discharges by agreement of the parties, . . . 308 III. Discharge of a joint party, . . . . .312 IV. Discharge of partnership debt by bill or note of one partner, . . 315 CHAPTER XLI. What Discharges a Surety. The Law of Principal and Surety in its Application to Bills and Notes, . .320 Section I. Who are principals, and who sureties ; and general prin- ciples of sureties' liabilities, .... 320 II. What acts of creditor discharge a surety for the debt, . 324 HI. What acts of creditor will not discharge a surety, . 337 IV. Latent sureties. Accommodation and joint parties as sureties, ........ 341 V. Surety's remedies, . . . . . . .351 CHAPTER XLIL The Forgery of Negotiable Instruments, .... 356 Section I. The definition and nature of forgery, . . .356 II. Liability of party who adopts a forged signature as his own, ........ 360 III. When one party is estopped from denying genuineness of another's signature, ..... 365 IV. Recovery of money paid upon forged instruments, . 377 CHAPTER XLin. The Alteration of Negotiable Instruments, . . . 383 Section I. Definition and nature of alteration, .... 383 II. Alterations of date, time, place, amount, and medium of payment, ....... 386 III. Alterations in respect to the parties to the instrument, 399 Viii TABLE OF CONTENTS. PAGB Section IV. Alterations in respect to the operation of the instrument, 404 V. Immaterial and authorized changes of the instrument, 409 VI. ^<7«d! /^^ holder of altered bill ornote, . . .415 VII. The effect of alteration, 422 VIII. The burden of proof of alteration, . . . .429 CHAPTER XLIV. The Law of Set-off in its Application to Negotiable In- struments, . 435 Section I. The general doctrines of set-off, .... 435 II. How far the law of set-off is applicable to negotiable instruments, ....... 442 CHAPTER XLV. Exchange and Re-exchange ; and Damages upon Dishonored Negotiable Paper, . 445 Section I. Nature of damages and of exchange, . . . 445 II. Nature of re-exchange, and drawer's liability, . .451 III. Indorser's and acceptor's liability for re-exchange and damages. Accumulations of re-exchange against drawer and indorser, ..... 454 IV. Re-exchange and damages upon promissory notes. Other charges, . . . . . .461 CHAPTER XLVI. Lost and Destroyed Bills and Notes, 467 Section I. Rights and duties of the loser, finder, and holder of a lost negotiable instrument, . . . .467 II. Suit against parties to a lost negotiable instrument, . 476 BOOK VI. VARIETIES OF NEGOTIABLE INSTRUMENTS OTHER THAN BILLS AND NOTES. CHAPTER XLVn. Coupon Bonds, 486 Section I. The definition and nature of coupon bonds, , . 486 II. The formal parts of negotiable bonds and coupons, . 493 III. The negotiability of coupon bonds, and the rights and duties of the holder or purchaser, . . . 505 IV. Action on negotiable bonds and coupons, . , .518 TABLE OF CONTENTS. IX CHAPTER XLVIII. PAGB The Validity of Municipal Bonds, 527 Section I. Nature of iminicipal corporations, and what powers may be conferred upon them, . . , . -52? II. Express and implied powers of municipal corporations. When they may issue negotiable bonds, . -537 III. Power of a municipal officer or agent to bind the mu- nicipality. Views of the United States Supreme Court . 547 IV. How invalidity of the bond is cured by acquiescence or ratification of the municipality, .... 558 V. Correct principles as to the liability of municipal corpo- rations upon negotiable bonds, .... 563 VI. Legislative control over municipal obligations, . .572 CHAPTER XLIX. The Law of Checks, 583 Section I. What is a check, ....... 5S3 II. Formal parts and varieties of checks. Business and memorandum checks, . . . , -593 III. Presentment and notice of dishonor ; and protest of checks, 599 IV. Certification of checks, . . . . . .613 V. Whose checks should be paid by the bank, . . 624 VI. What checks should be paid by the bank, . . .627 VII. Payment by checks, . . . . . .637 VIII. Over-checks, 643 IX. Cancelled, dishonored, and stale checks, . . . 645 X. Right of holder of uncertified checks to sue the bank, 648 XL How far a check is an assignment of the fund drawn upon, 657 XII. Checks as evidence, 659 XIII. Negotiability and transfer of checks, . . . 663 XIV. Forgeries of checks, ...... 665 XV. Alterations of checks after issue, . . . .671 CHAPTER L. Bank Notes, Section I. The definition, nature, and formal elements of bank notes, ....... II. How far bank notes are similar to money, . III. Liability of transferrer of bank notes, 676 676 679 682 X TABLE OF CONTENTS. PAGB Section IV. Rights, duties, and remedies of the holder or owner of bank notes, ....... 688 V. Payment in bank notes, and set-off, .... 695 VI. Lost or destroyed bank notes, 698 CHAPTER LI. Certificates of Deposit, 703 Section I. Definition, origin, and nature of certificates of deposit, 703 II. Transfer and negotiability of certificates of deposit, . 706 CHAPTER LII. Certificates of Stock ; and other quasi Negotiable In- struments, 713 Section I. Certificates of stock, 7^3 II. Other quasi negotiable instruments, . . . . 724 CHAPTER LIIL Bills of Credit, 728 Section I. What are bills of credit, 729 II. What are not bills of credit, 735 CHAPTER LIV. Bills of Lading, 73^ Section I. Definition and nature of bills of lading, . . . 738 II. Bills of lading accompanying bills of exchange drawn on shipments, ....... 749 III. The elements of a bill of lading, .... 75^ IV. Transfer of bills of lading, 761 CHAPTER LV. Guaranties, and the Law of Guaranty as applicable to Negotiable Instruments, ....... 768 Section I. Definition, nature, and construction of guaranties, .. 768 II. The consideration of guaranties, and the operation of the statute o'f frauds, 773 III. Forms and varieties of guaranties. Absolute and con- ditional guaranties, 7^0 TABLE OF CONTENTS. XI PAGB Section IV. Limited and unlimited, and temporary and continuing guaranties, ....... 7^2 V. The negotiability of guaranties, .... 785 VI. Requisites to the establishment and preservation of guarantor's liability, 793 CHAPTER LVI. Letters of Credit and Circular Notes, .... 800 Section I. Definition and nature of letters of credit, . . . 800 II. To whom a letter of credit is available, and how far it is negotiable, ....... 805 INDEX, 813 NEGOTIABLE INSTRUMENTS, BOOK IV. PROTEST AND NOTICE ; AND EXCUSES FOR WANT OF PRESENTMENT, PROTEST, AND NOTICE. CHAPTER XXVIII. THE PROTEST OF BILLS AND NOTES. SECTION I. THE NATURE AND NECESSITY OF PROTEST. § 926. First, as to what instruments must or may be protested. — ^When a foreign bill of exchange is presented for acceptance or payment, and acceptance or payment is refused, the holder must take what is called a protest, in order to charge the drawer or any indorser. According to the law of most foreign nations, a protest is essential in the case of the dishonor of any bill;^ but by the custom of merchants in England,^ and wherever the law merchant prevails in the United States, the protest is only necessary in the case of foreign bills ;' though by statute in most of ' Thomson on Bills (Wilson's ed.), 307. ^ Orr V. Maginnis, 7 East., 359 ; Gale v. Walsh, 5 T. R., 239 ; Leftly v. Mills, 4 T. R., 170 ; Boroug-h v. Perkins, i Salk., 131 ; Chitty on Bills (13 Am. ed.) [*332]. 372 ; Byles (Sharswood's ed.) [*249], 394. ' Burke v. McKay, 2 How., 66 ; Young v. Bryan, 6 Wheat., 146 ; Union Bank V. Hyde, 6 Wheat., 372 ; Bailey v. Dozier, 6 How., 23 ; Bank U. S. v. Leathers, 10 B. Mon., 64; Hubbard V. Troy, 2 Ired., 134; McMarchey v. Robinson, 10 Ohio St., 496; Smith v. Curlee, 59 III., 221 ; Green v. Louthain, 49 Ind., 139; Ocean N. B. v. Williams, 102 Mass., 141 ; Phoenix Bank v. Hussey, 13 Pick., 483. Vol. II.— I 2 PROTEST OF BILLS AND NOTES. § 927. the States inland bills and promissory notes may be pro- tested in like manner.^ So indispensable is the protest of a foreign bill in case of its dishonor, that no other evidence will supply the place of it, and no part of the facts requi- site to the protest can be proved by extraneous testi- mony,^ and it has been said, that it is a part of the consti- tution of a foreign bill.' But, while the practice is usually followed to protest inland bills and notes, under the per- missive statutes, it is not a practice which makes it incum- bent to protest them ; and the holder may waive the priv- ilege if he choose to do so, and produce other evidence of dishonor.^ § 927. The requisition of a protest in the case of foreign bills was in order to afford authentic and satisfactory evi- dence of due dishonor to the drawer, who, from his residence abroad, would experience a difficulty in making proper in- quiries on the subject, and be compelled to rely on the repre- sentations of the holder. " It also," observes a distinguished author, " furnishes an indorsee with the best evidence to charge an antecedent party abroad ; for foreign courts give credit to the acts of a public functionary in the same manner as a protest under the seal of a foreign notary is evidence in our courts of the dishonor of a bill payable abroad." ^ Such ' See Virginia Code of 1873, chap. 141, p. 987, §§7, 8, wherein it is provided: " § 7. Every promissory note, or check for money payable in this State, at a par- ticular bank, or at a particular office thereof, for discount or deposit, or at the place of business of a savings institution or savings bank, or at the place of business of a licensed broker, and every inland bill of exchange, payable in this State, shall be deemed negotiable, and may, upon being dishonored for non- acceptance or non-payment, be protested, and the protest be in such case evi- dence of dishonor, in like manner as in the case of a foreign bill of exchange. " § 8. The protest, both in the case of a foreign bill and in the other cases men- tioned in the preceding section, shall be prima facte evidence of -what is stated therein, or at the foot, or on the back thereof, in relation to presentment, dis- honor, and notice thereof." "^ Union Bank v. Hyde, 6 Wheat., 572 ; Carter v. Union Bank, 7 Humph., 548. ' Borough V. Perkins, i Salk., 121 ; 2 Ld. Raym., 992; Chitty on Bills (13 Am. ed.) [*333], 373 ; Edwards on Bills, 581. * Bailey v. Dozier, 6 How., 23 ; Wanger v. Tupper, 8 How., 234 ; 2 Rob, Prac. (new ed.), 121. " Byles on Bills (Sharswood's ed.) [^249], 395. 5 9-8. NATURE AND NECESSITY OF PROTEST. 3 was the convenience of evidence in this form, obviating the necessity of the attendance of witnesses, and preserving their testimony where otherwise it might be lost by death or re- moval, that it became common to protest inland bills, and promissory notes as well ; and the holder was often disap- pointed in finding that siich protest was not evidence of dishonor.^ This led to a very general enactment of statutes authorizing protests in such cases ; and giving them the like effect as in cases of foreign bills. The law merchant requires a protest and notice only in cases of bills negotiable by the custom of merchants. Bills payable " in currency," or any other medium than legal money, are not of this character, and therefore no protest is necessary, nor is it, unless by statute, evidence of any fact therein stated.'^ § 928. Foreign promissory notes. — In the case of prom- issory notes executed in one State or country, and payable in another, no notice, of course, is necessary to charge the maker ; and if there be no indorser there can be no analogy between the note and a bill. But as soon as a promis- sory note is indorsed it becomes closely assimilated to a bill, the maker being primarily liable, like the acceptor, and the indorser secondarily, like the drawer. It is often said that every indorser is a new drawer, and, in fact, the endorser's obligation is precisely like that of the drawer on an accepted bill. Therefore, when an indorsed note is pay- able in a State or country different from the one where it is drawn — perhaps more especially when the indorser is not of the State or country where it is payable, though no dis- tinguishing difference, it seems to us, exists — almost every consideration of convenience which would make a protest necessary and competent evidence of presentment and notice, in case of a foreign bill, would recognize it as equally '2 Rob. Prac. (new ed.), 181. ' Bank of Mobile v. Brown, 42 Ala., 108 ; Ford v. Mitchell, 15 Wis , 304. 4 PROTEST OF BILLS AND NOTES. § 929. competent in respect to the indorser of the note. It has been well said that " the similarity between the indorsement of notes, and the drawing and indorsement of bills of ex- change is so great, that there can be no sound reason given for establishing or preserving a distinction between them, and requiring a different character of evidence to prove the same facts with regard to two instruments, which, though different in some respects as to their phraseology, are so essentially similar in their nature and operations."^ And there are well-considered cases sustaining it.^ This view has been taken in Kentucky, respecting an indorsed certifi- cate of deposit.^ There are cases in which the converse view has been taken, it being considered that the certificate of protest of a promissory note is a document unknown to the law ; and although the note be payable in a foreign place, is inadmis- sible ; * and although the argument ad inconveniente is strong against this rejection of such testimony, in strict law, it seems to us, it must be excluded. A general usage would probably be controlling.^ § 929. As to the meaning of Protest, the term includes, in a popular sense, all the steps taken to fix the liability of a drawer or indorser, upon the dishonor of commercial paper to which he is a party.^ More accurately speaking, it is the solemn declaration on the part of the holder against any loss to be sustained by him by reason of the non-acceptance, or even non-payment, as the case may be, of the bill in question ; and a calling of the notary to wit- ness that due steps have been taken to prevent it.'^ The ' Parker, C. J., in Williams v. Putnam, 14 N. H., 540 ; Carter v. Burley, 9 N. H., 558 ; Smith v. Little, 10 N. H., 526 ; Edwards on Bills, 584. - Ticonic Bank v. Stackpole, 41 Me., 302, held admissible at common law. 'Piner v. Clary, 17 B. Men., 645. * Kirtland v. Wanzer, 2 Duer, 278. '■' See Burke v. McKay, 2 How , 66. " Townsend v. Lorain Bank, 2 Ohio St., 345 ; Coddington v. Davis, i Comst., 186. 'Walker V. Turner, 2 Grat., 536; Chitty (13 Am. ed.) [*458]. 5i6; Swayne T. Britton, 17 Kansas, 629. §§•930' 931- NATURE AND NECESSITY OF PROTEST. 5 word " protest " signifies to testify before ; and the testi- mony before the notary that proper steps were taken to fix the drawer's Hability is the substance, and the certificate of the notary the formal evidence, to which the term protest is legally applicable. § 930. Protest for iwn-acceptance. — According to the English law, the protest must be made in the case of dis- honor by non-acceptance ^ as well as dishonor by non-pay- ment. And the same rule prevails in the United States,' although it was decided by the Supreme Court of the United States, in an action on a protest for non-payment of a foreign bill, that a protest for, or notice of, non-accept- ance, need not be shown, inasmuch as they were not required by the custom of merchants in this country.^ But the English rule has been deemed the most consistent with commercial policy by the highest authorities, and Story and Kent adopt it as the true one ; the former observing that the decisions of the Supreme Court, if they would now be held law by that court, would be so held only upon the ground of the local law of Pennsylvania (to which State the decisions appertained), as to bills drawn or payable there.'* § 931. As to what constitutes a refusal to honor a bill, which will authorize or require a protest, a distinction exists between the dishonor for non-acceptance and dishonor for non-payment. If the drawee accepts the bill, he is bound to provide for its payment at maturity ; and if the holder 'Gale V. Walsh, 5 T. R., 239 ; Benjamin's Chalmers' Digest, 176; 2 Ames B. &N., 114. * Thompson v. Cummmg, 2 Leigh, 321 ; Mason v. Franklin, 3 Johns. 202; Watson V. Loring, 3 Mass.. 557 ; Phillips v. McCurdy. i Har. & J., 187 ; Sterry V. Robinson, i Day, 11 ; Winthrop v. Pepoon, i Bay, 468 ; Allen v. Merchants Bank, 22 Wend., 215 ; Story on Bills, § 273 ; Edwards on Bills, 444: 2 Ames B. & N., 114. ' Brown v. Barry, 3 Dallas. 365 ; Clarke v. Russell. 3 Dallas, 295, followed in Pennsylvania, in Read v. Adams, 6 Sergt. & R., 358. * Kent Com.. 95 ; Storv on Bills, § 273. note ; Edwards on Bills. 448 ; Chitty on Bills (13 Am. ed.), [*332]. 372. 6 PROTEST OF BILLS AND NOTES. §§932,933. present it at his home or place of business at maturity, and finds that he has absented himself, and left no one with funds to meet it, such conduct is in itself a refusal to pay, and the bill may be at once protested (and, if foreign, must be), and notice given. But absence from home or place of business, without leaving any one to accept a bill, is not a refusal to accept, for the drawee may not be aware that the bill is drawn, and is not bound (in the absence of a promise to accept) to be prepared for its presentment.^ § 932. There is no difference in respect to the necessity for protest whether the bill be payable at a certain time after date or after sight, for, although it is not necessary to present a bill payable at a certain time after date until its maturity, yet, if such a bill be presented for acceptance and dishonored, it is necessary to make protest and give notice, in order to charge drawer or indorsers.^ If a bill has been protested for non-acceptance, and its dishonor duly notified, it is not necessary to present it again for payment, and pro- test it separately for non-payment, or to give separate notice of non-payment.^ But there may be a subsequent protest for non-payment at maturity.* § 933. Notarial charges. — It is considered by high au-* thority that notarial charges are not a legal charge except where the protest is required by the law merchant, although it is certainly usual to pay them where they are reasonable, and made in good faith, and in conformity with usage.^ It being an entirely unnecessary act to protest an inland bill or a note in order to charge the drawer or an indorser, and purely voluntary and for his own convenience on the part ' Bank of Washington v, Triplett, i Pet., 35. See ante, § 589, vol. i. ^ Bank of Washington v. Triplett, i Pet., 25 ; U. S. v. Barker, 4 Wash. C. C, +64 ; O'Keefe v. Dunn, 6 Taunt., 305 ; S. C. 5 Maule & Sel., 282 ; Story on Bills, § 273. ^ De la Torre v. Barclay, i Stark., part 2, 7 ; Thomson on Bills (Wilson's ed.), 308. ^ Campbell v. French, 6 T. R., 200 ; Chitty, Jr., on Bills, 541. ^ I Parsons N. & B., 646 ; Johnson v. Bank of Fulton, 29 Ga., 260. §§ 934j 934^- ^^ WHOM and where made. 7 of the holder, there is obvious force in this suggestion. But it is, doubtless, in almost every case the cheapest, easiest, and safest way of proving notice. The defendant would be chargeable with costs of other testimony more cumbrous and more expensive, where liable, and custom has so extensively sanctioned the practice, that we antici- pate the courts will be slow to hold that it is not a legiti- mate charo-e, in cases where there is a drawer or indorser to charge by notice.^ But where there is no drawer or m- dorser to charge, the protest would be useless, and notarial fees could not be recovered,^ unless, indeed, the protest were authorized by statute, in which case a different rule might perhaps be applicable. SECTION 11. BY WHOM AND WHERE PROTEST SHOULD BE MADE. § 934. By whom the protest should be made. — As to the person by whom the protest should be made, it is necessary, as a general rule, that it should be made by a notary pub- lic in person,^ and by the same notary who presented and noted the bill.^ The notary is a public officer, commis- sioned by the State, and possessing an official seal, and full faith and credit are given to his official acts, in foreign countries as well as in his own.^ § 934«. But when ?io notary can be convetiiently found, the protest may be made by any respectable private person of the place where the bill is dishonored.^ ' Merritt v. Benton, lo Wend., 117. « German v. Ritchie, 9 Kan., no ; Noyes v. White, 9 Kan., 640 ; Cramer v. Eagle Man. Co., 23 Kan., 400. = Cribbs V. Adams, 13 Gray, 597; Ocean N. B. v. Williams, 102 Mass., 141 , ante, §§ 579, 5S7 ; Sacriber v. Brown, 3 McLean, 481. * Commercial Bank v. Varnum, 49 N. Y., 269; Commercial Bank v. Barks- dale, 36 Mo., 563 ; 2 Ames B. & N., 450. 863. ' See chapter XX, on Presentment for Payment, sec. i, vol. i, §§ 579- 1^1- • Burke v. McKay, 2 How., 66 ; Read v. Bank of Kentucky, i T. B. Mon., 91. 8 PROTEST OF BILLS AND NOTES. § 935- In England, it is required by statute that, in case of in- land bills, the protest by a private person shall be made in the presence of two or more credible witnesses.^ And it has been said that when a private person protests a bill, it should be done in the presence of two witnesses.^ Cer- tainly it is sufficient if it be so made,^ but it does not appear to be necessary to require witnesses to the protest of a foreign bill by a private person.* The notary to whom the bill or note is given for protest is bound to follow the in- structions given him, and it is not his duty to determine whether or not it should be protested on a certain day. If he follows instructions he is not liable to any person for any irregularity in his course.^ § 935- Where the protest should be made. — -As to the place of protest it is usually made at the place where the dishonor occurs.^ When the protest is for non-acceptance, the place of protest should be the place where the bill is presented for acceptance."^ But when the bill is drawn upon the drawees in one place, and is payable in another, the question has arisen, whether the protest should be at the place of acceptance or place of payment. Mr. Chitty says, in respect to protest for non-payment, that " if a bill be drawn abroad, directed to the drawee at Southampton or any other place, requesting him to pay the bill in London, ' 9 & lo William IIL, ch. 17. ' Bay ley on Bills (5th ed.), 258. No authority is referred to ; and " Qucsre, if not confined to inland bills," say the editors of Chitty. Chitty on Bills [*333], 374, note u. In Todd v. Neal's adm'r, 49 Ala., 273, it is said by Peters, J. : " If there be no legal notary there, on demand and refusal of payment, it is sufficient if the protest be made out and drawn up by a respectable inhabitant of the place where the bill is payable, in the presence of two witnesses." = Story on Bills, §276; i Pars. N. & B.,633 ; Byles (Sharswood's ed.), [*249], 395. * Brooks' Notary, 103; Chitty on Bills (13 Am, ed.), [*333]. 374, note u. " Commercial Bank v. Varnum, 14 N. Y. S. C. (7 Hun), 236; S. C. 49 N. Y., 269. "Chitty on Bills (13 Am. ed.) [*i7o], [*456] ; Benjamin's Chalmers' Dig., 175 ; 2 Ames B. & N., 450 ; Edwards on Bills, 580; Bigelow on Bills, 275 ; Byles (Sharswood's ed.) [^250], 396. Seeposf, § 936. ' Story on Bills, § 282. ' § 93; BY WHOM AND WHERE MADE. the protest for non-acceptance may be made either at South- ampton or in London." ^ But as the presentment for ac- ceptance must be at the former place, it would be better to make the protest for non-acceptance there also.^ It has been held that it is sufficient if the protest for non-payment, where there has been a refusal to accept, be made at the place of the drawee's residence ; ^ and in England, it being conceiv- ed that the decision cast a doubt upon the legality of making protest at the place specified for payment, the statute 2 and 3 William IV., c. 98, was enacted, declaring that a protest at the place of payment in case of a refusal to accept, without further presentment to the drawee, should be suffi- cient. It is conceived that this statute was merely declara- tory of the common law. Where there has been an ac- ceptance by the drawee in one place, to pay in another, the ' Chitty on Bills (13 Am. ed.) [*334], 374. " Thomson on Bills, 308; Man, 107, 108. ' Mitchell V. Baring, 4 Car. & P., 35 ; 10 Bam. & C, 8 (19 E. C. L. R.. 261). The Code of Virginia, ch. 144, § 2, provides as follows : " If a bill of exchange, wherein the drawer shall have expressed that it is to be payable in any place other than that by him mentioned therein to be the residence of the drawee, shall not, on the presentment thereof for acceptance, be accepted, such bill may, without further presentment to the drawee, be protested for non-payment in the place in which it shall have been by the drawer expressed to be payable, unless the amount thereof be paid to the holder on the day on which the bill would have become payable had it been duly accepted." This section was first incor- porated in the code of 1849, upon recommendation of the revisers, who said in their report to the General Assembly : " It is a general rule of law that the pro- test for non-payment is to be at the place where the drawee resides. In Mitchell, etc., v. Baring, etc., 4 Car. & P., 35 ; 19 Eng. Com. Law. Rep., 261 ; 10 Barn. & Cress., 4 ; 21 Eng. Law. Com. Rep., 12, the drawer of a bill made in America had expressed that it was to be payable in London, yet Liverpool was mentioned therein as the residence of the drawee ; on the presentment thereof for acceptance, it was not accepted, and the protest for non-payment was at Liverpool. Under particular circumstances appearing in the case, this protest was held sufficient ; the general question whether, if the acceptance had been in the usual form, a protest in London would have been sufficient, was left undecided. It appeared from the evidence of several witnesses, some of them notaries and others merchants, that, where a foreign bill, drawn upon a merchant residing at Liverpool, payable in London, was refused acceptance by the drawee, the usage was to protest it for non-pavment in London. Yet, though this was the usage, the doubt arose after the decision in Mitchell, etc., V. Baring, etc., whether such usage would be sustained by the courts, and the statute of 2 and 3 Will. IV., ch., 98, was passed to remove the doubt. We pro- pose, it will be perceived, to adopt the same statute in Virginia." Repoit of Revisers, p. 719. See anU, §651, vol. i. lO PROTEST OF BILLS AND NOTES. §§ 936-938. latter would seem to be clearly the place at which the pro- test should be made/ § 936. As to the law controlling the protest : it should be made according to the law of the place of presentment for acceptance, if it be for non-acceptance, or of the law of the place where the bill is payable, if it be for non-payment ; in other words, according to the law of the place where the dishonor occurs.^ SECTION III. FORMAL MAKING, PREPARATION, AND AUTHENTICATION OF PROTEST. § 937. As to the formality of making protest, and pre- paring the certificate thereof, it generally comprises three distinct steps: (i). Making the presentment, and demand of payment ; (2), Noting the dishonor ; and, (3), Extend- ing the protest. I 938. (i) The presentment and demand of paymejit. — The first step taken is the presentment of the instrument to the drawee, or acceptor, or maker, by the notary, and a demand of payment. By the law merchant it is abso- lutely necessary that the notary himself should make this formal presentment and demand. And, although the holder may have already presented the bill and demanded acceptance or payment, and been refused, it is still neces- sary that the presentment and demand, which are to be made the basis of the notary's certificate, should be made by him in person. For otherwise his testimony contained in the protest would be hearsay and secondary, and would ' Story on Bills, § 284 ; Thomson (Wilson's ed.), 309. ''Shanklin v. Cooper, 8 Blackf., 41 ; Turner v, Rogers, 8 Ind., 139; Carter V. Union Bank, 7 Humph., 548 ; Onondaga County Bank v. Bates. 3 Hill, 53 Rothschild v. Currie, i O. B., 43 ; ante, § 935. See chapter xxvil, vol. i, sec- tion ix ; Bigelow on Bills, 275 ; Wharton on Evidence, § 123. § 939- FORMAL PROTEST. II lack the very element of certainty which the protest is es- pecially designed to assure. Not even his clerk, nor, unless authorized by law, his deputy, can perform these functions for the notary, as it is to his official character that the law imputes the solemnity and sanction which are accorded his certificate. The authorities on this subject are collated in the chapter on " Presentment for Payment," in the first volume of this work.^ § 939. (2) Noting the disho7ior. — As soon as the pre- sentment and demand have been made, or at some sea- sonable hour during the same day, the notary makes a minute on the bill, on a ticket attached thereto, or in his book of registry, consisting of his initials ; the month ; the day ; the year ; the refusal of acceptance or payment ; the reason, if any, assigned for such refusal ; and his charges of protest. This is the preliminary step toward the pro- test, which may be afterward written out in full — extended, as the elaboration of these minutes is termed — and it is called noting.^ " Noting," it was said in an early case, " is unknown to the law, as distinguished from the protest ; it is merely a preliminary step to the protest, and has grown into practice within these few years." ^ But it is now quite well established in England, Scotland, and the United States, that the noting is a kind of " initial protest," as Thomson aptly terms it, not self-sufficient as a protest, but sufficient in the meantime, if the certificate of protest is regularly extended afterward.'* It must be made on the very day of dishonor by non-acceptance or non-payment, otherwise it can not be made the basis of the extended pro- ' Chapter XX, section i, §§ 579, 587. = Benjamin's Chalmers' Digest, 173 ; Chitty on Bills (13 Am. ed.) [*333], 373 ; Byles on Bills (Sharswood's ed.), *25i ; i Parsons N. & B., 644; Bigelow on Bills, 275 ; Edwards on Bills, 461. " Leftly V. Mills, 4 T. R., 170, Buller, J. *Chaters v. Bell, 4 Esp., 48 ; Geralopulo v. Wieler, 10 C. B., 690; 3 Eng. L, & Eq., 515; Edwards on Bills, 581; Thomson on Bills (Wilson's ed.), 311 , Story on Bills (Bennett's ed.), § 278. 12 PROTEST OF BILLS AND NOTES. § 94O. test.^ For the notary will not be permitted to trust to his memory for the requisite particulars. It is to his contem- poraneous written statement that the law gives credit.^ Where, in Scotland, the original protest could not be used, because not properly stamped, it was allowed to be used as a note for extending a valid protest,^ and it seems unim- portant in what particular form the noting is done. § 940. (3) Extending the pi'-otest — The extension of the protest is the completion of the instrument of protest, from minutes or "initial protest," as they are called, noted down on the day of dishonor. This extension may be made at any time. As said by Lord Kenyon : "If the bill was regularly presented, and noted at the time, the protest might be made at any future period," * and it is well settled to this effect in the United States.^ The extension may be made even at any time before suit is brought,^ or after trial has commenced, and when ma^e, it is antedated, as of the day when the initial protest was made.' ' Dennistoun v. Stewart, 17 Howard, 606; Buller, N. P., 373; Thomson on Bills (Wilson's ed.), 315 ; Leftly v. Mills, 4 T. R.. 170, Buller, J. ''Thomson on Bills, 312; Benjamin's Chalmers' Digest, 174; Story on Bills, §§ 278, 283 ; Bavley on Bills, ch. 7, § 2, pp. 266, 267; Bigelow on Bills, 275 ; Chittv, Jr., on Bills, 62 ; Chitty on Bills (13 Am. ed.) [*336], 377 ; Byles on Bills, (Sharswood's ed.), *25o. In Buttler v. Play, i Mod., 27 (1669), Chitty, Jr., on Bills, p. 161, it is said that protest "must regularly be the day of the bill due, especially if the party be not present on the place." In a note to Benjamin's Chalmers' Digest, p. 174, it is said (citing Brooks' Notary, p. 80), that in prac- tice, foreign bills are frequently not noted till the day after their dishonor, and that " it is conceived that if the bill has been duly presented this is sufficient." But this is against the current of authority, and is not the accepted view. * Thomson on Bills, 312. * Chaters v. Bell, 4 Esp., 48 (1801). To same effect Geralopulo v. Wieler, 10 C, B., 690 ; 3 Eng. L. & Eq., 515 ; Robins v. Gibson, i Maule & S., 288 ; Chitty on Bills (13 Am. ed.) [*336], 377 ; Bigelow on Bills, 275 ; Benjamin's Chalmers' Dig., 174; Stor)^ on Bills, 278; i Parsons N, & B., 644, note ; Byles on Bills, (Sharswood's ed.) *2 5o ; Chitty, Jr., on Bills, 62 ; Goostrey v. Mead Buller N. P., 271, cited in Orr v. Maginnis, 7 East., 358 (semble); Commercial Bank v. Barks- dale, 36 Mo., 563. ^ Bailey v. Dozier, 6 How., 23 ; Bank of Decatur v. Hodges, 9 Ala., 631 ; Cay- uga Co. Bank v. Hunt, 2 Hill, 635. * Dennistoun v. Stewart, 19 How., 606 ; Brooks* Notarj^ 97 ; Orr v. Maginnis, 7 East., 358 (semble). 'In Byles on Bills [^250], 396, it is said: "The protest of a foreign bill should be begun, at least (and such an incipient protest is called noting), on the day §§94^94-- FORMAL PROTEST. 13 In Scotland, the extension of a protest was permitted fifteen years after noting.^ § 941. In cases of payment supra protest. — It has been contended that in the case of payment for honor, which must be made stipra protest, the formal extension of the protest must be made before the payment, on the ground that unless this were done, the allegation that the bill was continued and paid under protest would not be proved, in- asmuch as the protest should be understood to mean such pr(5test as would give a right of action to the person paying for honor. But this distinction is not recognized. It is true that the declaration that the payment was made for honor must precede the protest, and that the noting of such declaration and of the dishonor must be then made, and that unless the declaration were then made, no after act could give to the payment the character of payment supra protest} But the protest in this, as in other cases, may be extended at any time, provided it was duly noted.^ § 942. When there is a protest for non-acceptance, and subsequently a protest for non-payment, it is not sufficient to simply note the bill for non-acceptance, and extend only the protest for non-payment ; but wherever proof of protest is requisite, the extended protest alone will suffice.* on which acceptance or payment is refused ; but it may be drawTi up and com- pleted at any time before the commencement of the suit, or even dunng the trial, and antedated accordingly." To same effect see Thomson on Bills (\Vil- son's ed.), 312. That it may be at any time before trial, see Story on Bills (Bennett's ed.), § 278, citing Geralopulo v. Wieler, 3 Eng. L. & Eq., 515; 10 Com. B., 690. That it may be at any time, Benjamin's Chalmers' Dig., 174. " It is not too late to make it after the bringing of suit, and in the course of trial," Bigelow on Bills, 275. Chitty says : " It is said it should be made before the commencement of suit." Chitty on Bills (13 Am. ed.) [*477]. 540. Prof. Ames says in vol. 2 B. «& N., 863 : " The dictum in Dennistoun v. Stewart, that the protest may be drawn up at any time before trial, can not be defended upon principle." But the text is supported by the general tenor of authority, and we can perceive no sound doctrine that it trenches upon. ' Alexander v. Scott, Thomson on Bills, 312. » Vanderwall v. Tyrrell, I Mood. & Malk., 87. 'Geralopulo v. Wieler, 10 C. B., 690; 3 Eng. L. & Eq., 515. * Rogers v. Stephens, 2 T. R., 713; Orr v Maginnis, 7 East., 359. 14 PROTEST OF BILLS AND NOTES. §§ 943 -946. § 943. Copy of protest, and of instrument protested. — If the drawer reside abroad, it has been said that a copy, or some memorial of the protest, should accompany the notice of dishonor.^ But it is now well settled, that it is only necessary for the drawer or indorser to receive a notice of the protest, without any copy or memorial of the instru- ment itself, in order to fix his liability, the protest not being necessary until the trial.^ § 944. It is usual, and highly important, to prefix a copy of the bill or note, with all indorsements thereon, verbaiim et literatim, to the instrument of protest, for the purpose of identifying the bill or note with certainty, and indicat- ing to the drawer or indorsers what party is entitled to pay- ment.^ § 945. How the protest is authenticated or proved. — The official seal of a 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 certifi- cate.* But it may be controverted as false, fictitious, or improperly annexed.^ § 946. It is not always essential to the admissibility in evidence of the certificate of protest that it should be under the notary's seal ; nor is it essential in all cases, as already seen, that it should be made by the notary in person ; but * Byles (Sharswood's ed.) P252], 399. ^ Goodman v. Harvey, 4 Ad. & El., 870 (31 E. C. L. R.) ; Robins v. Gibson, I Maule & S., 288; Cromwell v. Hynson, 2 Esp., 511 ; Ex /^r/^ Lowenthal, L. R. 9 ch., 591 ; Dennistoun v. Stewart, 17 How., 606; Lenox v. Leverett, 10 Mass., I ; Wells v. Whitehead, 15 Wend., 527 ; Wallace v. Agry, 4 Mason, 336 ; Chitty on Bills (13 Am. ed.) P344], 375 ; Bigelow on Bills, 275 ; 2 Ames B. & N., 115; post, § 986. 'Story on Bills, § 276; Chitty (13 Am. ed.) [*458], 517. * Nichols V. Webb, 8 Wheat., 326 ; Townsley v. Sumrall, 2 Pet., 170 ; Dickens V. Beal, 10 Pet., 582 ; Mullen v. Morris, 2 Barr., 86 ; Nelson v. Fotterall, 7 Leigh, 180; Carter v. Burley. 9 N. H., 558 ; Bryden v. Taylor, 2 Har. & J., 399 ; Bank of Ky. V. Pursley, 37 B. Monroe, 240 ; Bradley v. Northern Bank, 60 Ala., 258. " Ibid. §§ 947-949- FORMAL PROTEST. 15 in either of these cases it does not prove itself, and there must be extraneous evidence to show that it was duly made by the person officiating, and is sufficient with- out a seal, according to the laws of the country where it was made.^ In some cases it has been held that a notary's certificate of protest is sufficient without a seal, the law giv- ing full evidence to his protestations and attestations;' while other authorities hold that by the law merchant the notary's seal is an essential part of the certificate protest, and that without such seal the certificate is insufficient as proof of protest.' § 947. An impression of the notarial seal on the paper of the protest is prima facie sufficient, and it will be pre- sumed to have been affixed according to the laws of the country where the dishonor occurred until there is some- thing to impeach it.^ But it seems that a mere scrawl would not be.^ § 948. It is well settled that where the laws of the State in which the protest is made require that it shall be made under the notary's seal, it will not be received in evidence in another State without such seal, and no other mode of authentication is available.^ § 949. The protest should be signed by the notary ; but if his act, in fact, it may be signed by his clerk in his name, c r may be in printing, it being requisite only that it should be by his authority.'^ 'Carter v. Burley, 9 N. H., 558 ; Chanoine v. Fowler, 3 Wend., 173. 'Bank of Ky. v. Pursley, 3 T. B. Monroe, 240 (1826) ; Huffuker v. National Bank, 12 Bush. (Ky.), 293 (1876), Lindsay, C. J., saying ; "The notary being an officer of this State, his official signature is all that is required to the protest." Lambeth v. Caldwell, i Rob. La., 61. '-'Donegan v. Wood, 49 Ala., 251-2. See 2 Pars. N. & B., 634; Stoiy on Bills, § 277 ; Kirksey v. Bates, 7 Porter (Ala.), 529. * Carter v. Burley, 9 N. H., 558; Conolly v. Goodwin, 5 Cal., 220; Bank of Manchester v. Slason, 13 Vt., 334 ; Bradley v. Northern Bank, 60 Ala., 258. ' Carter v. Burley, 9 N. H., 558. See Donegan v. Wood, 49 Ala., 251. •Ticknor v. Roberts, 11 La., 14; Bank of Rochester v. Gray, 2 Hill (N. Y.), 227 ; Wharton's Conflict of Laws, § 699a. ^Fulton V. McCracken, 18 Md., 528. l6 PROTEST OF BILLS AND NOTES. §§ 95O-952. SECTION IV. CONTENTS OF PROTEST. § 950. The protest, or, more strictly speaking, the notarial certificate thereof, should set forth : (i) The time of presentment; (2) the place of presentment; (3) the fact and manner of presentment ; (4) the demand of pay- ment ; (5) the fact of dishonor ; (6) the name of the party by whom presentment was made ; and (7) the name of the person to whom presentment was made. And in respect to notice, it should state : (i) The person notified ; (2) the manner of notification ; and (3) when not served on the party in person, it should specify distinctly whether it was delivered at his house or place of business ; or, if sent by mail, that it was addressed to the post-office nearest to him, or at which he usually received his business letters. These, at least, are the elements of a regular and perfect protest. The admissibility of the protest as evidence of notice, and its statements in reference to notice, are considered under a separate head. § 951. As to the time. — It is essential that the time of presentment and demand should be stated, for otherwise it can not appear from the certificate that the bill was duly dishonored. And if it state that the bill was " this day pro- tested," and is dated on a day previous to, or after, the day of maturity, it is invalid upon its face.^ It is better to state that the presentment and demand were made during the usual hours of business, but where the hour of the day is not stated, it will be presumed that they were made at the proper time of day.^ § 952. As to the place. — If the bill is not payable at a particular place, it is not absolutely necessary to state at ' Walmsley v. Acton, 44 Barb., 312 ; see post, % 984. " Burbank v. Beach, 15 Barb., 326 ; DeWolf v. Murray, 2 Sand., 166 ; Cayuga County Bank v. Hunt, 2 Hill, 227 ; Skelton v. Dunston, 92 111, 49. §§ 953' 954- CONTENTS OF PROTEST. 1 7 what place the presentment and demand were made ; but if it were payable at a bank, or other specified place, the cer- tificate is insufficient unless it state presentment and demand at such place. ^ § 953. As to the manner and fact of presentment and demand. — The presentment of the bill and the demand of payment should be separately stated. The usual expression of the certificate is, that the notary " did exhibit said bill," and it is certain that there must be some expression im- porting ex vi termini that the bill was presented to the drawee or acceptor.^ The mere statement that payment was " demanded " has been held by the United States Su- preme Court to be insufficient in itself, because not neces- sarily implying a " presentment also."^ But there can be no legal demand without presentment, and the term " de- manded " has been considered sufficient in Louisiana.** The mere statement of " presentment " is not in itself sufficient without also a statement of demand.^ § 954. As to the fact of dishonor. — The dishonor of the bill must be stated, and it is usually expressed in the phrase that the person to whom it was presented " answered that it would not be accepted, or paid," or that such person " refused to accept or pay it," or some such language. If it does not, in some terms, inform the party of the dishonor, it is fatally defective.^ But it is not material what words are used. If it states that the reason of protest was its non-payment, it is sufficient.'^ ' People's Bank v. Brooke, 31 Md., 7. ' Union Bank v. Fowlkes, 2 Sneed, 555 ; Bank of Vergennes v. Cameron, 7 Barb., 143. ' Musson V. Lake, 4 How., 262, Woodbury and McLean, JJ., dissenting on this point. * Nott V. Beard, 16 La., 308. • Nave V. Richardson, 36 Mo., 130 ; Farmers' Bank v. Allen, 18 Md., 475. ' Taylor v. Bank of Illinois, 7 T. B. Mon., 576 ; Arnold v. Kinloch, 50 Barb. (N. Y.), 44 ; Littledale v. Maberry, 43 Me., 264. ' Young V. Bennett, 7 Bush. (Ky,), 477. Vol. II.— 2 1 8 PROTEST OF BILLS AND NOTES. §§955-958. § 955. As to the name of the person upon whom demand was made, it should be stated, especially when it was not made at the place of business of the drawer or acceptor. In the latter case, it is sufficient to describe the person as a clerk, or person in charge.^ If a firm were the drawer or acceptor, it would be fatally defective in not stating the name of the person on whom demand was made, as well as that he was a member of the firm.^ If the bill is payable at a bank, nothing more need be stated than that the notary presented it and demanded pay- ment at the bank, and that it was refused, without stating the name of the person or officer of the bank to whom it was presented.^ § 956. The certificate frequently states the name of the party who requests the protest to be made, and who looks to the drawer or indorser for payment ; but this is not necessary.^ § 957. It is said to be important that the reasons given by the drawee for non-acceptance or non-payment should be stated in the certificate of protest ; ^ and it may be usual to do so. But the reasons for a refusal to accept or pay, while they may sometimes be of such a character as to excuse protest or notice, as against the drawer, are not an essential part of the protest, and it makes no difference if they are not stated. § 958. No mere verbal inaccuracy or mistake in the cer- tificate of protest will vitiate it, if in fact the protest was properly made and the notice given. Thus, a misdescrip- tion of the acceptor as " Chas." instead of " And. E. Byrne," was held not fatal to the protest ; ^ and so a mis- statement of the date.'' ' Nelson v. Fotterall, 7 Leigh, 179 ; Stainback v. Bank of Va., 11 Grat., 260, "^ Otsego County Bank v. Warren, 18 Bark., 290. ' Hildeburn v. Turner, 6 How., 69. ■• Duckert v. Van Lilienthal, 1 1 Wis., 56 =■ Chitty on Bills (13 Am. ed.) P458], 516, 517 ; Story on Bills, § 276. ' Dennistoun v. Stewart, 17 How., 606. 'Bank at Decatur v. Hodges, 9 Ala., 631. ^ 959. THE PROTEST AS EVIDENCE. I9 SECTION V. THE PROTEST AS EVIDENCE. § 959. The original instrument of protest, or a duly au thenticated copy, is respected by the courts of a foreign country, and whenever admissible in testimony is regarded 2iS prz?na facie tviditncQ oi all the facts therein stated, so far as they come within the scope of the notary's duty in making the presentment and demand and protest.^ But it IS prima facie tw\&QncQ only, and any statement made in the protest may be rebutted by any competent testimony to the contrary.^ Although the notary, when examined, has no recollec- tion of the facts stated in the certificate of protest, it is st\\] prima facie evidence until contradicted.® But as, by the law merchant, the protest is only neces- sary, or receivable as evidence of dishonor, in the case of foreign bills or of indorsed notes, which are of the nature of foreign bills and come within the reason of the law re- specting them, the protest of an inland bill or of an inland promissory note is not evidence of dishonor in a foreign State, although it may be in the State where the dishonor occurred by statute* And where a State statute makes the protest, when executed by a notary of that State, evi- dence as to demand and notice, it does not authorize the notary to act beyond its territorial limits, or accord the same effect to his act when beyond them.^ ' Townsley v. Sumrall, 2 Pet,, 170 ; Chase v. Taylor, 4 Har. & J., 54. '^ Dickens v. Beal, 10 Pet., 582 ; Ricketts v. Pendleton, 14 Md., 320 ; Howard Bank v. Carson, 50 Md., 27; Wharton on Evidence, §123; Union Bank v. Fowlkes, 2 Sneed, 555; Nelson v. Fotterall, 7 Leigh, 180; Spence v. Crockett, 5 Baxter, 576. ' Sherer v. Easton Bank, 33 Penn. St., 134. * Dutchess Co. Bank v. Ibbottson, 5 Den., no; see Kirtland v. Wanzer, 2 Duer, 278, on this point. But see supra as to other points in which it is not approved. 'Dutchess Co. Bank v. Ibbottson, 5 Den., no. 20 PROTEST OF BILLS AND NOTES. §§960,961. § 960. By the law fnerchant protest not evidence as to notice. — When the notary who has in charge the bill for presentment has presented it for acceptance or payment, as the case may be, and has protested it in the event of its dishonor by a refusal, his official duty is fulfilled ; and it is not incumbent on him to go farther and give notice.- Al- though, if the holder desires him to do so, he may, as well as a private person, act as his agent in giving notice.^ It being no part of the notary's official duty to give notice, which is entirely distinct from the protest, the certificate of protest made out by the notary is not by the law mer- chant evidence of any fact stated therein respecting the service or transmission of notice, but only of such things, as pertain to his official duty in respect to the protest,^ By statutes, in the States of the Union, it is very generally provided that the certificate of protest shall be evidence of the facts stated therein respecting notice, it being found by experience to be a more convenient method, and as reliable as any other, of making the proof. Prof. Parsons ex- presses the opinion that without the aid of a statute, the certificate is evidence " not only of presentment, demand, and dishonor, but of such notice as it asserts to have been given." * When a statute makes the certificate of protest evidence of the facts stated therein, and it states the due mailing of notice to the proper post-office, properly di- rected, the mere fact that notice does not reach the in- dorser will not rebut the statements of the certificate.^ § 961. How notice proved. — The notice must be proved ' Dickens v. Beal, 10 Pet., 582 ; Morgan v. Van Ingen, 2 Johns, 204; Miller V. Hacl Barr , a82. See/^i/, § 967. " Waiker «. Turner, 2 Grat., 536; Bank of Vergennes v. Cameron, 7 Barb., 144. ' Morgar. v. v/'an Ingen, 2 Johns, 204. * Braashaw V. Hedge, 10 Iowa, 402 (i860); Sprague v. Tyson, 44 Ala., 34a (1870;. inlurne; v. xicgers, 8 Ind., 140 (1856), the certificate stated that, " I 22 PROTEST OF BILLS AND NOTES. § 962. the view which has been taken in the cases cited in the subjoined note, and which seems to us consistent with rea- son and with the strict principles of the law merchant, which throws the burden of proving due notice on the plaintiff. But the Supreme Court of the United States, it seems, takes a different view, though this precise ques^ tion was not before it. The question in the case before it arose upon a demurrer to evidence, the notary who made the certificate being examined as a witness, and testifying that he sent notice by mail addressed to the indorser at Alexandria, without any evidence that that was his place of residence ; and the court held that the jury would have been warranted to infer that the indors- er's residence was in Alexandria.^ In Virginia this case notified Henry Turner and John H. WoodfiU by letter to each at New Albany, Indiana, permail the same day." The parties named were indorsers. The court said, there was " no evidence that the defendant resided at New Albany or any- where else. The notary's statement in the protest that he notified the indorsers is qualified by specifying the manner in which it was done — that is, by address- ing notices to them at New Albany. The bill was drawn, indorsed, and payable in Ohio. There is no preeumption that they resided in New Albany." To same effect see also Sullivan v. Deadman, 19 Ark., 486. In Stiles v. Inman, 55 Miss., 472 (1877), notarial certificate stated that notice was mailed to Stiles, the in- dorser, at Vicksburg. The court said : " There was no evidence that Stiles, the indorser, resided at Vicksburg, or that Vicksburg was his place of residence, or his nearest post-office, or the one at which he received his mail matter. For all that appears, the notice might as well have been sent by mail to Boston or New- Orleans," and held that the proof of notice was insufficient, citing Walker v. Tunstall, 3 How. (Miss.), 259; Ellis v. Commercial Bank, 7 How. (Miss.), 294. The case of Raine v. Rice, 2 Patton. & H., 530 (1857), is often quoted for the saitie doctrine. The syllabus of the reporter is misleading, and no such ques- tion was decided, as is shown in Linkous v. Hale, 27 Grat., 674 (1876). ' Bank of U. S. v. Smith, 11 Wheat., 171 (1826). In this case it appeared that the notary who protested the note in Washington swore on the trial, being ex- amined as a witness, that on the day of dishonor he put in the post-office notice of non-payment, addressed to the defendant at Alexandria. This was the only evidence of due notice, and the defendant demurred to the evidence on the ground that it did not appear that Alexandria was the post-office to which no- tice should have been sent. Thompson, J., said, rendering the unanimous opinion of the court : " If the defendant's place of residence was Alexandria, it is not denied that but due and regular notice was given him. The notary was a sworn officer, officially employed to demand payment of this note, and it is no more than reasonable to presume that he was instructed to take all necessary steps to charge the indorsers. This must have been the object in viev/ in de- manding payment of the maker. And, it is fair, also, to presume that he made inquiry for the residence of the defendant before he addressed a letter to him ; for it is absurd to suppose he would direct to him at that place, without some knowledge or information that he lived there, this being the usual and ordinary course of such transactions and with which the notary was, no doubt, acquainted. § 962. THE PROTEST AS EVIDENCE. 23 was recently cited with approval by the Supreme Court of Appeals, and applied where there was no evidence but the notary's certificate that he mailed notice to the indorsers at Blacksburg, Virginia ; but while the court considered that on the demurrer to evidence, in which form the question arose, it should be inferred that their residence was at Blacksburg, it held that no such inference would be justi- fied in the case of a special verdict, it being an inflexible rule that the court, upon a special verdict, can not infer other facts from those found by the jury.^ In a late case in Iowa it was said by the court that "the bare certificate of the notary that he notified the makers and indorsers is itself /r2V;2^/«^2> evidence that they were notified. If he specifies the mode in which he did it, such specification does not destroy the prima facie case, nor render it neces- sary to prove that such mode would effectuate such result, unless indeed it should appear affirmatively that the mode adopted could not have done so. But if the notary only certify the mode he adopted to give the notice, and not to the fact that he did give it, then, unless it further appeared that such mode would effectuate notice, the certificate does not make 2i prima facie case." * This distinction is very re- The jury would, undoubtedly, have been warranted to infer from this evidence that the defendant's residence was in Alexandria. If that was not the fact, this case is a striking example of the abuse which may grow out of demurrers to evi- dence. For a single question to the witness would have put at rest that point one way or the other, if the least intimation had been given of the objection. It was manifestly taken for granted by all parties that the defendant lived at Alex- andria. And if a party will upon the trial remain silent, and not suggest an in- quiry which was obviously a mere omission on the part of the plaintiff, a jury would be authorized to draw all inferences from the testimony given that wouW not be agamst reason and probability, and the court, upon a demurrer to the evi- dence, will draw the same conclusions that the jury might have drawn." It will be perceived that this case does not determine the sufficiency of the evi- dence if it were merely contained in a statement of the protest. In such case the defendant could have no opportunity to cross-examine and to elicit the facts respecting reasonable inquiry by the notary, and although the decision just quoted militates strongly against the doctrine of the text, it is therefore not necessarily inconsistent with it. 'Linkous V. Hale, 27 Grat., 668-674 (1876), Moncure, P. See Slaughter v. Farland, 31 Grat., 134. ■••Walmsley v. Rivers, 34 Iowa, 466 (1871). In which case the notary certi- fied that he notified the indorsers, and that he dehvered the notice at the post- 24 PROTEST OF BILLS AND NOTES. § 963. fining, and without just ground. In Indiana it was not taken in a similar case.^ A certificate of notice to a drawer sent to a place where the bill bears date would stand on a different footing, that being presumably the drawer's place of residence.^ So where the protest states that notice of protest " was left at the boarding-house of A. B., or the office of C. D., it is not sufficient evidence that it was left in the proper manner.^ And where it states presentment of a note payable at bank to the cashier, it has been held that it is not to be inferred that the note was in the bank, or un- less it was in the bank, that the cashier was at the bank, but that might be proved by other testimony.^ § 963. As to the mere fact that due notice was given, however, when there is no question raised as to the person upon whom, or the place where, it was served, the certificate that " due notice was given or mailed, or that the person was duly notified," is sufficient evidence that the notice in itself corresponded to the protest, and was in proper legal form. A legal notice is a definite legal instrument, and where a statute makes the certificate of the notary evidence as to the service, or as to facts stated respecting notice, it would seem, that his certificate that notice was given, would be as definite as if it detailed the minutias of the instrument thus office addressed to them, " Des Moines." And the case was distinguished from Bradshaw v. Hedge, 10 Iowa, 402 {supra), in which the notary merelj' stated that he put notice in the post-office addressed to a certain place named. ^ Turner v. Rogers, 8 Ind., 140. "^ See chapter XX, on Presentment for Payment, vol. i, § 639, and chapter XXIX, on Notice, vol. 2, §§ 1030, 1031. 'Rives V. Parmley, 18 Ala., 262, Dargan, C. J., said: "Notice might have been left at the boarding-house of the detendant in a manner wholly insufficient to charge him. Indeed, the notice might have been left at the house on the day stated, and yet the notary might have been guilty of gross neglect, as if he had merely stopped at the house and left the notice without inquiry for the de- fendant, or saying a word about the object of his visit, or delivering the notice to any one to be handed to the defendant, when he could have delivered it to the party himself by inquiring for him." * Magoun v. Walker, 49 Me., 420 ; Seneca County Bank v. Neass, 5 Den., 329 ; ante, § 644. But see Barbaroux v. Waters, 3 Mete. (Ky.), 304, and a»/tf, §659. § 964. THE PROTEST AS EVIDENCE. 2$ described.^ But it has been held, that the protest, unless it states the contents of the notice, is only evidence that what purported to be notice was sent, and not of its suffi- ciency in law.* It seems to us that the separate facts as to service and place, and person should be stated, but that the contents of the notice are to be presumed to be conforma- ble to law. § 964. Presimiptioiis in favor of protest. — But legal presumptions are made in favor of the protest under proper circumstances. Thus, when the certificate of protest states that demand was made of the clerk of the drawee, found at his office or place of business, the drawee himself being absent, it is evidence not only of the fact of demand, but also that the person named was the drawee's clerk, duly authorized to refuse acceptance or payment.^ And it would be presumed, if not stated, that the drawee was absent.'' So (where it is evidence as to notice), if it state that notice was left "at the indorser's desk in the custom house, he being absent, with a person in charge," it is prima facie evidence that such was his place of business, and that it was properly left there, it not appearing that better service could have been made.^ So, if it states demand at his office or place of business, of his bookkeeper,® or agent,'' or clerk,® it is evidence that such person was the drawee's agent. But unless the demand was at the drawee's place * Tate V. Sullivan, 30 Md., 464 ; Pattce v. McCrillis, 53 iMe., 410 ; Orono Bank V.Wood, 49 Me., 26 ; Lewistown Bank v. Leonard, 43 Me., 144; Ticonic Bank v. Stackpole, 41 Me., 321 ; Simpson v. White, 40 N. H., 540; Bushworth v. Moore, 36 N. H., 144 ; Galladay v. Bank of Union, 2 Head., 57 ; Union Bank v. Middle- brook, 33 Conn., 95 ; McFarland v. Pico, 8 Cal., 626 ; Kern v. Van Phal, 7 Minn., 426. " Ducket V. Van Lilienthal, 11 Wis., 56 ; Smith v. Hill, 6 Wis., 154; Kimball V. Bowen, 2 Wis., 224. See post, % 105 1 and notes. ' Nelson v. Fotterall, 7 Leigh, 179; Stainback v. Bank of Virginia, 11 Grat., 260; W^halcy v. Houston, I2 La. Ann., 585. * Gardner v. Bank of Tenn., i Swan, 420. * Bank of Commonwealth v. Mudgett, 44 N. Y., 514. * Phillips V. Poindexter, 18 Ala., 579. ' Dickerson v. Turner, 12 Ind., 223.' * Bradley v. Northern Bank, 60 Ala., 259. 26 PROTEST OF BILLS AND NOTES. §§ 965, 966. of business, it would be different ; and where the protest was legal evidence of the manner of service of notice, it was held, nevertheless, that the certificate that " a notice to D. B. P., the indorser, was left at the residence of J. P. S., his attorney in fact, with a female white servant, the said J. P. S. not being in," was not evidence that S. was P.'s attorney in fact to receive notice, but only of such matters as it was the notary's duty to certify.^ § 965. And so a recital in a foreign notarial certificate, that the notary had served the protest on the acceptor, in his own name, and as agent of the drawer, is no evidence of the agency in a suit against the drawer,^ There is ob- vious reason in this distinction. When the notary finds a clerk or other person acting as the drawee's representative, in his office or place of business, he has a right to presume that he is duly authorized to represent him. Being held out as his clerk or agent, parties may so regard him. But when it is alleged that a mere outside person is an agent, it is an allegation to be sustained by distinct evidence, like any other separate fact. If the certificate state that a bill drawn on a firm was presented to A., one of the members thereof, it is evidence of his membership, upon the same principle that it is evi- dence as to the identity of an individual to whom present- ment is made.^ When the protest states that notice was sent by mail, it will be presumed that the postage was prepaid.* § 966. Not evidence of collateral facts. — But the certifi- cate of protest is not evidence of any collateral facts which may have been stated in it.- Thus, if it state that the reason given by the drawee for non-acceptance was, that he had no effects or funds of the drawer, it is no evidence of ' Drumm v. Bradfute, 18 La. Ann., 681. " Coleman v. Smith, 26 Penn. St., 255. * Elliott V. White, 6 Jones (N. C), 98. * Brooks v. Day, 11 Iowa, 46. ^ 967. THE PROTEST AS EVIDENCE. 2*] the want of effects or funds.^ Nor is it evidence that the drawee expressed his willingness to pay in certain bank bills.'^ Nor is it evidence of a course of conduct not specified in particular acts. Thus, where the notary stated in the protest that he " made diligent search and inquiry " for tlie makers, it was considered not proof of that fact, what search and inquiry not being stated.^ This seems to us correct, for what constitutes due diligence is a matter of law, to be adjudicated upon the facts, and is not a matter of notarial judgment and determination.^ § 967. Protest as secondary evideiice of notice. — Even where there is no statute authorizing it, there may arise circumstances which, upon general principles of the law of evidence, render the protest of a promissory note compe- tent to show due demand and notice. Thus, where the notary who had made the protest had died before the trial, and his testimony could not be procured, the protest of a note, coupled with the deposition of the notary's daughter, as to the uniform habit of her father in his notarial acts, was considered admissible secondary evidence for the pur- pose of conducing to prove demand and notice.^ So, where the messenger of a bank was dead, his book, in which he entered his acts respecting service of notices, was held admissible to prove that he notified an indorser.^ And in ' Dakin v. Graves, 48 N. H., 45 ; Dumont v. Pope, 7 Blackf., 367 ; i Parsons N. & B., 639; Wharton on Evidence, § 123. * Maccoun v. Atchafalaya Bank, 13 La., 342. * Bennett v. Young-, 18 Penn., 261. In Cockrill v. Loewenstine, 9 Heisk., 206 (1872), the notarial certificate stated that the notary " made diligent search and careful inquiry " to find the maker. The court held that this statement was not prima facie evidence that he did these things. Sneed, J., said : "The question of diligence is a question of law and fact, to be determined by the court and jury, and not to be certified by the notary The notarial protest by the law and usage of merchants is credited everywhere, and is generally prima facie evidence of the facts it recites ; but it must state facts, and not legal con- clusions." * Cockrill V. Loewenstine, supra. " Nicholls v. Webb, 8 Wheat., 450 " Welsh v. Barrett, 15 Mass., 380. 28 PROTEST OF BILLS AND NOTES. §§ 968, 969. respect to the form of notice, the notary being dead, his clerk's evidence as to the forms he was accustomed to use, is admissible.^ § 968. When suit is brought in State or country where protest is made, is it evidence ? — As has been already said, the instrument of protest is only admissible evidence of the facts it asserts in cases of foreign bills, except where stat- utory enactment has extended their admissibility in cases of inland bills and promissory notes.^ And it has been held that it can only be used to prove the dishonor when made in a foreign country ; and that if the bill were drawn in a foreign country, and payable in England, and suit were brought in England, the protest should be proved in the same manner as if it were an inland bill.^ For this ruling there is the high authority of Lord Ellenborough, who ex- pressed himself as "quite clear" in the opinion, but no prec- edent was quoted, and it has been criticised by Story, who considers that if the bill be foreign, the protest should be admitted.^ The United States Supreme Court has inti- mated its approval of the English precedent quoted ; but Story's views seem to us more judicious. Doubtless, the original reason of convenience, which recognized the pro- test of a bill made in foreign parts as evidence of dishonor, does not apply to a case in which the witnesses are within the country. But protest of all foreign bills is essential, irrespective of the place of payment ; and if the holder is required to make the protest, it would seem singular and unequal to deny him the benefit of its production.^ § 969. Evidence to supply omissions of protest. — When the protest has been made at the proper time and place, ' Wetherall v. Claggett, 28 Md., 465. ^ Union Bank v. Hyde, 6 Wheat., 572 ; Young- v. Bryan, 6 Wheat., 146 ; Sul- livan V. Deadman, 19 Ark., 484; Bond v, Bragg, 17 111., 69 ; Sumner v. Bowen 2 Wis., 524. ° Chesmer v. Noyes, 4 Camp., 129 ; Byles on Bills (Sharswood's ed.) [*254] 401 ; Edwards on Bills, 468. * Story on Bills, § 277, note 2. ' Nicholls v. Webb, 8 Wheat., 326. J 969. THE PROTEST AS EVIDENCE. 29 and in the proper manner, but does not upon its face make all the statements necessary to prove due demand and no- tice, parol evidence is admissible to supply the omission, provided it be in furtherance of, and not inconsistent with or contrary to, the statements that are made in the protest. Thus, where the protest stated a demand of the cashier, but omitted to state that the note was in, or the cashier at the bank, it was held admissible to prove these facts by parol testimony.^ So where it did not state where the present- ment and demand were made, or that the note was in the bank w^here it was made payable,^ or where it fails to in- form the indorser of a demand on the maker and a refusal,* or to state the fact of non-payment,^ any legitimate extrin- sic evidence is admissible to show that any of these facts existed, or steps were taken. And if there be any question as to the agency of the person to whom presentment was made, evidence is admissible to show it.^ In like manner, any defect in the statements respecting notice may be supplied — and, indeed, as we have seen, no- tice may be proved without any aid from the protest, which is only admissible, and not necessary evidence of it.^ ' Magoun v. Walker, 49 Me., 420 ; Seneca Co. Bank v. Neass, 5 Denio, 329. • W^etherall v. Claggett, 28 Md., 465 ; Hunter v. Van Bomhorst, i Md., 504. » Wetherall v. Claggett, 28 Md., 465 ; Nailor v. Bowie, 3 Md., 252. * Sasscer v. Farmers' Bank, 4 Md., 429. * Stainback v. Bank of Va., 1 1 Grat., 269. • Graham v. Sangston, i Md., 59. See Reynolds v. Appleman, 41 Md., 615. CHAPTER XXIX. NOTICE OF DISHONOR OF NEGOTIABLE INSTRUMENTS. SECTION I. NATURE AND NECESSITY OF NOTICE. § 970. 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. The party primarily liable is not entitled to notice, for it was his duty to have provided for payment of the paper ; and the fact that he is maker or acceptor for accommodation does not change the rule.^ Notice is not due to any party to a bill or note not negotiable, the rules of the law merchant concerning notice and protest applying to none but strictly commercial in- struments.^ It is regarded as entering as a condition in the contract * Hays V. N. W. Bank, 9 Grat., 127 ; see § 995. " Pitman v. Breckenridge, 3 Grat., 129. In Early v. Preston, 2 Pat. & Heath, 229, the following notice was accepted as good in form, and seems in every respect unobjectionable : Richmond August 20, 1842. Sir :— Please take notice that a draft drawn by S. H. Davis on Samuel S. Saunders, dated Lynchburg the i8th of February, 1842, for two thousand dol- lars, at six months' date, and indorsed by Joel Early and Pleasant Preston and A. Tompkins, Cashier, has been protested for non-payment by the President and Directors of the Farmers' Bank of Virginia, payment having been refused at the counting-room of S. S. Saunders on the 2otli instant, and you are held liable as indorser lor all loss, damages, principal, interest, cost, and charges sustained or to be sustained by reason of the non-payment aforesaid. Yours, Archibald Blair, Notary Public. {30) § 970^- NATURE AND NECESSITY OF NOTICE. 3 1 of the drawer and indorser of a bill, and of the indorser of a note, that he shall only be bound in the event that accept- ance or payment is only demanded ; and he notified if it is not made. And in default of notice of non-acceptance or non-payment, the party entitled to notice is at once dis- charged, unless some excuse exist which exonerates the holder.^ This, then, is one of the most important branches of the law of negotiable paper. § 970^. Power of government to regulate notice. — In England, in France, and in other countries where there is no restraint by constitutional law upon the legislative de- partment, interdicting its interference with contracts, it is within the power of that branch of the government to ex- tend the time of payment of negotiable and other securities, and consequently to preserve the liability of a drawer or indorser without the preliminary steps respecting protest and notice being taken at the stipulated time of payment, ac- cording to the terms of the instrument.^ But in the United States, where the States are prohibited by the Federal Con- stitution from passing any law " impairing the obligation of contracts," it is not within the power of any State legisla- tive body, whether a convention, or an ordinary representa- tive assembly, by ordinance, resolution, or enactment, to alter contracts entered into ; and as the condition of due notice is regarded as incorporated in the contract of the drawers and indorsers of negotiable paper, it would not be within their power to dispense with it, or change the time within which it must be given, so as to affect existing instru- ments. This view of the law in the United States was re- cently taken, and elaborately set forth by the Supreme Court of Appeals of Virginia, which held void an ordinance of the State convention, the effect of which was to dispense 'Rothschild v. Currie, 41 E. C. L. R., 43; Musson v. Lake, 4 How., 262. *Rouquette v. Overman, L. R. 10 Q. B., 525 (1875). 32 NOTICE OF DISHONOR OF INSTRUMENTS. § 97I. with demand, protest, and notice upon all checks, bills, and notes payable at a bank located in any city or town, if at the time of the maturity of such instruments, the town was occupied, invested, or access thereto interrupted by the public enemy ; and also an Act of the General Assembly which extended the time forgiving notice to ten days after the removal of the obstruction created by the presence of the enemy.* § 971. Failure to notify party entitled to notice dis- charges debt for which bill was drawn or indorsed. — So absolute is the necessity for notice to an indorser, in order to charge him, that if a note has been indorsed to the holder in conditional payment of a debt, the failure to give notice to the indorser will not only discharge the indorser as a party to the note, but also a debtor upon the original consideration, even though it be secured by a mortgage or deed of trust. The note, then, is made an absolute dis- charge of his liability, and the indorsee must look solely to prior parties.^ And so in respect to the drawer of a bill given in conditional payment.^ The neglect to give notice to the drawer of a renewed bill not only discharges him from liability to pay that bill, but discharges him from liability to pay the prior bill, to satisfy which it was drawn ; * and this although it be expressly agreed that the taking of such second bill shall not exonerate any of the parties to the first bill until actual payment.^ ' Duerson's Adm'r v. Alsop, 27 Grat, 230 (1876). See also Farmers' Bank v. Gunnell, 26 Grat., 144 (1875); see § 871 ; and Cook v. Googins, 126 Mass., 410, " Shipman v. Cook, i Green (N. J.), 251 ; Peacock v. Purcell, 14 C. B. N. S., 728. See also §§ 828, 1276, 1277 ; Benjamin's Chalmers' Digest, 180. 'Darrach v. Savage, i Show., 155 (1691) ; Bridges v. Berry, 3 Taunt., 130, Gale V. Walsh, 5 T. R., 239 ; Rogers v. Stephens, 2 T. R., 713 ; Allan v. Eldred, 50 Wis., 136; Betterton v. Roope, 3 Lea (Tenn.), 220; Rucker v. Hiller, 16 East., 43 ; 3 Camp., 217 ; Smith v. Miller, 43 N. Y., 171 (1870) ; 52 N. Y., 546 (1873) ; Edwards on Bills, 445. See infra, §§ 452, 828, 1276. * Bridges v. Berry, 3 Taunt., 130 ; 3 Maule & S., 362 ; Chitty on Bills [*433l 488 [*444], 500, See § 1276. " Reid V. Coats, Bro. P. C. ; Chitty on Bills [*434]. 488. ^972. FORMAL AND ESSENTIAL ELEMENTS OF NOTICE. 33 SECTION II. FORMAL AND ESSENTIAL ELEMENTS OF NOTICE. § 972. Notice 7nay be verbal or written. — The notice need not be in writing ; it is sufficient if it be given verbally ; ^ but for precision and safety written notice is preferable. Verbal notice must be necessarily confined to those cases in which notice is directly given to the party in person, or is sent by a messenger to his place of business or residence. It seems that a verbal notice is less strictly construed than a written one, especially when its sufficiency is impliedly admitted by the party's response.^ Thus, where the holder's clerk told the drawer that the bill had been duly presented, and that the acceptor could not pay it, and the drawer replied that he would see the holder about it, this was held to be suffi- cient evidence to warrant the jury in finding that the fact of the dishonor of the note w^as sufficiently communicated to the drawer.^ Mere knowledge of dishonor does not constitute notice.* Notice signifies more; but when the fact of dishonor is communicated by one entitled to call for payment, it be- comes notice, as it is then to be inferred that the intention is to hold the party notified responsible. ** " Boyd's Adm'r v. City Savings Bank, 15 Grat., 501 ; Glascow v. Pratte, 8 Mo., 366 ; First National Bank v. Ryerson, 23 Iowa, 508 ; Cuyler v. Stevens, 4 Wend., 506; Thompson v. Williams, 14 Cal., 160; Pierce v. Schader, 55 Cal., 406 ; Merritt v. Woodbury, 14 Iowa, 299 ; Bank v. Brooking, 2 Litt., 41 ; Gilbert v. Dennis, 3 Mete, 495 ; Byles on Bills (Sharswood's ed.). 411 ; Story on Notes, § 341 ; I Parsons N. & B.,477 ; Thomson on Bills, 336; 2 Ames B. & N., 432 ; Tindal v. Brown, i T. R., 167 ; Housego v. Cowne, 6 L. J. Exch., 1 10 ; Crosse v Smith, I Maule & S., 545. 'Byles on Bills [*264], 211, 212 : Phillips v. Gould, 8 C. & P., 355 (34 E. C. L. R.) ' Metcalfe v. Richardson, 11 Com. B., ion (73 E. C. L. R.) * Juniata Bank v. Hale, 16 Serg. & R., 157 ; Bank of Old Dominion v. McVeigh, 29 Grat., 559; 26 Grat., 852; Brown v. Ferguson, 4 Leigh, 37 ; Story on Bills. § 375- 'Caunt V. Thompson, 7 Com. B., 400; Miers v. Brown, 11 M & W.. ^72; Tindal v. Brown, i T. R., 167. Vol. II.— 3 34 NOTICE OF DISHONOR OF INSTRUMENTS. §§ 973, 974. § 973. As to the fo7'm of the notice, no particular phrase or form is necessary. The object of it is to inform the party to whom it is sent : i, that the bill or note has been pre- sented ; 2, that it has been dishonored by non-acceptance, or non-payment ; and, 3, that the holder considers him liable, and looks to him for payment. And in framing the notice, all that is necessary to apprise the party of the dis- honor of the instrument is, to intimate that he is expected to pay it. In order that a notice should answer these conditions, and duly intimate dishonor to the drawer or indorser, it should therefore, either expressly or by just and natural implication, comprise the following elements : (i) A suffi- cient description of the bill or note to ascertain its identity. (2) That it has been duly presented for acceptance or pay- ment to the drawee, acceptor, or maker. (3) That it has been dishonored by non-acceptance or non-payment. (4) That the holder looks to the party notified for payment* § 974. Description of the bill or note dishonored. — The notice should describe the bill or note in unmistakable terms ; should state where the note is, that the party noti- fied may find it ; should state who the holder is, and who gives the notice, or at whose request it is given. Such, at least in theory, are the requisites of a proper notice ; and a good business man should never neglect to comply with them. But the courts are not strict in requiring this thor- ough description of the dishonored instrument ; and the requirements of the law are considered as satisfied by any description which, under all the circumstances of the case, so designates the bill or note as to leave no doubt in the mmd of the party, as a reasonable man, what bill or note was intended.^ ' Bank of Old Dominion v. McVeigh, 29 Grat., 558 ; Thompson v. Williams, 14 Cal., 162 ; Story on Notes, § 348, '^ Gilbert v. Dennis, 3 Mete, 495 ; Shelton v. Braithwaite, 7 M. & W., 436 ; I Parsons N. & B., 472, 474. § 975- FORMAL AND ESSENTIAL ELEMENTS OF NOTICE. 35 § 975. The object of the law in requiring a correct de scription of the bill or note to be given in the notice to the drawer or indorser is, that he may be put upon notice of the extent of his liability, and placed in possession of the material facts necessary to enable him to secure the liability of others over to him, and his mvn reimbursement upon payment of the note. The rule was not intended to subserve a technical purpose, but to promote substantial justice ; and when it sufficiently appears that the drawer or indorser, at the time of receiving the notice, knew what particular piece of paper was referred to, and could not have been prejudiced by the failure to describe it, he should not be permitted to object that his information was not communicated in a particular manner.* Accordingly, it has been held in California that where the holder verbally informed the indorser that " he had demanded payment of that note, and should endeavor to make him liable," the indorser was bound, although the note was neither produced nor described, as it appeared that he knew what note was referred to, and was in no re- spect misled.^ Describing a bill as having been left for col- lection by the indorser, when in fact it was left by the holder, would make no difference.^ § 976. Circumstances may be regarded in testing suf- ficiency of description. — Story says that "the description of the note should be sufficiently definite to enable the in- dorser to know to what one in particular the notice applies ; for an indorser may have indorsed many notes of very dif- ferent dates, sums, and times of payment, and payable to different persons, so that he may be ignorant, unless the description in the note is special to which it properly ap- plies or which it designates.'"* This is undoubtedly the correct statement of the general rule, as to the best mode ri>* , ' Thompson v. Williams, 14 Cal., 162, langiiage of Cope, J. ' Thompson v. Williams, supra. ^ Biilson v. Hood, 5 Victorian R., 125, * Story on Promissory Notes, § 349 ; Cook v. Litchfield, 5 Seld., 289. $6 NOTICE OF DISHONOR OF INSTRUMENTS. § 977. of preparing notice ; but if it were intended to confine the parties to the mere face of the notice to ascertain its suf- ficiency, it would be clearly erroneous. For there is no doubt that the circumstances of each particular case, and the indorser's or drawer's knowledge of them, may be looked to, to ascertain whether or not the notice is sufficient. And if the drawer or indorser could not reasonably con- found the bill or note mentioned in the notice with another, the notice would be sufficient, although meagre in its de- scription. And if full and ample in setting forth the terms of the note, it would make no difference that the notice left the indorser in doubt as to what instrument it referred to, it being his misfortune, if from his having indorsed sev- eral notes, a complete description of one of them, in every essential feature, does not enable him to identify it.^ § 977. In New York, where defendant was payee and indorser of four several notes made by J. L. Caren, and dated each " Detroit, April 2d, 1849," it appeared that each note was for the sum of $740, and were precisely the same terms, except that one was payable in nine, one ten, one eleven, and the other twelve months from date. Each note was presented and protested on the day of maturity, and notices addressed to the indorser, each stating that the note to which it referred " was duly protested for non-pay- ment on the day that the same became due." In a suit upon the notes, it was held by the Superior Court that the notices were sufficient, inasmuch as they informed the in- dorser that each note was protested on the day it became due, and although they did not describe the respective notes by their dates, they sufficiently identified them as the notes falhng due on the very days they were respectively protested.^ This decision was subsequently reversed by the ' Hodges V. Shuler, 22 N. Y., 115 (i860). The defendant executed a number of notes in all respects alike, and distinguishable only by the numbers marked on the margin. It was held that the omission to state the number in a notice oi non-payment of one of them, did not vitiate it. * Cook V. Litchfield, 5 Sandf., 340 (1851), Durer, J. 5 97^- FORMAL AND ESSENTIAL ELEMENTS OF NOTICE. 2>7 Court of Appeals, on the ground that the description of the notes was insufficient, in not distinguishing the one from the other, and a new trial ordered.^ And finally judgment was rendered for the plaintiff, the jury having found as a fact that the defendant knew to what particular notes the notices respectively related.^ The Superior Court reluctantly bowed to the authority of the Court of Ap- peals, in respect to the doctrine enunciated ; and the views of the Superior Court seem to us altogether unanswerable.^ § 978. The entire omission of the maker's name in the no- tice of dishonor of a note would be fatal ; ■* but notice to the acceptor describing the bill as " drawn by you," though not naming the drawer, has been held sufficient, there being no proof that he had drawn or indorsed any other paper with which it could be confounded, and it being otherwise cor- rectly described.^ And likewise, notices describing a note as a bill,^ a bill as a note,''' or the drawer as acceptor,® or the indorser as maker,^ have been held not vitiated thereby. Where a note is made payable to two persons jointly, and indorsed by each, it is not indispensable that notices of protest should be addressed to them jointly, or refer to their joint indorsement, and notices addressed to them sev- erally, each describing the note as indorsed by the person to whom it is addressed, without mentioning the other in- dorser, are sufficient to charge them, being in other respects unobjectionable.^^ ' Cook V. Litchfield, 5 Selcl., 286 (1853), Ruggles, C. J. ' Cookv. Litchfield, 2 Bosw., 147 (1857), Bosworth, J, ' See Hodges v. Shuler, 22 N. Y., 115, and ante, § 976, • Home Insurance Company v. Green, 5 Smith (19 N. Y.), 518; see also. Stockman v. Parr, li Mees. & W., 809 ; s. c. i Car. & K., 41. " Gill V. Palmer, 29 Conn., 54. • Messenger Southey, i Man. & G., 76 (39 E. C. L. R.) ' Stockman v. Parr, 11 M. & W., 809. • Mellersh v. Rippen, 7 Exch,, 578, overruling, in effect, Beauchamp v. Cash, 1 Dow. & R., 3, where it was held that a notice calling the " drawer " an " in dorser " was bad. ' Haines v. Dubois, i Vroom (N. J.), 259. '° Cayuga Co Bank v. Warden, 2 Seld., 19. 38 NOTICE OF DISHONOR OF INSTRUMENTS. § 979 § 979. What notice need not state. — The notice need not state who is the holder of the bill or note,^ nor at whose request it is given.^ For although the protest and notice are nullities, unless proceeding from the request of a party- entitled to direct them, the objection that the party is a stranger must appear from proof, and is not presumable from the mere omission of the notice to state the interest or relation of the party sending it ;^ nor where the demand was made ; * nor at what hour the paper was presented ; ^ nor where it is lying, nor on whose behalf payment is de- manded ; ^ nor that the party presenting had the paper with him at the time ;'' nor at what time it fell due ;^ nor the absence of the maker when it was presented.* But it should be signed or indicated from whom it pro- ceeds — otherwise it will be insufficient.^" It is not netessary that the party should know the fact of dishonor, if the notice unequivocally states it." The decisions in the United States go to the extent of ' Mills V. Bank United States, li Wheat., 431 ; Bradley v. Davis^ 26 Me,, 45 ; Howe V. Bradley, 19 Me., 35. ' Shed V. Brett, i Pick., 401. ' Gillespie v. Nevill, 14 Cal., 408 ; Woodthorpe v. Lawes, 2 M. & W., 109. * Mills V. Bank United States, 11 Wheat., 431. In this case the Supreme Court said : " The last objection to the notice is, that it does not state that pay- ment was demanded at the bank when the note became due. It is certainly not necessary that the notice should contain such a formal allegation. It is sufficient that it states the fact of non-payment of the note, and that the holder looks to the indorser for indemnity. Whether the demand was duly and regularly made is a matter of evidence, to be established at the trial. If it be not legally made no averment, however accurate, will help the case ; and a statement of non- payment and notice is, by necessary implication, an assertion of right by the holder, founded upon his having complied with the requisitions of law against the indorser. In point of fact, in commercial cities, the general, if not universal, practice is not to state in the notice the mode or place of demand, but the mere naked fact of non-payment." See remarks on this case in Gilbert v, Dennis, 3 Mete, 409, quoted post, § 983, p. 39, note 3. " Fleming v. Fulton, 6 How. (Mo.), 473. ' Woodthorpe V. Lawes, 2 M, & W„ 109; Harrison v, Ruscoe, 15 M, & W„ «3i. ' Mainerv. Spurlock, 9 Rob. (La.), 161. * Denegre v. Hiriart, 6 La. Ann., 100. ' Sanger v. Stimpson, 8 Mo., 260. "• Klockenbaum v. Pierson, 16 Cal., 375 ; Walker v. State Bank, 8 Miss., 704, " Jennings v, Roberts, 4 E. & B„ 615 (82 E, C, L, R.) § 979^- FORMAL AND ESSENTIAL ELEMENTS OF NOTICE. 39 holding that a notice to the indorscr of a note, simply statinjr the name of the maker, the amount, and the fact that it was indorsed by the party to whom notice was sent, is sufficient.^ But if there are any circumstances which caused this meagre description to mislead the party receiv- ino- the notice — as, for instance, if he were the indorser of o two or more notes to which the terms of the notice might equally apply — then the notice might be void for uncer- tainty of description.^ A notice without date, stating that the instrument had been " this day presented for payment," would be defective, in not fixing the date of dishonor, though extraneous evi- dence mieht doubtless be introduced to show that the de- feet did not mislead the indorser, and that the dishonor was, in fact, at the proper time.^ § 979^. No misdescription of the date of the iiistrument will vitiate the instrument, unless it misleads} — Nor will ' Housatonic Bank v. Laflin, 5 Cush., 546; Youngs v. Lee, 18 Barb., 187 . Beals V. Peck, 12 Barb., 245. ' I Parsons N. & B., 473 ; Story on Bills, § 301 ; Cook v. Litchfield, 5 Seld., 279; Cayuga Bank v. Warden, i Corns., 415. ^ Wynn v. Alden, 4 Den., 163; Thompson v. Williams, 14 Cal., 164; Reynolds V. Appleman, 41 Md., 615. But this is doubtful, i Parsons N. & B., 474. * Mills V. Bank United States, il Wheat., 431. In the case cited, the note ot Wood & Ebert, for $3,600, was dated " 20th July, 1819," and was payable " sixty days after date, at the office of discount and deposit of the Bank of the United States, at Chilicothe," and the notice was as follows: "Chilicothe, 22d September, 1819. " Sir : You will hereby take notice that a note, drawn by Wood & Ebert. dated 20th day of September, 1819, for §3,600, payable to you or order in sixty days at the office of discount and deposit of the Bank of the United States, at Chilicothe, and on which you are indorser, has been protested for non-payment, and the holders thereof look to you. " Yours, respectfully, " Levi Belt, Mayor of Chilicothe. "Peter Mills, Esq." The notice was sustained, the court saying that the error of substituting Sep- tember for July was apparent on the face of the notice, and immaterial, as the mistake could not mislead. Dennistoun v. Stewart, 17 How., 606; Tobey v. Lennig, 14 Penn. St., 483 ; Kilgore v. Buckley, 14 Conn., 362 ; Ross v. Planters' Bank, 5 Humph., 335 ; Cayuga County Bank v. Warden, i Corns., 413 ; Byles on Bills (Sharswood's ed.) [*269], 417 ; Thompson v. Williams, 14 Cal., 162. 40 NOTICE OF DISHONOR OF INSTRUMENTS. §§ 980, 98 1. such a misdescription of the amount;* nor of the names of the parties ;^ nor of the time the paper fell due.^ § 980. As instances. — Notices in which the indorser was termed " Samuel A. Bradbury," while his real name was " Samuel A. Bradley";* describing "J. Cushman " as "J. Gushing";^ one "Byron" as "Pyron,"^ have been held sufficient. So notices describing the bill as dated " 28th October," whereas it bore date the "23d";'' describing a note as for "$200," which was only for " $175",^ describ- ing the amount as " $999.52," instead of " $599.52 'V and the amount as "$300," instead of "$600,"^° have been held sufficient, the party not being misled. § 981. Where there was a misstatement in the notice of the party on whose behalf it was given, it was held that the ' Bank of Alexandria v. Swann, 9 Pet., 33, in which case the court said : " The misdescription complained of in this case is in the amount of the note. The note is for $1,400, and the notice describes it as for the sum of $1,457. In all other respects the description is correct ; and in the margin of the note is set down in figures, 1,457 ; and the question is, whether this was such a variance or misdescription as might reasonably mislead the indorser as to the note for pay- ment of which he was held responsible. If the defendant had been an indorser of a number of notes for Humphrey Peake, there might be some plausible grounds for contending that this variance was calculated to mislead him. But the special verdict finds that from the 5th of February, 1828 (the date of a note for which the one now in question was a renewal), down to the day of the trial of this cause, there was no other note of the said Humphrey Peake indorsed by the defendant, discounted by the bank, or placed in the bank for collection, or otherwise. There was, therefore, no room for any mistake by the indorser as to the identity of the note." Bank of Rochester v. Gould, 9 Wend., 279 ; Reedy v. Seixas, 2 Johns Cas., 337 ; Rowan v. Odenheimer, 5 Sm. & M., 44; Snow v. Perkins, 2 Mich., 238 ; Wood v. Watson, 53 Me., 300. In Cayuga County Bank V. Warden, i Corns., 413; 2 Seld., 19, the note was for $600, and the notice to the indorsers described it as for $300. It being the only note of the maker, Warden, indorsed by the defendants, and "$600" being indorsed on the margin of the notice, it was held sufficient. Jewett, Ch. J. : " Who can doubt but that this notice conveyed to the minds of the defendants the information that this identical note had been dishonored, although it misdescribed the note as it respects the sum for which it was made in the body of it ? " See, also, Downer V. Remer, 23 Wend., 670. ^ Dennistoun v. Stewart, 17 How., 606 ; Carter v. Bradley, 19 Me., 62 ; Smith V. Whiting, 12 Mass., 6. ^ Smith v. Whiting, 12 Mass., 6; see §984. * Carter v. Bradley, 19 Me., 62. " Smith v. Whiting, 12 Mass., 6. " Moorman v. Bank of Alabama, 12 Ala., 353. "• McCune v. Belt, 38 Mo., 291. * Snow v. Perkins, 2 Mich., 238. ' Downer v. Remer, 23 Wend., 670 ; 25 Id., 277. " Cayuga Co. Bank v. Warden, i Corns., 413 ; 2 Seld., 19. § 9^2. FORMAL AND ESSENTIAL ELEMENTS OF NOTICE. \.\ notice was not thereby wholly avoided ; but the party giv- ing it was placed in the same situation, as to the party to whom it was given, as if the representation had been true. And, therefore, that defendant would be entitled to every defence against the plaintiff that he would have had if the notice had been given by the party named.^ § 982. /7i the second and third places, as to the statement of presentment and dishonor. — It was held at one time that the presentment and dishonor of the bill or note must ap- pear on the face of the notice "in express terms or by nec- essary implication";^ but the later and better ruling is that it is sufficient if this appear by "reasonable intendment."' Though properly understood, the sense of the two phrases is pretty much the same, for " necessary implication means not natural necessity, but so strong a probability that an intention contrary to that which is imputed can not be sup- posed."* But it is quite clear that it will not be sufficient merely to state in the notice the fact of non-payment of the bill or note, without stating that payment was demanded of the maker, drawee, or acceptor, as the case may be, or stating some legal excuse for not making such demand. It should state whether or not the paper has been presented for payment ; and if not, why not, for the reason that the indorser has a right to be informed of the facts on which the liability depends, to the end that he may judge for him- self whether or not it is his duty to pay it.^ * Harrison v. Ruscoe, 15 M. & W., 231. ^ Solarte v. Palmer, 7 Bins'., 53^ (20 E. C. L. R.) ; 5 Moo. & P., 475 ; I Cromp. & J., 417 ; i Tyrw., 371 ; Boneton v. Welsh, 3 Bing. N. C, 688 ; Byles on Bills (Sharswood's ed.) [*265], 413. " Hedger v. Steavenson, 2 M. & W., 799 ; Lewis v. Gompertz, 6 M. & W„ 402 ; Byles on Bills (Sharswood's ed.), 413, n. 9, and [*265j, 416 ; Chitty [*466], 525 ; Edwards on Bills, 595. * Wilkinson v. Adams, i Ves. & B., 466, Lord Eldon ; Hedger v. Steavenson, 2 M. & W., 799 ; 5 Dowl., 771, Parke, B. * Page V. Gilbert, 60 Me., 488 (1872), Walton, J. : "A notice to the indorser of a note, which merely informs him of the non-payment of the note, and de- mands payment of him, without stating that payment has been demanded of the maker, or giving any legal excuse for not demanding it of him, is not sufficient to charge the indorser. The notice should state whether or not the note has 42 NOTICE OF DISHONOR OF INSTRUMENTS. § 983. § 983. What is sufficient intijnation of dishonor. — The mere statement that the bill or note is unpaid is not alone sufficient to intimate by " reasonable intendment" that the bill or note has been dishonored, for the holder may not have used due diligence in presenting it ; and therefore something more must appear, according to the weight and number of authorities on the question,^ though there is au- thority to the contrary, which deprecates overnicety, and been presented to the maker for payment ; and if not, why not ? The indorser has a right to be informed of those facts on which his liability depends, to the end that he may judge for himself whether or not it is his duty to pay the note. A notice which merely states that the note has not been paid, without stating whether or not it has been presented for payment, or giving any excuse for not presenting it, is not sufficient ; for such a notice may be strictly true in every particular, and yet the indorser not be liable. When the official certificate of a notary public states that he ' duly ' notified the indorser, it is sufficient prima facie to charge the indorser ; because the notary could not properly say he had ' duly ' notified hmi unless he had given hun notice of a demand as well as of non-payment of the note." Gilbert v. Dennis, 3 Mete, 495 ; Union Bank v. Humphreys, 48 Me., 172 ; Strange v. Price, 2 Perry & D., 278. 1 Phillips V. Gould, 8 C. & P., 355 (34 E. C. L. R.) ; Strange v. Price, 10 Ad. & EL, 125 (37 E. C. L. R.) ; Furze v. Sharwood, 2 Q. B., 338 (42 E. C. L. R.) ; Messenger v. Southey, i Man. & G., 76 (39 E. C. L. R.) ; Boneton v. Welsh, 3 Bing. N. C, 688 (32 E. C. L. R.) ; Hartley v. Case, 4 Barn. & C, 339 ; Gilbert V. Dennis, 3 Mete, 495 ; Townsend v. Lorain Bank, 2 Ohio St., 355 ; Armstrong v'. Thruston, 11 Md., 148 ; Graham v. Sangston, i Md., 60 ; Arnold v. Kinloch, 50 Barb., 44 ; Ething v. Schuylkill Bank, 2 Barr., 356 ; Sinclair V. Lynch, I Spears, 244; Clark v. Eldridge, 13 Mete, 96; Pinkham v. Macy, 9 Id., 174; Lockwood v. Crawford, 18 Conn., 361. In Mills v. Bank United States, 11 Wheat., 431, cited in a previous note, it is said obiterhy the Supreme Court that " the mere naked fact of non-payment is sufficient." This dictum, as explained in Gilbert v. Dennis, 3 Mete, 495, is reconcilable with the text, and we concur fully in what is said by Shaw, C. J., in the latter case. Says he, speaking of the case of Mills v. Bank United States : " In the case then before the court, the notice contained a full and precise statement of the presentment, demand, and non-payment by the maker. The objection with which the court was dealing was, that the notice did not specify the time and place of demand. The answer made was, that such particularity was unnecessary, and that it is sufficient that it states the fact of non-payment. AppHed to the facts of that case, it may be construed to mean non-payment after due presentment. So when the learned judge speaks of the practice of commercial cities, he speaks of notice of the mere naked non-payment, in contradistinction to stating in the notice the mode and place of demand. That such is the meaning may be inferred from the passage before cited, in which he speaks of the object of the notice, which is to inform the indorser that payment has been refused by the maker. Refusal implies non- payment on demand, or under such circumstances as render a presentment and demand unnecessary. Indeed, in many cases, simple notice of non-payment is notice of dishonor ; as where the note is in terms, or by usage or special agree- ment, payable at a bank, a notice stating the date and terms of the note, showing that it has become due, and averring that it is unpaid, is equivalent to an aver- ment that it is dishonored." § 983. FORMAL AND ESSENTIAL ELEMENTS OF NOTICE. 43 declares such rulings to be severe technicalities.* But such a notice may suffice when the paper is payable at a bank, and the notice emanates from the bank.^ Nor will it be sufficient to say simply that payment was demanded, unless it appear also that it was presented.^ But the direct statement that the instrument has been " dishonored," is sufficient, that word including the presentment and demand which were neces- sary f and there are other words which, coupled with the state- ment of non-payment, indicate sufficiently a dishonor. Thus : " Your bill is unpaid, noting 5s.";^ or, " is this day returned with charges";^ or, " noting expenses, etc.";'' or, " with charges of protested exchange."^ The expression "returned un- paid " was held insufficient to indicate dishonor at one time ;* but subsequently the opposite view prevailed.*" And Hkewise "protested,"" is sufficient in the case of promissory notes and inland bills,*^ as well as of foreign ' Cromer V. Piatt, 37 Mich., 132. See 26 Am. Rep,, 505, where it is shown that this decision is but slenderly supported by precedent. But in Paul v. Joel, 4 H. & N., 355 (1859), where to the statement that the bill was dishonored was added, " payment is requested before 4 o'clock," notice was held sufficient. 2 Ames B. & N., 378. * See previous note, and Gilbert v. Dennis, 3 Mete, 495. ' Musson V. Lake, 4 How., 262. * Stocken v. Collin, 9 C. P., 653 (38 E. C. L. R.) ; S. C. 7 M. & W., 515 ; Woodthorpe v. Lawes, 2 M. & W., 109; Shekon v. Braithwaite, 7 M. & W., 436 ; Edmunds v. Cates, 2 Jur., 183 ; Lewis v. Gompertz, 6 M. &: W., 400 ; King V. Bickley, 2 Q. B., 419 ; Rowland v. Sprinjett, 14 M. & W., 7 (7 E. C. L. R.) ; Smith V. Boulton, i Hurl. & W., 3. ' Armstrong v. Christiana, 5 C. B., 687 (57 E. C. L. R.) ; Hedger v. Steaven- son, 2 M. & W., 799 ; 5 Dowl., 771. * Grudgeon v. Smith, 6 Ad. & El., 499 (33 E. C. L. R.) ; 2 Nev. & P., 303 ; Everard v. Watson, i El. & B., 801. ' Everard v. Watson, i EI. & B., 801 ; Mellersh v. Rippen, 7 Exch., 578. * De Wolf V. Murray, 2 Sandf, 166. ' Boulton V. Welsh, 3 Bing. N. C, 688. " Robson V. Curlewis, Car. & M., 378 ; S. C. 2 Q. B., 421, " Wheaton V. Wilmarth, 13 Mete, 422 ; Saltmarsh v. Tuthill, 13 Ala., 390 ; McFarland v. Pico, 8 Cal., 636 ; Eastman v. Turman, 24 Cal., 383 ; see also Burkham v. Trowbridge, 9 Mich., 209 ; Edwards on Bills, 295. '■^ Mills V. Bank United States, 11 Wheat., 431 ; Bank of Alexandria v. Swann, 9 Pet., 33 ; Brewster v. Arnold, i Wis., 264 ; Kilgore v. Buckley, 14 Conn., 362; Smith V. Little, 10 N. H.. 526; Howe v. Bradley, 19 Me., 31; Cook v. Litchfield, 5 Sandf, 330; 5 Seld., 279; Youngs v. Lee, 2 Kern, 551 ; Housa- tonic Bank v. Laflin, 5 Cush., 546; Beals v. Peck, 12 Barb., 445 ; Denegre v. Hiriart, 6 La. An., 100; Burgess v. Vreeland, 4 N. J., 71; amfra, Piatt v. Drake, J Doug. (Mich.), 296, overruled by Burkham v. Trowbridge, 9 Mich., 209, 44 NOTICE OF DISHONOR OF INSTRUMENTS. §§ 984, 985. bills.^ Where the notice of the maker's non-payment of an instahnent states that the holder looks to the indorser for payment of the instalment and of the interest on the note, the surplusage does not vitiate it.^ § 984. Whether misstateme7it of notice will vitiate it. — There is conflict of authority on the question whether or not the indorser is discharged by a misstatement in the notice of the time of presentment or protest, when in fact there had been no irregularity. Some cases hold that, if he were not misled or deceived, the notice is valid ; ^ but others decide it to be invalid, on the ground that it, in fact, communicates to the party that he is discharged in stating presentment or protest at an improper time.^ But it is obvious that the holder in such a case claims that the party is not discharged, and he is notified that he is held liable, and looked to for payment. He ought not to be misled by the mere circumstance of a mistaken date, which on its face would seem to be a mistake. And if, in fact, there was due presentment and protest in the proper time, it would be adopting a technicality quite opposed to the uniform liberal spirit of the law of notice to discharge the mdorser on account of it. § 985. In the fo2irth place, as to the statement that the holder looks to the party to whom notice is sent for pay- 1 Crawford v. Branch Bank, 7 Ala., 205 ; Spies v. Newbury, 2 Doug. (Mich.), 495. Titchburg Mutual Fire Ins. Co. v. Davis, 121 Mass., 121. ^Ontario Bank v. Petrie, 3 Wend., 456 ; Crocker v. Getchell, 23 Me., 392 ; Byles on Bills (Sharswood's ed.) P269], 417, note i ; Journey v. Pierce, 2 Houston. *Routh V. Robertson, 11 S. & M., 362; Etting v. Schuylkill Bank, 2 Penn. St., 355; Ransom v. Mack, 2 Hill, 587 ; Townsend v. Lorain Bank, 2 Ohio St., 345 ; I Parsons N. & B., 476. In Reynolds v. Appleman, 41 Md., 615, this view seems to be approved, but it was held inapplicable to the case considered. In this case the notarial certificate was dated December 23d, and stated that the note " is delivered to me for protest, the same not being- paid, payment thereof having been demanded and refused." The court said, through Bartel, C. J. : " This implies, in the absence of any statement to the contrary, that the demand was duly made at the maturity of the note," the note fell due, and was duly pre- sented on December 22d, as was proved by parol testimony. Edwards on Bills, 593. § 9^6. FORMAL AND ESSENTIAL ELEMENTS OF NOTICE. 45 ment, the express statement in the notice to this effect was, as it might seem, formerly held necessary ; ^ but the pre- vailing rule at the present time is, that the mere fact of giving notice to the party implies that he is looked to for payment.^ On this subject it has been said by the United States Supreme Court :^ "A suggestion has been, made at the bar, that a letter to the indorser, stating the demand and dishonor of the note, is not sufficient, unless the party sending it also informs the indorser that he is looked to for payment. But when such notice is sent by the holder, or by his order, it necessarily implies such responsibility over. For what other purpose could it be sent ? We know of no rule that requires any formal declaration to be made to this effect. It is sufficient, if it may be reasonably in- ferred from the nature of the notice." § 986. Whether notice must state fact of protest. — When a protest is necessary in order to charge the drawer or in- dorser, the notice should state that the bill was protested, in order to show that his liability was fixed.; but if, in point of fact, the bill was noted for protest, no statement as to protest in the notice is necessary.* And in one case, where the notice stated expressly that the bill had not been protested, it was held by the court, that it might mean no more than that the protest had not been extended, and it misfht still be understood that it had been noted. ^ W^here o 'Tindal v. Brown, i T. R., 169 ; Solarte v. Palmer, 7 Bing., 530 (20 E. C. L. R.) 'Bank of Cape Fear v. Seawell, 2 Hawks, 560; Warren v. Gilman, 5 Shep., 360; Shrieve v. Duckham, i Litt., 194; Cowles v. Harts, 3 Conn., 517; Town- send V. Lorain Bank, 2 Ohio St., 345 ; Burg-ess v. Vreeland, 4 N. J., 71 ; Bar- stow V. Hiriart, 6 La. An., 98; Story on Promissory Notes, § 355; Furze v. Sharwood, 2 Q. B., 388 (42 E. C. L. R.) : Chard v. Fo.x. 14 Q. B., 200 (68 E. C. L. R.) ; Metcalf v. Richardson, 20 Eng. L. & Eq., 301 ; Miers v. Brown, ii Mees & W., 372; Caunt v. Thompson, 7 C. B., 400 (62 E. C. L. R.) ; King v. Buckley, 2 Q. B., 419 (42 E. C L. R.) ; Edwards on Bills, 598, 660. 'Bank of U. S. v. Carneal, 2 Pet., 543. * Ex parte Lowenthal, L. R., 9 ch., 591 ; 2 Ames B. & N., 452. ' Brown v. Dunbar, Thomson on Bills, 332. 46 NOTICE OF DISHONOR OF INSTRUMENTS. § 987. the party receiving notice is abroad, it has been said that the notice should mention the protest, since he could not readily ascertain as to the fact by inquiry,^ but this doctrine does not seem to have become ingrafted into the principles of the law merchant. It is now settled — though the contrary at one time was maintained — that it is not necessary that a copy of the pro- test of a foreign bill should accompany notice of its dis- honor.^ But information of the protest should be sent if the party to whom notice is transmitted resides abroad.^ SECTION III. WHO MAY GIVE NOTICE OF DISHONOR. § 987. The notice of dishonor should emanate from the holder of the instrument at the time of its dishonor, and should be communicated to all the parties whom he means to hold liable for its payment. But it is not absolutely neces- sary that it should come from him, for the holder is entitled to the benefit of notice given in due time by any party to the instrument who would be liable to him if he, the holder, had himself given him notice of dishonor.* Thus if the holder duly notifies the sixth indorser, and he the fifth, and he the ' Lord Ellenborough, in Rollins v. Gilson, 3 Camp., 334 ; i M. & S., 288 ; Thomson on Bills, 334. ^Goodman v. Harvey, 4 Ad. & EL, 870 (31 E. C. L. R.) ; Wallace v. Agry, 4 Mason, 336 ; Story on Bills, § 302 ; ante, § 943. = See Rogers v. Stephens, 2 T. R., 713 ; Byles on Bills (Sharswood's ed.) [*270], 418. * Chapman v. Keene, 3 Ad. & El., 193 ; 4 Nev. & M., 607 ; Lysaght v. Bryant, 9 C. B., 46; s. C. 2 Cam & K., 1016; Jameson v. Svvinton, 2 Camp., 373; Wilson V. Swabey, i Stark., 34 ; Stafford v. Yates, 18 Johns, 327 ; Bachellor v. Prest, 12 Pick., 406; Stanton v. Blossom, 14 Mass., 116 ; Bank U. S. v. God- dard, 5 Mason, 366; Triplett v. Hunt, 3 Dana, 126; Renshaw v. Triplett, 23 Mo., 213 ; Whitman v. Farmers' Bank, 8 Porter (Ala.), 258; Wilson v. Mitchell, 4 How. (Miss.), 272 ; Marr v. Johnson, 9 Yerg., i ; Abat v. Rion, 9 Mart. (La.), 465; Stor}' on Prom. Notes, § 301; Story on Bills, §304; i Parsons N. & B., 503, 504 ; [Tindal v. Brown, i T. R., 467, and ex parte Barclay, 7 Ves., 597, are overruled] ; Thomson on Bills, 357 ; Edwards, 626, 627 ; Swayze v. Britton, 17 Kansas, 627. § 9^8- ^^'HO MAY GIVE NOTICE OF DISHONOR. 47 fourth, and so on to the first, the latter will be liable to all the parties.* Where the holder has duly notified, or exer- cised due diligence to notify the several and successive in- dorsers, and an intermediate indorser who did not himself notify his predecessors, takes up the bill or note, there is no doubt that the notice sent them by the holder to whom he makes payment inures to his benefit, provided it actually reached them.^ But it has been observed that it would seem to be still unsettled whether the notice inured to the benefit of the intermediate indorser, when the holder's dili- gence in sending notice did not secure its actual reception.^ In the single American case, deciding the question, which we have seen, it was held that the plaintiff could not avail himself of the diligence of the holder in such a case, and " that there was no authority for holding that an excuse for the omission to serve notice by the holder should ex- tend to other parties for whom there is no such excuse."^ But high authority has sustained the view that all the in- dorsers being liable to the holder, an intermediate indorser on paying him becomes substituted to his rights and is en- titled to recover.^ And Thomson considers the doctrine settled to this effect.^ § 988. It is certain that notice from a mere stranger'^ is i7t- sufficicnt, and it is equally well established that a party to the bill who has been discharged by laches, and who could not in any event sue, can not give notice for his own or another's benefit, he being then a mere stranger to the paper. ^ * Hilton V. Shepherd, 6 East., 14 ; Swayze v. Britton, 17 Kansas, 627. ' Stafford v. Yates, 18 Johns, 327. ' i Parsons N. & B., 627. * Beale v. Parrish, 20 N. Y., 407, overruling 24 Barb., 243. * I Parsons N. & B., 627. * Thomson on Bills, 327. ' Stanton v. Blossom, 14 Mass., 1 16 ; Chanoine v. Fowler, 3 Wend., 173 ; Juni- ata Bank v. Hale, 16 Sergt. & R., 157; Brailsford v. Williams, 15 Md., 150 Stewart v. Kennett, 2 Camp., 177 ; Byles on Bills (Sharswood's ed.) [*278J,43o; Storjf on Notes, § 301 ; Thomson on Bills, 355 ; Edwards, 626. * Harrison v. Ruscoe, 15 L. J Exch., no ; 15 M. «&: W., 231 ; Turner v. Leech, 4 B. & Aid., 451 ; Rowe v. Tipper, 13 C. B., 249 ; Thomson on Bills, 358. 48 NOTICE OF DISHONOR OF INSTRUMENTS. §§ 989, 99O. The broad doctrine is laid down by some of the authori- ties that any party to the instrument may give notice ; ^ but as we have already seen, this rule is certainly not without exception, for if the party be discharged he can no longer interfere with the rights of others. And the proper limita- tion to the rule seems to be that he must be a party whose liability is fixed ; or one who, on the paper being returned to him when he pays it, will be entitled to reimbursement from some prior party.^ § 989. The liability of the party must be fixed before he is himself competent to give notice, and that it may inure to the holder's benefit.^ But it is not necessary that he should be himself aware at the time that his own liability has been duly fixed by dishonor in proper form ; for if the fact have been so, and the notice to him have been given, the requisites to his liability are there, and his own state of mind on the question can not alter the situation.^ § 990. Whether acceptor may give notice. — Whether or not the acceptor of a bill, who refuses or fails to pay it, may give the notice, has been a matter of difference. In respect to the early cases, which held that he could,^ it has been said by some of the text writers that they must have been cases in which the holder constituted the acceptor his agent for that purpose.® There are also cases which hold * See I Parsons N. & B., 503 ; Wilson v. Svvabey, i Stark., 34. In Chitty on Bills, C. 10, pp. 524, 527, it said : " It suffices. if it be given after the bill was dis- honored by any person who is a party to the bill, or who would, on the same being- returned to him, and after paying it, be entitled to require reimburse- ment." And Story on Bills, § 304, adopts the principle in almost the identical language of Chitty. '^ In Bayley on Bills, it is said (pp. 254, 256) : " The notice must come from the holder, or from some party entitled to call for payment or reimbursement." See also Chanoine v. Fowler, 3 Wend., 173. ' Lysaght v. Bryant, 9 C. B., 46; Harrison v. Ruscoe, 15 M. & W., 231; Thomson on Bills (Wilson's ed., 1865), 357 ; Bayley on Bills, 254. * Jennings v. Roberts, 24 L. J. Q. B., 102 ; Thomson on Bills, 358. ^ Shaw V. Craft (1793), Chitty on Bills, 333 ; Kosher v. Kiernan, 4 Camp., 87. ^Byles on Bills (Sharswood's ed.) [*279], 431, 432; Bayley on Bills (5th ed.), 254 ; Thomson on Bills (Wilson's ed., 1865), 359; i Parsons N. & B., 505, Parke, B., in Harrison v. Ruscoe, 15 M. & W., 231. ^ 990. WHO MAY GIVE NOTICE OF DISHONOR. 49 ±at the maker of a note may give notice.^ But the cases which maintain the doctrine do not rest it on the ground of agency. It was, at one period, held in England that no one but the holder at the time could give a valid notice ;* but the rule became re-established that the acceptor might do so, and now the principle is settling down to that effect. In reasserting the doctrine, Lord Denman, after referring to ex parte Barclay, and Tindal v. Brown, quoted in the previous note, said :^ " Notwithstanding these high authori- ties, it is clear, from Jameson v. Swinton, 2 Camp., i']^) ; •J Wilson v. Swabey, i Stark., N. P. C, 34 ; and also from — J tjie learned treatises on bills of exchange, that the contrary ^ "^ doctrine has prevailed in the profession, and we must pre- > "^ glume a contrary practice in the commercial world. It is . if ^universally considered that the party entitled, as holder, to ^- fsue upon the bill, may avail himself of notice given in due o time by any party to it We are now compelled to determine whether the case of Tindal v. Brown, as to this point, be good law. We think that it is not." This lan- guage of Lord Denman was approved in Maryland in a well-considered case, and Tuck, J., added: "We may con- sider the doctrine then announced established law."* It had been held, in Massachusetts, that a drawee who refuses acceptance can not give a valid notice.' ' First National Bank v. Ryerson, 23 Iowa, 508 ; Glasgow v. Pratte, 8 Mo., 336 ; Wade on Notice, § 713. " Tindal v. Brown, i Term R., 167 ; ex parte Barclay, 7 Ves., 597 ; Stewart v. Kennett, 2 Camp., 177. 'Chapman v. Keene, 3 Ad. & EL, 193 (30 E. C. L. R., 69) ; Thomson on Bills, 356. ^Brailsford v. Williams, 15 Md., 157 (1859), Tuck, J., saying: " In Jameson V. Swinton, 2 Camp., 373, where the notice was not given by the holder of the bill, but by his immediate indorser, who had received notice, the Court said : 'The diawer or indorser is liable to all subsequent indorsers, if he had due notice of the dishonor of the bill from any person who is a party to it. Such a notice must serve all the purposes for which the giving of notice is required. The drawer or indorser is authoritatively informed that the bill is dishonored ; he is enabled to take it up, if he pleases, and may immediately proceed against the acceptor or prior indorser.' " * Stanton v. Blossom, 14 Mass., 116. Vol. II.— 4 50 NOTICE OF DISHONOR OF INSTRUMENTS. <^§ 99I Professor Parsons dissents from the views of the later authorities, and considers that notice must emanate from one who, if he were owner, could recover of some other party to the paper. But, as matter of authority, the doc- trine seems now to be established, whatever be its merit. And as any established rule of mercantile conduct is better than continuous shifting, we suppose the courts will not be disposed to disturb it, whether they find it necessary to adopt the idea of agency or otherwise. It rests upon usage, and is a principle of the law merchant, however unphilosophical it may seem. § 991. Notice by agent. — Notice given by an agent is the same as if by the holder himself, and it may be either in the agent's name,^ or in the name of any party entitled to give notice.^ The notary to whom the bill or note has been given for presentment may, as the agent of the holder, give notice ; ^ but it is no part of his official duty ; * and a bank holding a bill or note for collection, or its officers or agents, should, as a matter of duty, give the notice neces- sary.^ Any person, indeed, in whose hands the bill law- fully is, may give the notice as holder or agent, as the case may be, and, if as agent, a verbal authority from the holder is sufficient.^ • W^oodthorpe v. Lawes, 2 M. & W., 109, " Rogerson v. Hare, i Jur., 71 ; Harrison v. Ruscoe, 15 M. & W., 231 ; Byles on Bills (Sharswood's ed.), 432 ; Benjamin's Chalmers' Digest, 182. ^ Smedes v. Utica Bank, 20 Johns, 372 ; s. c. 3 Cow., 662 : Bank of Utica v. Smith, 18 Johns, 230; Safford v. Wyckoff, i Hill (N. Y.), 11 ; Cowperthwaite V. Sheffield, i Sandf., 416; Crawford v. Branch Bank, 7 Ala., 205; Shed v. Brett, I Pick., 401 ; Fulton v. McCracken, 18 Md., 528 ; Renick v. Robbins, 28 Mo., 339 ; Swayze v. Britton, 17 Kan., 629. * Burke v. McKay, 2 How., 66 ; Harris v. Robinson, 4 How., 336 ; Swayze v. Britton, 17 Kan., 625. See a7ite, chapter xxviii, on Protest, § 960. It is held in Tennessee that a notary failing to give notice is liable on his official bond, he having been instructed to give it, and it thus becoming under the Tennessee statute a part of his official duty. Wheeler v. State, 9 Heiskell, 393. ^Ogden V. Dobbin, 2 Hall, 112 ; Freeman's Bank v. Perkins, 7 Shep., 292 ; Bank of State of Missouri v. Vaughan, 36 Mo., 90. ^ Story on Bills, § 303 ; Byles on Bills (Sharswood's ed.), 432 ; Cowperthwaito V. Sheffield, i Sandf., 416. § 992. WHO MAY GIVE NOTICE OF DISHONOR. 5 1 § 992. Banks and other agents for collection. — A bank or banker with whom a bill or note is deposited to present for acceptance or payment, of any agent to whom it is in- dorsed for collection, is to be regarded as a distinct holder for the purposes of notice, and has the same time to notify the principal, and the principal the prior parties, as if such bank or agent were the real owner^ — but the mere servant acting as the principal would not be.^ The same rule ap- plies to the several branches of the same bank." Upon the same principle, where the holder of a bill em- ployed an attorney to give notice to an indorser, and the at- torney wrote to another professional man requesting him to ascertain the indorser's residence, and received an answer with information on the i6th of the month, which informa- tion he communicated to his principal on the 17th, and on the 1 8th forwarded the letter containing notice of dishonor, it was held sufficient* The factor, or other agent or attorney, may not know which of the prior parties his principal may desire to hold bound to him ; or he may not know where notice would find them, as he has no interest in the bill or note, or privity with the parties, and the rule placing such agents on the footing of a distinct holder is essential to the conven- ient collection and management of negotiable paper. ' Friend v. Wilkinson, 9 Grat., 31 ; Neal v. Wyatt, 3 Humph., 125 ; Gindrat V. Mechanics' Bank, 7 Ala., 324 ; Hill v. Planters' Bank, 3 Humph., 670 ; Crocker V. Getchell, 23 Me., 392; Sussex Bank v. Baldwin, 2 Har. , 487; Bank United States V. Goddard, 5 Mason, 366 ; Church v. Barlow, 9 Pick., 547 ; Colt v. Noble, 5 Mass., 167; Ogden v. Dobbin, 2 Hall, 112; Howard v. Ives, i Hill (N. Y.), 263; Butler v. Duval, 4 Yerg., 265; Worden v. Nourse, 36 Vt., 756; I3artlett v. Isbell, 31 Conn., 296; Mead v. Engs, 5 Cow., 303 ; Sheldon v. Ben- ham, 4 Hill (N. Y.), 129; Eagle Bank v. Hathaway, 5 Mete, 213; Lawson v. Farmers' Bank, i Ohio St., 206 ; Langdale v. Trimmer, 15 East., 291 ; Daly v. Slater, 4 Car. & P., 200 ; Robson v. Bennett, 2 Taunt., 388 ; Scott v. LitTord, 9 East., 347 ; Byles on Bills (Sharswood's ed.) [*276], 428 ; Story on Bills (Ben- nett's ed.), 292 ; Benjamin's Chalmers' Digest, 186. So far overruling Haynes V. Birks, 2 Bos. & P., 599. "^ Bartlett v. Isbell, 31 Conn., 296. 'Ciode v. Bayley, 12 M. & W., 51. ♦ Firth V. Thrush, 8 B. & C, 387 (15 E. C. L. R.) ; 2 Man. & Ry., 259. Lord Tenterden said : " A banker who holds a bill for a customer is not bound to give notice of dishonor on the day on which the bill is dishonored. He has another day, and upon the same principle I think the attorney in this case was entitled by law to be allowed a day to consult his client." 52 NOTICE OF DISHONOR OF INSTRUMENTS. §§ 993-995- The name of the party should be upon the bill or note, and a drawee who has not accepted, and who therefore is an entire stranger to the bill, is incompetent to give notice.* § 993. Sending the bill or note to a bank for collection implies authority to it to give notice, and in giving it, it may itself claim to be holder — or agent of the holder — or give it in the real holder's name.^ Authority to collect a bill is authority to give notice.^ A creditor holding the paper as collateral security * is a holder for the purposes of notice, and so also is he who accepts or pays supra pro- test'' § 994. If the holder be dead, his personal representative should give notice, if there be one; but if none be ap- pointed at the time of maturity, the indorser will not be dis- charged if notice be sent him in a reasonable time after an appointment is made.® SECTION IV. TO WHOM NOTICE OF DISHONOR SHOULD BE GIVEN. § 995. Each indorser of a bill or note is entitled to no- tice, and so also is the drawer of a bill payable to a third party, as bills generally are. The acceptor of a bill and the maker of a note are not entitled to notice, they being the primary debtors. Where there are several successive in- dorsers, the holder may, and ordinarily does, give notice to all, with a view to preserve his recourse upon all. But he ' "^ttpost, § 995 ; Chanoine v. Fowler, 3 Wend., 173 ; Brailsford v. Williams, 15 Md., 155 ; Stanton v. Blossom, 14 Mass., 116. ' Worden v. Nourse, 36 Vt., 757 ; Woodthorpe v. Lawes, 2 M. & W., 109 ; Edwards on Bills, 629. ' Worden v. Nourse, 36 Vt., 756. * Peacock v. Purcell, 14 C. B. N. S., 728 (108 E. C. L. R.) * Konig V. Bayard, i Pet., 262 ; Martin v. Ingersoll, 8 Pick., i. * White V. Stoddard, 11 Gray, 38 ; i Parsons N. & B., 444, 559- W 995^' 995^- "^Q WHOM given. 53 IS not bound to give notice to all, in order to bind those to whom he does give it. He may, if he please, give notice to any one or more of the indorsers, who are then made liable to him ; and the indorser receiving notice must then notify antecedent indorsers in order to assure himself.^ § 995^. Indorsers for collectio7t entitled to notice. — The rule requiring notice to the indorsers of bills and notes ex- tends to all indorsers, whether they are indorsers for value or mere agents for collection. A banking house,^ or other agent,^ merely passing title to the bill or note by indorse- ment for purposes of collection, stands on the same footing as any other indorser in respect to notice. "In regard to notice, each branch of a bank is considered a separate es- tablishment." * It is not sufficient, in order to charge a prior indorser, to enclose notice for him to a subsequent one. Each suc- cessive indorser is entitled to notice, in order to charge him, and overdiligence in notifying one will not supply the de- fect as to diligence in respect to another.^ The transferrer of a negotiable instrument by delivery without making him- self a party is not entitled to notice.^ § 995' v. Parker, 6 Ad. & E., 502 ; s. C. N. & P., 752 ; Carter V. Flower, 16 M. & W., 749. "^ Citing, see Brownell v. Bonney, i Q. B., 30; 3 M. & Ry.,.359 ; S. C. Dans. & L., 151 ; Firth v. Thrush, 8 B. & C, 387; Baldwin v. Richardson, i B. & C, 24s ; s. C. 2 D. & Ry., 285. ^ Citing Carter v. Flower, 16 M. & W., 749. * 2 Greenleaf on Evidence, § 197. § I049- ALLEGATION AND PROOF OF NOTICE. 99 decisions that in an action by the indorsee against the in dorser of a note, evidence of a waiv^er of demand, protest, and notice is sufficient in support of an averment of de- mand, protest, and notice,^ and in other States the same view has been adopted.^ Edwards states on English au- thority that a waiver of notice before dishonor can not be proved under an allegation of due notice ;^ but this is not the prevailing rule in the United States."* § 1049. So it may be regarded as established in the United States, that evidence of due diligence in the holder to obtain payment, and to make protest and give notice, is admissible under the general averment of due demand, pro- test, and notice.^ Thus, where the maker of a note could not be found at his store, and a demand was made on his clerk, it was not thought necessary to aver this fact specifi- cally, but that it might be shown under an allegation of due demand upon the maker. So where the drawer of a check stopped payment, and due notice was averred, it was held that the averment might be disregarded as surplusage, and the defendant was held bound.^ § 1050. Second, as to proof of notice. — The burden of proving that notice was duly given so as to charge the ' Armstrong v. Chadwick, 127 Mass., 756 ; Harrison v. Bailey, 99 I\Tass., 620 ; Taunton Bank v. Richardson, 5 Pick., 436, 444 ; Jones v. Fales, 4 Mass., 245 ; City Bank v. Cutter, 3 Pick., 414; North Bank v. Abbott, 13 Pick., 465 ; Kent v. Warner, 12 Allen, 561. This, iiowever, has been there regarded as an excep- tion " to an established and most salutary rule of evidence," and held not ap- plicable to other executory agreements, in Colt v. Miller, 10 Cush., 51. ^ Tobey v. Berly, 26 111., 426; Norton v. Lewis, 2 Conn., 478 (waiver before maturity); Camp v. Bates, 11 Conn., 488, 493 (waiver after maturity); Wind- ham Bank v. Norton, 22 Conn., 214, 219; Kennen v. McRea, 7 Port. (Ala.), 176, 186. See also Spann v. Balzell, i Florida, 302; Shirley v. Fellows, 9 Porter,' 300; McVeigh v. Bank of Old Dominion, 26 Gratt., 799, Moncure, P. ; Redfield & Bigelow's Lead. Cases, 417 ; 2 Smith's Lead. Cases, 74. = Edwards on Bills, 636. « Norton v. Lewis, 2 Conn., 478, * Stewart v. Eden, 2 Caines, 127 ; Williams v. Matthews, 3 Cow., 262 ; Ogden V. Conley, 2 Johns, 274; see also Saunderson v. Judge, 2 H. Bl., 510; contra, Curtis V. State Bank, 6 Blackf., 314. In England the rule is different. Allen v. Edmundson, 17 L. J. N. S. ; Common Law, 291 (1848) ; 2 Exch., 719. ' Purchase v. Mattison, 6 Duer, 592 ; see also Jacks v. Darrin, 3 E. D. Smith, 558 (Professor Parsons in vol. 2, N. & B., p. 72, quotes these cases by mistake for the opposite doctrine). lOO NOTICE OF DISHONOR OF INSTRUMENTS. §I05I drawer of a bill, or the indorser of a bill or note, rests upon the plaintiff. And this burden he may bear in two ways ; First, by proving due and legal diligence used in giving notice to the party entitled thereto, in which case the legal presumption of its due receipt will attach and obviate the necessity of further evidence.^ Or second, by proving that notice was actually received in due time, in which case it matters not what means of communication was employed.^ Presumptions of due notice may also be created by proof of promise to pay, or part payment, in the manner else- where considered.^ An admission or acknowledgment of notice is presumptive evidence of notice.^ § 105 1. The plaintiff must distinctly show that notice was given on the proper day ; it will not suffice to show that it was given on one of two days, because the latter would be too late.^ But when it is shown that the notice was on the proper day deposited in the post-office, properly ' Lambert v. Ghiselin, 9 How., 552 ; Saco National Bank v. Sanborn, 63 Me., 340 ; Shed v. Brett, i Pick., 401, the court saying: "An averment of notice wiil be sufficiently proved by showing that the steps necessar)' to give the notice have been taken ; if subsequently received, it will relate to the time when it was sent ; if never received, the fact of having put it in the proper train is enough." ^ Dickens v. Beal, 10 Pet., 572 ; First N. B. v. Wood, 51 Vt., 471. See §§ looo, 1003. ' See chapter xxxv. * Todd V. Neal's Adm'r, 49 Ala., 266 ; Donegan v. Wood, 49 Ala., 242. ^Lawson v. Sherwood, i Stark., 314 (2 E. C. L. R.) In Friend v. Wilkinson & Hunt, 9 Grat., 31, two bills payable in Cincinnati were protested for non-pay- ment, on February ist, 1850, and notice was due to the Bank of Virginia, at Charleston, Kanawha Co., Va., which had transmitted it for collection. Judge Allen, who rendered the opinion of the court, said : " A notice of protest dated at Cincinnati on the first of February, 1850, was sent by mail to the cashier of the Bank of Virginia, at Charleston, Kanawha County, Va., and was received on the night of the 7th of February, inclosed in a letter postmarked Cincinnati, Ohio, and was handed to Friend, the indorser, on the next day. It was further proved that a letter would arrive at Charleston in four or five days after it was mailed in Cincinnati, if it came by the direct route. If sent by another route, a letter might be ten or twelve days on the way ; or that it might be, and letters sometimes were, delayed at Chilicothe, Ohio, by the regulations in regard to the departure of the mail on the regular route from Cincinnati. Upon this proof the question arises whether Friend had due notice of the dishonor of the bill. The Bank of Virginia, at Charleston, Kanawha, is to be treated as a distinct holder, the bill having been placed there for presentment and collection ; and notice was given by it in due time after it was received from Cincinnati. The party not residing in or near the city of Cincinnati, a notice sent by the mail of the next day, or the next practicable mail, would be sufficient, and the burden of proving a reasonable notice is on the plaintiff. It is, where notice is required, a condition § 1052. ALLEGATION AND PROOF OF NOTICE. lOl addressed in respect to name and post-office, no further proof is necessary, as due diligence will then have been ex- ercised.^ If notice be given by letter, its contents may be shown without a notice to produce the letter.'^ If it were given by one of two duplicate notices, evidence may be given of sending one, and then the other offered to the jury without notice to produce the one sent.^ A finding that a notice the contents of which are unknown was served is not equivalent to finding that notice of protest,, much less that sufficient notice of protest, was served."* § 1052. Postmark as evidence. — A postmark is prima faciei but not conclusive ® evidence that notice was mailed precedent to his right to recover, and he must show a strict performance. In this case it does not appear whether there was a daily mail between Cincinnati and Charleston or not, nor when the notice was put in the post-office to be mailed. It is dated on the first and was received on the night of the 7th of February ; and the proof is that a letter would arrive at Charleston in four or five days after it was mailed at Cincinnati if it came by the direct route. The notice therefore might have been placed in the office and mailed on the morning of the 4th, and have arrived after night on the 7th, according to this eudence. Being protested on the ist, it should have been placed in the office to be sent by the mail of the next day, unless that was Sunday, and if so, by the mail of the third of February if there was such mail, or if not, by the next practicable mail ; and it was incumbent on the plaintiff below to show the time it was so placed in the office to be mailed The notice may have been put in the office to be mailed on the 2d, and not have been received until the night of the 7th ; if so, it would have been sufficient ; but it might have been put in the office and mailed on the 3d or 4lh and received at the same time ; if so, it was too late, unless that was the first mail after the dishonor of the bill. And these were matters which the plaintiff were bound to prove, and probably could have done so by an examination of the notary.'' ' Bussard v. Levering, 6 Wheat., 102 ; Dickens v. Beal, 10 Pet., 572 ; Shed v. Brett, I Pick., 401 ; Briggs v. Hervey, 130 Mass., 186. "Eagle Bank v. Chapin, 3 Pick., 180 ; Lindenberger v. Beall, 6 Wheat., 104 ; Leavitt v. Simes, 3 N. H., 14; Kine v. Beaumont, 3 Brod. & B., 288; 7 J. B. Moore, 112 ; Roberts v. Bradshaw, i Stark., 28, overruling earlier cases ; 2 Par- sons N. & B., 490, note. ^ Ackland v. Pearce, 3 Camp., 599 ; Roberts v. Bradshaw, i Stark., 28 ; 2 Par- sons N. & B., 491. ^ Couch V. Sherrill, 17 Kansas, 622, Brewer, J. : There is no presumption in favor of the action of the notary as official action, because it is no part of his official duty as notary to serve notice. If he serve any notice it is as agent of the holder, and not as notary. Hence, the finding as to notice is to be treated as though notice had been served by the holder. Now what notice was served ? .... It does not even appear to have been notice of protest." ^Earl) V. Preston, i Pat. & Heath, 228 ; Crawford v. Branch Bank, i Ala., 205 ; New Haven Co. Bank v. Mitchell, 15 Conn., 206; Arcangelow v. Thompson, 2 Camp., G20; Rex v. Plumcr, Rus. & Ry., 264; Langdon v. Hulls, 5 Esp., 156; Fletchei v. Braddyll, 3 Stark., 64. *Stocken v. Collin, 7 M. & \V., 545 ; 9 C. & P., 653 (38 E. C. L. R.) I02 NOTICE OF DISHONOR OF INSTRUMENTS. § IO53 on the day designated ; and when one puts a letter in the mail on the day. that it ought to be received he must show that it was posted in time to be received on that day.^ Genuineness of the postmark may be proved by any wit- ness, whether a post-ofhce employe or not.^ § 1053. When there are a nu77tber of parties entitled to notice it is sufficient in order to hold any one of them bound, to show that notice reached him in such a time as it would occupy for the intermediate parties to transmit it to him in due course of the mails, allowing each one his day.^ But the courts can not take judicial cognizance of the course of the mails, and that must be shown by the plaintiff.^ It would be better for him also to show that he gave notice in due season to his immediate indorser.^ When the plaintiff has shown that notice reached the remote party within the time which would regularly be consumed, it will be for him to show a defective link in the chain of notices, if any there be. § 1054. When the mail is the proper channel for the communication of notice, it is not necessary to show the distinct fact that the particular letter containing the notice was put in the mail, by ocular evidence thereof. Proof that notice was put with letters for the post-office by one clerk, and that the letters of that day were deposited by another clerk, would be sufficient.^ And it would likewise be sufficient to show that it was put with letters customarily made up in the usual course of business for the postman, and that he invariably carried all the letters found upon the * Fowler v. Henden, 4 Tyrw., 1002 ; Byles on Bills (Sharswood's ed.) [*275], 427. «V^oodcock V. Houldsworth, 16 M. & W., 124; Fletcher v. Braddyll, 3 Stark., 64. ' Jones V. Warden, 6 W. & S., 399; Etting v. Schuylkill Bank, 2 Penn. St. R., 345 ; Marsh v. Maxwell, 2 Camp., 210. " Friend v. Wilkinson, 9 Grat., 31 ; Carter v. Burley, 9 N. H., 558 ; Early v Preston, 2 Pat. & Heath, 228. ' I Parsons N. & B., 518. ° Commercial Bank v. Strong, 28 Vt., 316 §» I055- ALLEGATION AND PROOF OF NOTICE. IO3 table.^ But it has been held that proof that a letter was put on the table with others, and that it was the regular course of business for the porter to take them to the post- office, would not be sufficient — at least unless it were proved that the porter always carried the letters so pre- pared, which, without any distinct remembrance as to that particular one, the court intimated would be satisfactory.^ Delivering the notice to the assistant postmaster in an adjoining room would suffice, that being the usage of the place ; ^ but a clerk's statement that notice was put in, he not remembering whether by himself or another, would not.* § 1055. The protest of a foreign bill \s, by the law^ mer- chant, evidence of its presentment and dishonor ; but ex- cept where it is so provided by statute, it is not evidence in respect to notice ; and where statute does not authorize the admission of the certificate of protest as evidence of no- tice, it is usual to take the notary's deposition to prove it, or that of some other witness, or to call the notary or wit- ness to testify ore tenus at the trial.^ Statutory enactments have very generally changed this doctrine of the law merchant, and though sustained by au- thority, a distinguished author has denied it.^ If the notary has kept no record of the notice, his oral testimony is competent to prove the contents." § 1056. Where a notary testified that it; was usual for ^ Skilbeck v. Garbett, 7 Q. B., 846; see Brailsford v. Williams, 15 Md., 150 ; Flack V. Green, 3 Gill & J., 474 ; Miller v. Hackles, 5 Johns, 375. ' Hethering^on v. Kemp, 4 Camp., 193; Byles on Bills (Sharswood's ed.), 420. ^ Mount Vernon Bank v. Holden, 2 R. I., 467. * Havvkes v. Salter, i M. & P., 750. ' See chapter xxvill, on Protest, sec. v, § 960 'diXX\^, flagrante bello, would suffice as an excuse.^ In a Virginia case the circumstances of a recent occupation of a town by the enemy's forces were thought insufficient to excuse a failure of protest and notice four days after their departure.* ' Story on Notes, §§ 257, 263 ; i Parsons N. & B,, 461. ' Polk V. Spinks, 5 Cold., 431. ' Story on Notes, § 261. See Blair & Hoge v. Wilson, 28 Grat., 172. * Tardy v. Boyd, 26 Grat., 632. 112 WANT OF PRESENTMENT, PROTEST, AND NOTICE. § I065. SECTION II. POLITICAL DISTURBANCE, EPIDEMIC DISEASE, AND OVER- WPIELMING CALAMITY OR ACCIDENT. § 1065. In the fourth place, as to political disturbances, which virtually interrupt and obstruct the ordinary negotia- tions of trade, it is recognized that such disturbances con- stitute a sufficient excuse for want of presentment or no- tice, upon the same principle that controls in cases where it is prevented by calamities, military operations, or inter- dictions of commerce.^ We should say that the case of a riot or insurrection in which a city was taken possession of by the outlaws, or the closing of houses and suspension of business became necessary to the protection of property or life, would present a striking instance of such a disturbance. But the mere condition of political and military troubles in a country, producing an alarming and unsettled state of affairs, would be insufficient.^ § 1066. In the fifth place, as to the prevale^ice of a malig- nant disease. — 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 district.^ And every consideration of public policy and of humanity must sanction this rule. To require communica- tion with the infected district is to widen the avenue for the extension of the disease, and to require the holder to imperil his life for such a purpose would be a cruel imposi- ^ Story on Notes, § 261. See Blair & Hoge v. Wilson, 28 Grat., 172. - Apperson v. Union Bank, 4 Cold., 446. ' I Parsons N. & B., 460, 531 ; Edwards on Bills, 492 ; Story on Bills, § 308 ; Story on Notes, § 260, § 1067. DISTURBANCE, DISEASE, OR ACCIDENT. II3 tion. In New York it has been accordingly held that the prevalence of a contagious malignant fever in the place of residence of the parties, which occasioned a stoppage of business, was a sufficient excuse for not giving notice until November of a protest made in September;* and the de- cision seems to us entirely worthy of approval.^ In that State the subject is now regulated by statute. § 1067. In the sixth place, as to overwhelvii7ig calamity a7id u7iavoidable accident. — We have to consider those cir- cumstances of overwhelming calamity, or inevitable accident which suddenly intervene, and, without any default on the holder's part, render it impossible or impracticable for him to make due presentment or to give due notice. The prin- ciple contained in the maxim of the civil law, impossibilium nulla obligatio est, is equally applicable to the law of bills and notes, which requires only reasonable diligence on the part of the holder to fix the liability of drawer and indors- ers ; and it does not countenance a forfeiture of his risfhts when overruling causes constrain him. And, therefore, although there is but meagre illustration of the doctrine in the cases touching negotiable instruments, we find it uni- versally asserted that the holder is exonerated when a ca- lamity or accident of the kind described prevents him.^ Among the circumstances of this class may be enu- merated freshets which carry away bridges and destroy the means of communication ; violent snow-storms which render the roads impassable ; tornadoes and earthquakes which par- alyze all affairs for the time being, or render intercourse impracticable. § 1068. Accident or casualty. — According to the strict principles of the common law, contracts to do particular ' Tunno v. Lague, 2 Johns' Cas., i. ■ But see Roosevelt v. Woodhull, 2 Anth. (N. Y.), 50. ' Chitty on Bills (13 Am. ed.) [*45i]. 509 ; Edwards on Bills, 492 ; Thomson on Bills (Wilson's ed.), 280, 368 ; Story on Notes, § 258 ; Story on Bills, §§ 283. 286, 308, 327, 365 ; Hilton v. Shepherd, 6 East., 16 (respecting notice) ; Wind- ham Bank v. Norton, 22 Conn., 213. Vol. II.— 8 114 WANT OF PRESENTMENT, PROTEST, AND NOTICE. § lo6Sa. things, and at particular times, are absolute in their nature ; and as a general rule accident or casualty would not excuse their non-performance. But by the law merchant, it must be remembered, that although due demand and notice are conditions precedent to the liability of drawers and indors- ers, the contract of the holder is only that he will exercise due diligence to make such demand and give such notice ; and this implies an exception in favor of those unavoidable accidents which prevent it.^ § io6Sa. Miscarriage or delay iit transmission by mail. — Upon this principle, if the holder confide the bill or note to the public mail, as a means of transmitting it for present- ment, and without negligence on his part, he could not justly be liable for any delay arising out of any accident, miscarriage, or default in the postal service.^ And as has been said, speaking of a bill, " such mode of transmission is in accordance with the general commercial usage and law in the case of paper of this description. Indeed, it is recom- mended by the books as the most proper mode of transmis- sion, as being the least hazardous, and therefore preferable to a special or private conveyance." And accordingly it was held in the case quoted, where the bill had been depos- ited in the post-office in time for due presentment in due course of mail, and by mistake of the postal clerk in misdi- recting the package, it did not duly reach its destination, that the delay did not discharge the indorser.^ But if the holder has been himself in fault in causing the delay in transmission by the mail, or blame is imputable to him in ^ Lord Ellenborough, in Patience v. Townly, 2 J. P. Smith, 223 ; Windham Bank v. Norton, 22 Conn., 213. "^ Windham Bank v. Norton, 22 Conn., 213. See ante, § 1021. 'Windham Bank v. Norton, 22 Conn., 213, Storrs, J. To same effect see Pier V. Heinrichshoffen, 67 Mo., 163, in which case hokler of note payable in a distant city sent it to a bank there for collection. The letter was returned by the postmaster marked " bank failed." Holder at once mailed it to another agent in the city, who immediately caused presentment and protest, but it was several days after maturity. Held, that indorsers were not discharged. ^ 1069. DISTURBANCE, DISEASE, OR ACCIDENT. II 5 the misdirection of the bill, he will not be excused for fail- ure in prompt presentment.^ § 1069. Accident or calamity 7iz7ist be preventive of dili- geiice. — It should distinctly appear when an accident, or calamity, or operation of superior force is brought forward as an excuse for non-presentment, that it has the effect to prevent its being duly made. The mere fact that a violent storm occurred at the time, unless it also appeared that it obstructed communication, would not suffice.^ But if there were a general calamity involving a community, it might be different. Doubtless the recent conflagrations, suddenly laying large portions of Boston and Chicago in ruins, will give rise to questions of this kind. When communities are visited by such overwhelming and appalling calamities as these, all thoughts of business must give way to considera- tions of self-preservation and humanity ; and should cases involving their effect be presented to the courts, it would be safe to predict that this doctrine of excuses will find a liberal application. The excuse of inevitable accident or calamity will apply as well to protest when it is thereby ' prevented, and if it is made as soon afterward as it reason- ably can be, that will suffice.^ § 1070. When impediment ceases, duty to make dci?ia?id or give notice revives. — These excuses — war, military or political disturbance, interdiction of commerce, prevalence of disease, overwhelming accidents, et cetera — do not justify ' Schofield V. Bayard, 3 Wend., 488. In this case the holders of a bill paya- ble in London, by mistake of their own, sent it to Liverpool for presentment. Their agents sent it back by mail in time to reach the holders, and be by them sent to London, if it had reached them in due season. But by a mistake of the post-office it did not reach the holders in time to be reforwarded by them in due season. The court held that the fault was in the holders, and that failure of due presentment could not be excused. Savage, C. J., saying : " This presents no impossibility if due diligence had been used. The plaintiffs should not have sent the bill to Liverpool at all. It is true that, after thfe letter containing it had been left at Liverpool, it could not have reached London in due season ; but it was the fault of the plaintiffs to have parted with the bill in the manner they did. Instead of sending it to Liverpool they should have sent it to London, and then it would have been in season, and probably would have been paid.' " Edwards on Bills, 493. ' Story on Bills, § 283. Il6 WANT OF PRESENTMENT, PROTEST, AND NOTICE. § I07I. a total dispensation of demand and notice, but only excuse the delay which these circumstances may occasion. As soon as the impediment ceases, the duty revives ; and if demand and notice be not speedily made, the holder is in default, and drawers and indorsers are discharged.* Thus, where the holder of a bill in New York delayed, for several months after restoration of commercial intercourse between New York and New Orleans (the former being in the United States, and the latter in the Confederate States during the war of secession), to present the bill to the ac- ceptor in New Orleans for payment, it was held that the drawer was discharged.^ In Maryland, it was said by Stewart, J. : " There must be the earliest possible present- ment when impediment ceased."^ § 1 07 1. In Pennsylvania,* it appeared that two bills which were drawn (and indorsed) in Pennsylvania upon a house in New Orleans, were duly protested on the nth and 29th of July, 1 86 1, respectively, in that city. Communication was suspended between New Orleans and Pittsburg, where the parties entitled to notice resided, until July ist, 1862, when the first mail was received at the latter place. Under these circumstances, and there being considerable intervals be- tween the mails, notice received at Pittsburg July nth, 1862, was considered within reasonable time, and held suf- ficient. But in Kentucky,** where there was a delay of over five months in forwarding notice after the reopening of communication, which had been suspended, it was said it could not be "deemed reasonable nor accounted for by the then political condition of the country." ■ Farmers' Bank v. Gunnell, 26 Grat., 132 ; Tarby v. Boyd, 26 Grat., 631 ; Mc- Veigh V. Bank of Old Dominion, 26 Grat., 785 ; Bynum v. Apperson, 9 Heiskell, 632 ; Lane v. Bank of W. T., 9 Heiskell, 419 ; Billgerry v. Branch, 19 Grat., 393 Apperson v. Union Bank, 4 Cold., 445 ; Morgan v. Bank of Louisville, 4 Bush (Ky.), 82; House v. Adams, 48 Penn. St., 266; James v. Wade, 21 La. Ann., 548 ; Peters v. Hobbs, 25 Ark., 67 ; Durden v. Smith, 44 Miss., 552 ; Dunbar v. Tyler, 44 Miss., 10 ; Shaw v. Neal, 19 La. Ann., 156. ' Durden v. Smith, 44 Miss., 552 ; see Dunbar v. Tyler, 44 Miss., 10. ' Norris v. Despard, 38 Md., 491. ' House v. Adams, 48 Penn. St., 266 ' Morgan v. JBank of Louisville, 4 Bush, 82. CHAPTER XXXI. SPECIAL CIRCUMSTANCES OF EXCUSE WHICH SHOW AN ORI& INAL ABSENCE OF RIGHT TO REQUIRE PRESENTMENT, PROTEST, OR NOTICE. § 1072. Besides the circumstances of a general nature wliich excuse delay or absence of presentment, protest, or notice, there are some of a special nature which have the like effect. These special circumstances may be classified as follows : I. Circumstances showing an original absence of right to require these steps to be taken. II, Circum- stances arising from special acts of waiver. III. Circum- stances which show an inability on the part of the holder to make due presentment or protest, or give notice. IV. Special circumstances arising from the conduct of the party. V. Special waivers by promises to pay and part payments after maturity. These circumstances, thus classi- fied, and ramifying into many details, will be now separately considered. SECTION I. DRAWING WITHOUT RIGHT TO DO SO, OR REASONABLE GROUND TO EXPECT THAT BILL WILL BE HONORED. § 1073. In the yfr^/ place, when the drawer has drawn the bill without the right to do so, or without any reasona- ble ground to expect that the drawee would honor it, the omission of the holder to make a due presentment of it for acceptance or payment (no acceptance intervening), or to give the drawer due notice of its dishonor by the drawee, (117) Il8 SPECIAL CIRCUMSTANCES OF EXCUSE. § IO74. will be excused.^ This doctrine rests upon the ground that the drawer has committed fraud or folly in undertaking that the drawee would honor his bill, when he had no right or reasonable ground to expect it ; and that he can suffer no loss or injury from the failure of the holder to make a pre- sentment to the drawee, which would naturally be fruitless, or to give him, the drawer, notice of a dishonor which he must have known by anticipation. This excuse applies alike to presentment, protest, and notice, for the reason that all the steps ordinarily taken to fix the drawer's liability are predicated upon the assumption that he has drawn the bill in good faith, and after proper provision for its payment, and when such is not the case he is absolutely liable. The authorities to this effect are over- whelming in number as they are clear in principle;^ but there are a few cases which hold that it does not apply to presentment, for the reason that the drawee might have accepted or paid for the honor of the drawer.* So any fraud relating to the instrument committed by the drawer will excuse want of due diligence, presentment, or notice. Thus, if having obtained a draft or check, he should sell, it for value, and before its presentment should obtain a duplicate and sell it for an additional sum, or draw out the money upon it, he would be absolutely liable on the first draft or check.^ § 1074. As to lack of funds. — It was held in an early English case, which has been much quoted, that when the drawer had no funds in the hands of the drawee, no notice would be necessary to charge him, for the reason, as assigned by one judge, that drawing a bill in such a case is a fraud, and, as assigned by another, that no injury could result to the • Chitty on Bills (13 Am. ed.) [*436], 490; Story on Bills, §§ 280, 375. "" I Parsons N. & B., 530, note m ; Story on Bills, § 280. 'Cruger v. Armstrong, 3 Johns' Cas., 5, Radcliff, J.; English v. Wall, 12 Rob. (La.), 132. * Moody V. Mack, 43 Mo., 212. ^ 1074. DRAWING WITHOUT RIGHT TO DO SO. I I9 drawer.^ And the rule is often laid down in the language that the want of funds excuses the holder from giving notice ; " the statement of it in this form arising from the fact that, when the bill has been improvidently drawn, it turns out that there were no funds to meet it. But the converse proposition is not true, that, whenever there are no funds provided to meet the bill, the drawer was improvident in drawing it. The drawee may have promised to accept or pay for the drawer's accommodation, or have come under an obligation, founded on legal consideration, to do so. And the true criterion of the right to require due demand and notice is, not whether the drawer had funds in the drawee's hands, but whether or not the drawer had a risrht to expect or require that the drawee would honor his bill.'^ Whenever such right exists, the drawer is discharged if there be not due demand and notice, and not otherwise. In Maryland, the defendant drew a bill of exchange against a cargo of wheat, and indorsed and delivered to plaintiffs the bill of exchange, and also the bill of lading of the car- go, as collateral security for the acceptance and payment of the bill of exchange, authorizing them, in case they thought it necessary, to sell the cargo and apply the proceeds to payment of the bill. The drawees declined to accept, on the ground that they were not bound to do so under the agreement with the drawers, unless they were put in posses- sion of the bill of lading. The court held that present- ment and notice of non-acceptance were excused, as the drawers had not complied with their contract with the * Beckerdike v. Bollman, i T. R., 405 (1786). - Edwards on Bills, 640. ' French v. Bank of Columbia, 10 Pet., 572 ; French v. Bank of Columbia, 4 Cranch, 141 ; Hopkirk v. Page, 2 Brork, 20 ; Mistr v. Trovinger, 7 Ohio St., 281 ; McRae v. Rliodes, 22 Ark., 315 ; Schuchardt v. Hall, 36 Md., 600; Louisi- ana State Bank v. Buhler, 22 La. Ann., 83; Farmers' Bank v. Van meter, 4 Rand., 553 ; Claridge v. Dalton, 4 Maule & S., 226 ; Golladay v. Bank of Union, 2 Head, 557; Oliver v. Bank of Tennessee. 11 Humph., 74; Edwards on Bills, 640 ; Welch v. B. C. Taylor Mfg. Co., 82 111., 581, Dickey, J. : " It is sufficient that the drawers in good faith supposed the drawee was their debtor to that amount." But see Foard v. Womack, 2 Ala., 368 ; and Tarver v. Nance, 5 Ala., 712. I20 SPECIAL CIRCUMSTANCES OF EXCUSE. § IO75. drawees, had intercepted the means of payment, and had no reasonable ground to expect acceptance of the bill.^ § 1075. Drawer with funds strictly entitled to present- ment and notice. — If the drawer have funds in the drawee's hands he will be entitled to strict presentment and notice, ev^en though the drawee represent, when the bill is drawn, that he will not be able to provide for it, and that the drawer must make provision to meet it,^ or although requested not to draw on him, and believing him insolvent as stated.^ And it will be no excuse for want of presentment or notice that the drawee is his creditor for a larger amount than he is his debtor.^ The want of injury to the drawer is never now admitted as an excuse for want of demand or notice.^ If the funds of the drawer be attached or otherwise in- tercepted in the drawee's hands, after the bill is drawn, it would not affect the drawer's right to demand and notice.* § 1076. Want of funds no excuse when drawer has right to draw. — Among the circumstances under which the drawer has a right to expect that his bill will be hon- ored, and consequently to require strict presentment and notice, may be named : When he draws before a consign- ment which he has made comes to hand, and in anticipation of it ; ''' or upon a consignment insufficient by reason of ' Schuchardt v. Hall, 36 Md., 590. ° Prideaux v. Collier, 2 Stark., 57 ; Clegg v. Cotton, 3 Bos. & P., 239 ; Staples V. Okines, i Esp., 332. In this case the acceptor was indebted to the drawer at the time the bill was drawn, but then informed the latter that he would not be able to provide for the bill. It was understood between them that the drawer was to provide for the bill when due. Notice to the drawer was held necessary. Lord Kenyon said : " The law was general, only exempting the party from the necessity of giving notice where the drawee had no effects ; and as here the drawee was indebted to the defendant, on whom the bill was drawn, and so, in fact, had effects in hand, and if he had had effects in hand when the bill became due, would have taken it up, he was of opinion that notice was necessary." Story on Bills, § 375. Cedar Falls Co. v. Wallace, 83 N. C, 229. *Blackham v. Doren, 2 Camp. N. P. C, 503 ; Bayley on Bills, 195. ''Set post, chapter xxxvi, sec. i, § 11 70. 'Stanton v. Blossom, 14 Mass., 116. ' Dickens v. Beal, 10 Pet,, 572 ; Grosvenor v. Stone, 8 Pick., 79 ; Orear v. Mc- Donald, 9 Gill, 350. § 1077- DRAWING WITHOUT RIGHT TO DO SO. 121 depreciation in value, or other loss ; * or when there is a fluctuating balance or running account between him and the drawee ; ^ or when the drawee is accustomed, in the course of trade, to honor the drawer's bills under similar circumstances, or without regard to the state of their ac- counts ; ^ or where a third party has promised to provide the drawee with funds ;* or the drawee has authorized the drawing of the bill,° though not so if the terms of the bill exceeded the authority.'* § 1077. Want of funds no excuse when party woitld be entitled to sue another. — And it may be stated that want of funds is no excuse for want of demand or notice, whenever the drawer or indorser, as the case might be, would be en- titled, upon taking up the bill, to sue either the acceptor or any other party for the amount due.'^ Thus, if the bill were drawn for the acceptor's accommodation,^ or for the accommodation of the payee, or of a subsequent indorsee,' the drawer is entitled to strict presentment and notice. So the drawer is entitled to notice when he has placed securities in the hands of the drawee, with the reasonable expectation that the drawee would accept, or pay on the credit thereof, or provide funds out of them for payment.*** ' Robinson v. Ames, 20 Johns, 146 ; Williams v. Brashear, 19 La., 370 ; Ruckcr V. Hiller, 16 East., 53 ; Robins v. Gibson, 3 Camp., 384. 'Blackham v. Doren, 2 Camp.. 503; Hammond v. Dufrene, 3 Camp., 145. ^ Adams V. Darby, 28 Mo., 162; Dickens v. Beal, 10 Pet., 572; Dunbar v. Tyler, 44 Miss., i. *■ Dickens v. Beal, 10 Pet., 572 ; French v. Bank of Columbia, 4 Cranch, 141 ; Lafitte V. Slatter, 6 Bing., 623 ; 4 Moore & P., 457. ' Walvvyn v. St. Quintin, i Bos. & P., 652 ; Austin v. Rodman, i Hawks, 194 ; Orear v. McDonald^ 9 Gill, 350; Dickens v. Beal, 10 Pet., 572 ; Hopkirk v. Page, 2 Brock., 20; Oliver v. Bank of Tennessee, 11 Humph., 74. ° Claridge v. Dalton, 4 Maule & S., 226. ' Chitty on Bills (13 Am. ed.) [*438]. 493. 494 ; Edwards on Bills, 644. * Ex parte Heath, 2 Ves. & B., 240 ; see Shirley v. Fellows, 9 Port. (Ala.), 300, » Cory V. Scott, 3 B. & Aid., 619 ; Whitfield v. Savage, 2 Bos. & Pul., 277 ; Norton v. Pickering, 8 B. & C, 610 ; Brown v. Maffey, 15 East., 216. It was held at one time (in Walvvyn v. St. Quintin, i Bos. & P., 652), that if the drawer had no effects in the drawee's hands he would not be entitled to notice although the payee had ; but in Norton v. Pickering the decision was overruled. '° Spooner v. Gardiner, Ry. & Mood., 84 ; ex parte Heath, 2 Ves. & B., 240 ; Chitty [*446-7] ; Campbell v. Pettingill, 7 Green!., 126. 122 SPECIAL CIRCUMSTANCES OF EXCUSE. § IO78. But not where he has supplied the drawee with property on a credit, and the credit would not expire until after maturity of the bill.i § 1078. As to the time at which the reasonable expectation that the bill will be honored must exist, the rule on the sub- ject is differently stated by different authorities. Mr. Chitty considers that if there were effects in the drawee's hands at any time between the drawing of the bill and its present- ment and dishonor, the drawer should have notice ;^ while, on the other hand, it is said that notice is unnecessary when at the time of the drawing there were no effects to meet the bill.3 But the bona fide expectation of the drawer based upon his relations with the drawee, and the provision he has made, or intends to make, and does make, are, it seems to us, the circumstances to be regarded. If he has no funds in the drawee's hands when he drav>^s, and yet provides them before presentment, he should have notice.* If he had funds when he drew, but withdrew them before presentment, he forfeits the right to it.^ If the drawer has any arrange- ment, by which, at the time the bill is presented, he has a right to expect it to be honored, we should say he should have demand and notice.^ For it would be presumed that such arrangement was contemplated when he drew. § 1079. Where there is a running ope7i accotint between the parties, the drawer is entitled to require presentment and notice, although the balance due him may be less than the ' Claridge v. Dalton, 4 Made & S., 226. ' Chitty (13 Am. ed.) [*444]. 5oo- ' French v. Bank of Columbia, 10 Pet., 572. * Where the proceeds of a cargo were in the broker's hands, and he was to put the drawee in funds, the drawer was held entitled to notice. Robins v. Gibson, 3 Camp., 334. So where the drawer after acceptance and before maturity sent funds to the acceptor, having none when he drew in his hands. Hammond v. Dufresne, 3 Camp., 145, Lord EUenborough, C. J., saying: "I think the. drawer has a right to notice of the dishonor of a bill, if he has effects in the hands of the acceptor at any time before it comes due." Orear v. McDonald, 9 Gill, 350 Eichelberger v. Finley, 7 Har. & J., 381. ' S&eposi, § 1081. » See I Parsons N. & B., 548. § I080. DRAWING WITHOUT RIGHT TO DO SO. 1 23 amount of the bill;^ and it is very frequently said that where there are any funds, however insufficient, in the drawee's hands, failure of the holder in either particular is not excused.^ But here the true criterion, as in all other cases, is, had the holder a right to expect that his bill would be honored ? And this is to be ascertained by regard to all the circumstances of the case. Where transactions have ceased, and the drawer knows that he has but a small bal- ance to his credit, he would not be justified in expecting payment of a bill of a large amount ; and if, under such circumstances, he were to draw a bill for a large amount, he would be chargeable without presentment, protest, or notice. § 1080. Thus, where the drawee had a balance of i6s. lid. in his hands in favor of the drawer, and the latter drew upon him for ;^246 3^. yd., without having any pros- pect of more funds in his hands than the balance mention- ed, or right to expect that the bill would be honored, he was held bound without notice. And Chief-Justice Mar- shall said :^ " The sound sense and justice of the exception is, that where a drawer knows he has no right to draw, and has the strongest reasons to believe his bill will not be paid, the motives for requiring notice of its dishonor do not exist, and his case comes within the reason of the excep- * Thackray V. Blackett, 3 Camp., 164 ; Legge v. Thorpe, 12 East., 171 ; Chitty (13 Am. ed.) 1*444]- " Lacoste v. Harper, 3 La. Ann., 385. The bill was for 82,777, and the amount of funds $883. Slidell, J., said: "We are not aware of any authority extending the exemption of the necessity of notice where the drawee had funds in his hands at the maturity of the bill. Even if the funds be insufficient to cover the bill, the drawer is entitled to notice." See also Sutcliffe v. McDowell, 2 Nott & M'C, 251 ; Wollenleber v. Ketterlinus, 17 Penn. St., 389. In Hill v. Norris, 2 Stew. Sc P., 1 14, Lipscomb, J., said : " I admit, that if there were cir- cumstances to satisfy the jury that the drawer committed a fraud in drawing on the drawee, and that he knew his bill would be dishonored, there would be much force in the argument that he ought not to be permitted to take shelter from the consequences of his fraud by intrenching behind a very small amount of assets that might be in the hands of the drawee. But I must again repeat, that I have not known a case, where there was any amount of funds in the hands of the drawee, that it has been ruled that the drawer was not entitled to notice." ' Hopkirk v. Page, 2 Brock. C. C, 20, 34. 124 SPECIAL CIRCUMSTANCES OF EXCUSE. § I081. tion. Where all transactions between the parties have ceased, and there is nothing to justify a draft but a balance of one penny, it would be sporting with our understanding to tell us, that a creditor for this balance, who should draw for a thousand pounds, would be in a situation substantially different from what he would be, were he debtor in the same sum." In another case where the draft was for $96, and only $38 balance was in the drawee's hands, no notice was held necessary.^ And the doctrines here stated have the authority of Story* as well as Marshall. There is more difficulty in determining its application to the facts, than in discerning the true principle. § 1 08 1 . If the drawer withdraws the funds which he had in the drawee's hands when he drew the bill, or intercepts funds which he had provided to meet the bill ; ^ or if he privately directs the drawer not to honor it ; * or otherwise prevents the due acceptance or payment of his draft, he commits a fraud upon the holder of the bill, and forfeits his right to require demand and notice. But the with- drawal of funds will not operate as a forfeiture of the right to require demand and notice, if other arrangements be made between the drawer and drawee, by which the latter is justly expected to honor the bill.^ So if the drawer fail to comply with conditions precedent to his right to draw, he can not insist on demand and notice, for he himself is in fault.^ And although there may be open accounts be- tween the drawer and drawee, yet if they are in litigation, ' Blankenship v. Rogers, 10 Ind., 33 ; see also v. Stanton, i Hayw., 271. " Matter of Brown, 2 Story, 502, 520. ° Dickens v. Real, 10 Pet., 572 ; Rhett v. Poe, 2 How., 457 ; "^''alk v. SimmonSj 4 Mason, 113; Conroy v. Warren, 3 Johns' Cas., 259 ; Murray v. Judah, 6 Cow. 484; Rucker v. Hiller, 3 Camp., 217 , Chitty (13 Am. ed.) [*44i], 496. * Sutcliffe V. McDowell, 2 Nott & M'C, 251 ; Mr. Chitty puts a query (Chitty, 484), and Story says : " Perhaps (Story on Bills, § 375) this is the rule. We think there can be no doubt about it." ' Orr V. McGinniss, 7 East., 359. * Wollenleber v. Ketterlinus, 17 Penn. St., 389. § I0S2. DRAWING WITHOUT RIGHT TO DO SO. I 25 and the drawer knows it, he would not be justified in draw- ino- and could not be entitled to demand and notice.^ It the drawer of a bill is discharged by laches, in failure to give him notice of dishonor, no subsequent appropriation of his funds in the drawee's hands to its payment is au- thorized, and the drawee so appropriating them will not be exonerated from liability to the drawer.^ § 1082. Effect of acceptance on the qtiestion. — When the bill has been accepted, the acceptance is, printa facie, an ad- mission of funds by the acceptor, and renders him absolute- ly liable to a third party. It is also to some extent evidence that the drawer had a right to expect that the acceptor would pay the bill, even when it is shown that he had not been provided with funds ; ^ and it seems to have been held conclusive in favor of the drawer's right to require present- ment for payment and notice, although without funds.* But acceptance does not alter the general rule on the sub- ject, and when it is shown that the drawer had no right to expect payment of the bill by the acceptor, the holder is excused for not making presentment,^ or giving notice." And proof that the acceptor was not in funds is prima facie evidence that there was no right to expect payment."^ The fact that the acceptor has told the drawer before the maturity of the bill that he could not provide for it, and the drawer must, and that the acceptor has given the drawer money for that purpose, will not excuse w^ant of due pre- sentment and notice ; ^ nor will the fact that the drawer, in apprehension of the dishonor of the bill, has lodged other money of the acceptor in the hands of the indorser, upon ' Dollfus V. Frosch, i Denio, 367. ' Smith v. Rowland, 18 Ala., 367. ' Orear v. McDonald, 9 Gill, 350 ; Hill v. Norris, 2 Stew. & P., 1 14 ; Camp, bell V. Pettengill, 7 Greenl., 126. * Pons V. Kelly, 2 Hayw., 45 ; Richie v. McCoy, 13 Sm. & M., 541. ' Kinsley v. Robinson, 21 Pick., 327 ; Mobley v. Clark, 28 Barb., 390. * Hoffman v. Smith, I Caines, 157 ; Allen v. King, 4 McLean, 128. ' Seeposf, § 1084. * Baker v. Birch, 3 Camp., 107. 126 SPECIAL CIRCUMSTANCES OF EXCUSE. § IO83. an undertaking by the indorser to return it if he should be exonerated from payment of the bill.^ § 1083, The rule as to indorser s of bills drawn without fu7ids. — Ordinarily the indorser of a bill drawn without funds does not stand upon the same footing as the drawer, and although the drawer is not, he is, entitled to insist on strict demand and notice.^ He is presumed to know nothing of the accounts or arrangements existing between the drawer and drawee ; and if he has indorsed the bill for the accom- modation of the drawer, or for another indorser, or a third person,^ his liability is not fixed save by regular demand and notice. But there may be circumstances under which the indorser is no more entitled to insist upon diligence than the drawer. Thus where he indorses for accommoda- tion of the drawer, knowing the character of the bill, and neither of them expects that it will be honored, he comes within the reason of the principle which excuses the holder from giving the drawer notice, and it is equally unnecessary to charge him.* And in any case where the indorser partic- ipates in the fraud the rule applies. ' Clegg V. Cotton, 3 Bos. & Pull., 239 ; Story on Bills, § 376. "^ Wilkes V. Jacks, Peake, 202 ; Ramdullolday v. Darieux, 4 Wash, C. C, 61 ; Ralston v. Bullitts, 3 Bibb, 261 ; Scarborough v. Harris, i Bay, 177 ; Byles on Bills [*288]. 443. ' Warder v. Tucker, 7 Mass., 449 ; Rea v. Dorrance, 18 Me., 137 (presentment too late) ; Carter v. Flower, 16 M. & W., 743 ; Brown v. Maffy, 15 East., 216. * French v. Bank of Columbia, 4 Cranch (S. C), 141. In Farmers' Bank v. Vanmeter, 4 Rand., 553, Green, J., said : "The modern doctrine is perfectly well settled that the law implies an injury from a want of due notice ; and this presumption is so strong that in order to repel it proof is required to show that it was impossible for the party to suffer any damage or inconvenience. Thus in the case of a drawer, if the bill be drawn without funds in the hands of the drawee, and the drawer had no reason to expect that the bill would be accepted, this is considered as a case in which it is shown that no possible prejudice can result to the drawer from want of notice, since he knew when he drew the bill that it would devolve upon him to take it up, as well without as with notice of its dishonor ; and having no reason to expect the bill to be accepted, it can not be supposed that he would make any arrangements for putting funds in the hands of the drawee to take it up. But if the drawer without funds in the hands of the drawee has any just ground to believe that the bill will be accepted, he ought to have notice ; for in that case it is to be presumed that he will so ar- range his funds as to place the means of paying the bill at maturity in the hands of the drawee. Such arrangements, if unnecessar}' and fruitless, would be prej- udicial to the party ; and to enable him to avoid this mischief, immediate notice ^ I0S3. DRAWING WITHOUT iaCIIT TO DO SO. llj The indorser of a note for accommodation of the maker or other party, is in general entitled to require strict de- mand and notice.^ In Virginia it has been said : " With the exception of the cases in which, it can be shown that they could not by pos- sibility suffer an injury by the failure to give them notice, the drawer and indorser have in all cases a right to strict notice, unless they waive that right or forfeit it by their own fraud. I do not find this ground of fraud very distinctly laid down as a reason for dispensing with the necessity of notice. But there are many cases in which it appears to have been the sole ground of the judgment, and in which the principle is distinctly alluded to.^ .... Every drawer of a bill virtu- ally represents to all dealing for it, that it is drawn upon sufficient funds. The holder deals upon the faith that he shall have the additional security of the drawer ; and if he fails in this he is disappointed by the fraud of the drawer ; and if the indorser, with a knowledge of the facts, indorsed should be given. The case of an indorser is still stronger than that of a drawer ; for he has in general a right to resort to the drawer for indemnity, and to enable him to assert this right with the greatest possible effect, he ought to have imme- diate notice. But even as to an indorser a case may occur in which it may be shown to be impossible for him to suffer any inconvenience from the want of notice. As in the case of a note indorsed by the payee for the accommodation of the drawer, who should place in the hands of the indorser sufficient funds to discharge it. The latter would not be entitled to notice of the non-payment, because he could not possibly suffer any damage by the failure to give him no- tice (Cornay v. De Costa, i Esp. Rep., 303), since the only purpose of a notice would be to inform him of the necessity of resorting to the drawer for indemnity, which, in this case, is unnecessar}', as he already has that indemnity in his hands." But in England it was recently held that the reply of the plaintiff to the indorser, who set up absence of notice, that neither at the time when the bill was drawn nor afterward, nor when it became due, and in presentment thereof, had the acceptor, or the drawer, or any indorser prior to the defendant, any funds of defendant in his hands, and that the bill was drawn for the purpose of raising money for the defendant, the drawer, the acceptor, and the prior indorser, jointly, and the defendant was in no way damnified — was a bad reply, and that the indorser was discharged by want of notice. Foster v. Parker, 2 Law, R. C. P. Div. 18 (1876). ' French v. Bank of Columbia, 4 Cranch, 141 ; Bogy v. Keil, i Mo., 743; Croton v. Dalheim, 6 Greenl., 476 ; Jackson v. Richards, 3 Caines, 343 ; Carter V. Flower, 16 M. &. W., 743 ; Sisson v. Tomlinson, Selw. N. P., 335 ; Brown v. Maffcy, 15 East., 222. ^ Farmers' Bank v. Vanmeter, 4 Rand., 553, Green, J., citing Sisson v. Tom- linson, Selwyn N. P., 324 ; Brown v. Maffey, 15 East., 216 ; Leach v. Hewitt, 4 Taunt., 731. 128 SPECIAL CIRCUMSTANCES OF EXCUSE. § I084. for the purpose of promoting the object of the drawer, he would be a participator in the fraud These cases are referred to for the purpose of showing that an indorser who unites with the drawer to deceive the holder by repre- senting a bill as one that will probably be accepted, with a knowledge that it will not, is guilty of a fraud, which de- prives him of the right to insist on notice." § 1084. The burden of proof as to waiit of funds. — Wher the holder seeks to rely on this excuse for want of present- ment or notice, the burden of proof rests upon him to show that there were no funds in the hands of the drawee to meet the bill ; ^ and this he must do by affirmative proof, as it will be presumed that there were funds, although the bill were dishonored.^ Having shown that there were no funds, "dc prima facie excuse is made out ; and if there were such qualifying circumstances as would entitle the drawer to require strict presentment and notice — such as his being an accommodation drawer, or keeping an open account, and the like — he must show them, for they lie peculiarly within his own knowledge.* SECTION II. WHEN THE PARTY IS UNDER AN OBLIGATION TO PROVIDE FOR PAYMENT. § 1085. In the second place, when the bill has been ac- cepted for the mere accommodation of the drawer, and he has undertaken to supply funds to meet it, a failure to pre- sent it to the acceptor will be excused as against the drawer, ' Baxter v. Graves, 2 A. K. Marsh, 152 ; Golladay v. Bank of Union, 2 Head.,^ 57 ; Ford v. McClung, 5 West Va. (Hagans), 1 56. ^ Ibid. ' Merchants' Bank v. Easley, 44 Mo., 288 ; Sullivan v. Deadman, 23 Ark., 14 ; Cook V. Martin, 5 Sm. & M., 379 ; Durrum v. Hendrick, 4 Tex., 495 ; Wood v. McMeans, 23 Texas, 122; Carter v. Flower, 16 M. & W., 743; Fitzgerald v. Williams, 6 Bing. N. C, 68 ; Kemble v. Mills, i Man. & G., 771 ; Edwards on Bills, 645 ; ante, § 1082. '§ 1085. OJSLIGATION TO TROVIDE FOR I'AVMENT. 1 29 who could not suffer save from his own laches.^ "And if the bill be drawn payable at his own house, it will be presumed to be for his (the drawer's) accommodation.^ And so, while the indorser of a bill drawn for the accommodation of tht^ drawer or acceptor, and the indorser of a note made for the accommodation of the maker, is entitled to insist upon its due presentment at maturity, yet if the bill is drawn and accepted, or the note made for the accommodation of a par- ticular indorser, that indorser is the real party who should make provision to pay the bill at maturity, and the failure to make a due presentment or give due notice will be ex- cused as to him, though not as to the other indorsers, or to the drawer if it be a bill.^ This rule rests upon the princi- ple that the accommodated indorser can by no possibility (as a rule) suffer loss by reason of a failure to make due presentment ; since if the bill or note were dishonored, there would be no party against whom he would have re- course upon paying it. Still, however, if there were cir- cumstances in the transaction which subjected the party ac- commodated to loss by failure to make a due presentment, it would be open for him to show them, and to the extent of such loss he would be exonerated.'* If the bill be drawn for the accommodation of the acceptor, both drawer and in- dorsers are entitled to notice, for they have a right to ex- pect him to pay it.^ Upon the same principle, a drawer, ' French v. Bank of Columbia, 4 Cranch (S. C), 141 ; Barbaroux v. Waters, 3 Mete. (Ky.), 304 ; Holman v. Whiting, 19 Ala., 703 ; Torrey v. Foss, 40 Me., 74 (case ot notice) ; Ross v. Bedell, 5 Duer, 462 ; Story on Bills, § 370 ; Sharp v. Bailey, 9 B. & C, 44 ; ex parte Heath, 2 Ves. & B., 240. ^ Sharp V. Bailey, 9 B. & C, 44. Mbid. ; Story on Notes, § 268 ; Edwards on Bills, 638 ; Keyes v. Winter, 54 Me., 400 ; French v. Bank of Columbia, 4 Cranch, 141 ; McVeigh v. Bank of Old Dominion, 26 Grat., 785. Turner v. Samson, 2 Q. B. Diw, 23 ; igMoak's E. R., 195. * Story on Notes, § 269. But see McMean v. Little, 59 Tenn., 330, where one of two drawers was the acceptor for accommodation of the other, and it was held that the latter was discharged by failure in respect to demand and notice, ^French v. Bank of Columbia, 4 Cranch (S. C), 141, Marshall, C. J., saying" "Where he (the drawer) draws solely for the purpose of raising money by dis- count for himself, he expects to pay the bill, and there is no person to whom he can resort for repayment. There is no person on whom he can have a legal or Vol. II.— 9 130 SPECIAL CIRCUMSTANCES OF EXCUSE. § I086. although drawing upon funds, is not entitled to require notice from an indorser who indorsed for his accommoda- tion, to enable him to get his bill discounted, or add strength to its credit ; for although as against other parties entitled to require strict diligence in respect to presentment and notice, as to such indorser the debt is his own.^ But it does not seem that an agreement by an indorser of a note, made at the time of indorsement, to pay the note at matu- rity would bind him absolutely without presentment or notice ; it would be understood to have been made with the implied reservation that if the maker paid he was not liable, and he would be discharged by failure to demand payment of him.^ If the maker and the payee, who is also indorser, jointly borrows the money, a promise of the payee to pay it, dispenses with the necessity of presentment and notice.^ § 1086. What relations between the parties excuse want of notice. — Where one of several partners draws upon a firm of which he is a member, it has been held that he is not entitled to notice, both in the case of an ac- an equitable demand in consequence of the non-payment of the bill. But how can the same reasoning be said to apply a fortiori \.o the case of the bill being drawn for the use of the acceptor ? In such case the relative situation of the parties must be substantially the same as if the money raised on the bill for the acceptor were funds of the drawee in his hands on which the bill was drawn. Every motive for requiring notice of non-payment, in the case of a bill drawn upon funds, except that which results from a right to claim those funds by a suit, would apply to a bill drawn to raise money tor the acceptor, unless it was under- stood at the time that the acceptor was not to pay the bill." .... And then, after stating the principle set forth in this section, that where the money is re- ceived by the indorser he is not entitled to notice, he added : " But the same rea- sons do not appear to exist where the note has been discounted for the maker. In that case the funds which represent the note are in the hands of the maker, or, to use the language applicable to bills, in the hands of the acceptor before the draft becomes payable, the drawer had a right to draw, and had a right to expect that his bill would be paid. Upon principles of reason and of justice, then, it would seem that notice of non-payment could as little be dispensed with in this case, as if he had himself paid the money to the maker of the note, and then re- ceived it from the bank, or as if the note had been given him for a previous debt, and had been discounted for his own use." ^ Ex pxrfe Heath, 2 Ves. & B., 240; Story on Bills, § 310. ^ Davis V. Gowen, 19 Me., 447. ^Bank of Seaford v. Conneway, 4 Houston, 206. § 1087. OBLIGATION TO PROVIDE FOR PAYMENT. I3I cepted ^ and of an unaccepted bill.^ The drawer will, how ever (where a bill is drawn on a firm of which he is a mem ber), be entitled to notice if the copartnership had dissolved before the bill was drawn. ^ The question of notice of the dissolution of the firm, it is said, might be important.* In like manner, where the drawer and drawee are partners in the particular transaction in which the bill was drawn, no notice, it has been held, is necessary, for the reason assigned that knowledge of one partner is the knowledge of the other, and notice to one partner is notice to the other.^ But it has been held that notice must be given to the in- dorser, when one member of a firm makes a note and another indorses it, both parties signing in their own name, although the note was given for partnership purposes, and was to be paid out of the partnership funds.^ Where one firm draws on another, and they have a common member,' or a firm draws on a member,^ the drawer firm is not en- titled to notice. § 1087. What relations between parties excuse want of demand. — Where the makers of a note constitute one firm, and it is indorsed by another firm, in each of which firms ' Rhett V. Poe, 2 How., 457 ; Story on Bills, § 392 ; i Parsons N. & B., 524 In Porthouse v. Parker, i Camp., 82 (1807), the bill was drawn by the agent ol George, James, and John Parker, who were partners, upon John Parker, and ac- cepted by the latter's agent. Lord Ellenborough held, that the bill having been accepted by order of one of the defendants, this was sufficient evidence of its having been regularly drawn ; and, further, that the acceptor being likewise a drawer, there would be no occasion for the plaintiff to prove that the defendants had received express notice of the dishonor of the bill, as this must necessarily have been known to one of them, and the knowledge of one was the knowledge of all. See also New York, etc., Co. v. Meyer, 51 Ala., 325, ^ Fuller v. Hooper, 3 Gray, 334. In New York, etc., Co. v. Selma Sanngs Bank, 51 Ala., 305, a bill was drawn by one firm on another, and was accepted by the latter. The two firms had a common member. Held, notice not neces- sary to charge the drawers. Taylor v. Young, 3 Watts, 339 ; Gowan v. Jackson, 20 Johns, 176; Story on Bills, § 392. 'Taylor v. Young, 3 Watts, 339. * i Parsons N. & B., 525. " Harvvood v. Jarvis, 5 Sneed, 375; Storj' on Bills (Bennett's ed.), 3i3«/ Rhett V. Poe, 2 Howard, 457. " Foland v Boyd, 23 Penn. St., 476, Lowrie, J. ' New York, etc., Co. v. Selma Savings Bank, 51 Ala., 305 ; see Porthouse v. Parker, i Camp., 82, supra. ° New York, etc., Co. v. Meyer, 51 Ala., 325. 132 SPECIAL CIRCUMSTANCES OF EXCUSE. § I088. the same person is one of the partners, the indorsing firm is entitled to require strict presentment to the firm making the note, for the two firms stand in their business relations as distinct persons, with separate accounts, funds, and liabili- ties, although having a common member.^ And, as has been said, to hold otherwise would subject the firm indors- ing to payment of the note, because one of the partners be- longed to both firms, when the firm primarily liable is sol- vent, and would pay at once if the note were presented.* The same rule applies when the drawer or indorser of a bill belongs to two firms.^ For though each partner is presumed to have knowledge of all the facts known to another, yet knowledge of non-presentment is no equivalent to it, nor is it a waiver of the holder's obligation to make it. Where the two firms reside in different and distant places, the ne- cessity and reason of the rule is peculiarly obvious.^ § 1088. It is intimated by Professor Parsons that notice to the drawing or indorsing firm would be likewise neces- sary.^ But this does not seem to be a necessary implication from the foregoing. A formal demand upon the firm pri- marily liable is necessary in order to ascertain whether or not it will pay the bill or note ; and until such demand is made at its place of business or otherwise, according to law, the drawing or indorsing firm has not broken its contract that upon such demand the bill or note will be paid. But if it is not paid on demand, it might be urged that the firm drawing or indorsing must be chargeable with the default, as it should know of the dishonor through its common co- partner, who was as much bound to see the bill or note paid as his associate in the other firm. This view has been taken, ' Dwight V. Scovil, 2 Conn., 654 ; Gaunt v. Thompson, 7 Man. G. & S., 400 Foland v. Boyd, 23 Penn. St., 476; i Parsons N. & B., 523; Story on Notes, §294. ^ Swift, G. J., in Dwight v. Scovil, 2 Conn., 654. ^ Storj' on Bills, § 376 * Dwight V. Scovil, 2 Gonn., 654. ' i Parsons N. & B., 523. § 1089. OBLIGATION TO PROVIDE FOR PAYMENT. 1 33 or at least very distinctly intimated, in a case where a ques- tion nearly identical was presented.^ § 1088^. Where the drawer and the drawee of the bill are the same person it is in effect a promissory note, and no notice of dishonoi to the drawer is necessary,^ and upon the doctrine that the maker of a note, like an ordinary debtor, must seek his creditor, the drawer of a bill upon himself has been held chargeable without presentment.^ But as to presentment this doctrine is doubtful.* § 1089. Joint makers at distance from each other. — When there are joint makers of a note, and they live so far apart that it is impossible to make demand of both on the same day, it would seem that a delay for the necessary time ,0 present to both would excuse for such time the want of demand on both, and the want of notice.^ > West Bank Branch v. Fulmer, 3 Penn. St., 399. The note in this case was made by one firm and indorsed by another. All the indorsers were partners in the firm which made the note, which firm had two additional members. No notice was given to Cochran & Perry, the indorsing firm, but they were held liable, and Gibson, C. J., said : " It would be absurd in an indorser to complain that he had not been served with formal notice of what was known to him, or that he was prejudiced for want of it. As, then, it was as much the business of Cochran, Perry & Co. as it was the business of the other members ol Beers, Cochran & Co. (the makers) to provide for the payment of their joint note at its maturity, and as they all knew that provision had not been made for it, proof of notice to Cochran & Perry would have been superfluous in an action against them as indorsers." ^ Vol. I, §§ 128, 129, and cases cited. ' Bailey v. Southwestern Bank, 11 Fla., 266 ; Maux Ferry Co. v. Branegan, 40 Ind., 361 ; Fairchild v. Ogdensburg R.R., 15 N. Y., 337 ; 2 Ames B. & N., 462 ; Benjamin's Chalmers' Digest, 3. * See 2 Ames B. & N., 462. Ante, % 1088. ^ I Parsons N. & B., 531. See chapter XX, on Presentment for Payment, § 595, vol. I. CHAPTER XXXII. SPECIAL CIRCUMSTANCES OF EXCUSE FOR WANT OF PRE- SENTMENT, PROTEST, AND NOTICE, ARISING FROM SPE- CIAL ACTS OF WAIVER. SECTION I. SPECIAL WRITTEN AND VERBAL WAIVERS OF PRESENTMENT, PROTEST, AND NOTICE — GENERAL PRINCIPLES RESPECTING NOTICE. § 1090. When presentment of the bill or note at maturity has been dispensed with by prior agreement between the parties, or, in other words, has been waived by the party entitled to require it, the holder is excused for his failure to make it. It would be a fraud upon the holder to permit him to suffer by acting upon the assurance of the party to whom he looks as security upon the paper ; and as prompt presentment is a requirement solely for the benefit of the drawer and indorsers, they are themselves the sole judges to determine whether or not they will enforce it. The waiver may be either verbally or in writing ; it may be ex- pressed in totidem verbis, or inferred from the words or acts of the party ; and it matters not what particular lan- guage may be used, so that it conveys the idea that the pre- sentment at maturity is dispensed with. The like observa- tions apply to the protest and notice. Where the indorser of a check wrote over his name, " waiving demand and no- tice," it was held that he was not entitled to require any demand of the maker, or notice to himself of non-pay- (134) , §§ lOQI, 1092. SPECIAL WAIVERS. I35 ment, as conditions precedent to his liability.^ Such words have the effect to dispense with the necessity for those formahties. If a higher security for the debt be given by the drawer or the indorser — as, for instance, a mortgage or deed of trust, and nothing is said therein respecting de- mand and notice, the failure in respect to them will not impair the security given, which may be enforced upon de- fault being made.^ § 1 09 1. It is not necessary that the waiver should be direct and positive. It may result from implication and usage, or from any understanding between the parties which is of a character to satisfy the mind that a waiver is intended ; ' but there is authority to the effect that such waivers as we are now treating of should receive a strict construction.* And it has been said that to show a waiver of demand and notice there must be clear and unequivocal evidence,^ and that equivocal circumstances or agreements will not suffice.^ Mr. Chitty intimates that an indorser's waiver must be express, while he admits that the drawer's may be implied.' But no distinction in this regard is recognized.' § 1092. Sometimes the waiver is embodied in the instru- ment itself, and in such cases the waiver enters into the contract of every party who signs it, whether as drawer, maker, acceptor, or indorser. Thus, where the words " pres- entation and protest waived," or " notices and protests of non-acceptance and non-payment waived," are written in the bill, they are binding, not only upon the drawer, but * Emery v. Hobsen, 62 Me., 578. See also Woodman v. Thurston, 8 Cush., 157; 16 American Rep., 514. " Cardwelf. v. Allen, 33Grat., 164. * Fuller V. McDonald, 8 Greenl., 213 ; i Parsons N. & B., 594. * Bird V. Le Blanc, 6 La. Ann., 470; Wall v. Bry, i La. Ann., 312. ' Gregory v. Allen, Mart. & Y., 74. * Story on Bills, § 371. ^ Chitty on Bills (13 Am. ed.) [*5o61, 573, on authority of dictum of Sir James Mansfield, in Borradaile \'. Lowe, 4 Taunt., 93. * Thornton v. Wynn, 12 Wheat., 183 ; Story on Bills, § 321. 136 EXCUSE FOR WANT OF PRESENTMENT. § lOgia. also upon the iiidorsers, who are in effect new drawers, and who become parties to the waiver in becoming parties to the bill.^ Clearly this is the case where such a waiver ex- pressly includes the drawer and indorsers.^ § 1092^. Whether waiver over one indorsement applies to others. — Sometimes the waiver is not embodied in the in- strument itself, but is made by one of the indorsers by writing over his signature, " I waive demand," or "I waive presentment," or "waiving demand and notice," or " I hold myself accountable without protest or notice," ^ or some such expression ; and in such cases the better opinion is that the waiver is simply the individual waiver of the in- dorser over whose signature it is written, and not binding upon others who do not make themselves parties to it.* For indorsement is a separate and independent contract, embodying, it is true, the terms of the bill, or note ; but not by implication embodying the terms of any other in- dorsement, each indorsement speaking independently of others, and introducing such terms as may be consistent with the nature of the act. But a contrary view has been taken in Maine ; and where the first indorser wrote over his signature, " waiving demand and notice," it was held that subsequent indorsers who merely appended their naked signatures were bound by the waiver, and that if a subse- quent indorser intended to exclude himself from its opera- tion he should use the words, "requiring demand and no- tice." « § \OQ)2b. Waiver on separate paper. — The waiver may ' Bryant V. Merchants' Bank, 8 Bush (Ky.), 43; Smith v. Lockridge, 8 Bush (Ky.), 423 ; Lowry v. Steele, 27 Ind., 170; Farmers' Bank v. Ewing, 78 Ky. (l Rodman), 266. "" Bryant v. Lord, 19 Minn., 397. ' Halley v. Jackson, 48 Md., 254. * Duffy V. O'Connor, 7 Baxter, 498; Woodman v. Thurston, 8 Cush., 157. But if such waiver were orig-inally indorsed on the back of the instrument it would seem that each indorser would be bound by it as a part of the instrument. Farmers' Bank v. Ewing, 78 Ky. (i Rodman). 266 ' Parshley v. Heath, 69 Me.. 00 §§ I093. I094- SPECIAL WAIVERS. 137 also be upon a separate paper, written prior to,^ contempora- neously with,^ or subsequent to, the indorsement,'^ § 1093. Whether verbal zuaiver at time of indorsement may be shown. — It is conceded on all sides that a verbal waiver is as effectual as a written one ; and the weight of au- thority sustains the proposition that a parol promise to pay the note absolutely, made by the indorser at the time he indorses it, or a promise to pay it if the maker docs not, or a verbal agreement between the parties that payment should not be demanded until after maturity, is admissible to prove a waiver of demand and notice. Such evidence is not offered for the purpose of varying the written con- tract of indorsement, which is simply to pay the note after exercise of due diligence against the maker, but to show that the parties have between themselves settled the amount of diligence to be required.^ It has been held differently,^ but the doctrine of the text seems to us more consistent with the principles upon which waivers are sustained. § 1094. Exteiit of waiver. — The terms of the waiver are often broad enough to include all the steps usually neces- sary to fix the liability of the indorser. Thus where the words, "I waive demand and notice," "^ are written over the indorser's signature, or "presentation and protest waived,"'' are embodied in the instrument, they import an express waiver of demand, protest, and notice. So, "waiving de- ' Duvall V. Farmers' Bank, 7 Gill & J., 44- " Po^i^ § io93- ' Spencer v. Harvey, 17 Wend., 489. *Dye V. Scott, 35 Ohio St., 194 (approving the text) ; Taylor v. French, 2 Lea Tenn., 260; Boyd v. Cleveland, 4 Pick., 525; Barclay v. Weaver, 19 Penn. St., 396; Hazard v. White, 26 Ark., 174; Lane v. Steward, 20 Me., 98; Fuller v. McDonald, 8 Greenl., 213 ; see also Wall v. Bry, i La. Ann., 312 ; see i Parsons N. & B., 584; Story on Bills, § 317, note i ; aiite, § 719. 'Beeler v. Frost, 70 Mo., 186; Rodney v. Wilson, 67 Mo., 123. Hough, J., saying: " We think the policy of the law requires that the paper ' shall tell its own story.' " See 2 Ames B. & N., 133 ; Hightower v. Ivy, 2 Port. (.Ala.), 308 ; Barry v. Morse, 3 N. H., 132 ; Kern v. Van Phul, 7 Minn., 74 ; Davis v. Gowen, 19 Me., 447, held demand not waived, as the promise could not be construed to discharge that obligation. See § 719. ' Woodman v. Thurston, 8 Gush., 1 57 ; Jaccard v. Anderson, 37 Mo., 91. ' Bryant v. Merchants' Bank, 8 Bush (Ky.), 43. 138 EXCUSE FOR WANT OF PRESENTMENT. § IO95. mand and notice,"^ or "I waive protest and notice,"^ or " I waive demand of protest,"^ though somewhat variant in expression, have the same significance — a waiver of all steps usually taken to bind the indorser. Sometimes notice alone is waived, as, for instance, where the drawer refused to give his address, saying that the ac- ceptor would not pay, and that he would call in a few days, and inquire whether the bill had been paid or not* § 1095. Effect of waiver of protest of foreign bill. — ^The words, " I waive protest," or " waiving protest," or any similar phrase, importing that the protest is waived, are, when applied to a foreign bill, universally regarded as ex- pressly waiving presentment and notice, the protest being according to the law merchant the formal and necessary evidence of the dishonor of such an instrument. In waiv- ing " protest," the party is considered not only as dispens- ing with a formality, but as dispensing with the necessity of the steps which must precede it, and of which it is merely the formal though necessary proof which the law requires.^ § 1095^. Effect of waiver of protest of inlafid bill or 7iote. — But when a waiver of protest is applied to an inland bill, or to a promissory note, it has not in all cases been consid- ered clear that it was intended to dispense with notice ; the protest of such instruments not being necessary in order to charge the drawer or indorsers. But the word "protest-" has, by general usage, acquired a more extensive significa- tion than the mere formal declaration of a notary. Inland bills and promissory notes may be protested by statutory enactment in many States, and the protest is accorded the same effect as to them when it is made, though it is not 'Johnston v. Searcy, 4 Yerg., 182. " Gordon v. Montgomery, 19 Ind., no. 'Porter v. Kemball, 53 Barb.* 467. * Phipson V. Kneller, i Stark., 116; 4 Camp., 285 ; Edwards on Bills, 633. " Union Bank v. Hyde, 6 Wheat., 572 ; Brown v. Hull, 33 Grat., 31 ; Edwards on Bills, 634. I095- SPECIAL WAIVERS. 139 necessary to make it. And the weight as well as the number of authorities predominate in favor of constru- ing a waiver of protest to signify as much when applied to inland bills and notes as when used in respect to a foreign bill.* And such seems to us clearly the correct conclusion.^ In the Supreme Court of the United States a waiver of protest of an inland bill was considered under the circumstances ambiguous as to the intent of the party, and parol evidence was admitted to show that it had the full signification of a waiver of demand and notice ; but the reasoning of the opinion seems to us to bear out the doctrine of the text that, ex vi termini, it imports, according to the understanding of mercantile men, that all the steps to be ordinarily taken are dispensed with.^ The contrary view obtained in Louisiana.'* In 'Coddington v. Davis, l Comst., i86; 3 Denio, 16. In this case the waiver was as follows: "Please not protest T. B. Codding-ton's note due, and I will waive the necessity of the protest thereof." Porter v. Kemball, 53 Barb., 467 ; Fisher v. Price, 37 Ala., 407 ; Jaccard v. Anderson, 37 Mo., 91 ; Carpenter v. Reynolds, 42 Miss., 807, note ; Hood v. Hallenbeck, 14 N. Y. S. C. (7 Hun), 364, note. See Brown v. Hull, 33 Grat., 31 ; Sprague v. Fletcher, 8 Oregon, 367. "" Harvey v. Nelson, 31 La. An., 434. In this case the text is quoted and ap- proved. The indorsers had written on the note in suit : " We hereby waive the necessity of either protest or notice." White, J. : " The protest necessarily includes a due demand, and if such be the case the waiver of protest necessarily waived that which was an integral or essential part of the protest." • Union Bank v. Hyde, 6 Wheat, 572. The following undertaking of the in- dorser of a promissory note : " I do request that hereafter any notes that may fall due in the Union Bank, in which I am, or may be, indorser, shall not be protested, as I will consider myself bound in the same manner as if the said notes had been, or should be, legally protested," was held by the United States Supreme Court to be ambiguous as to whether it amounted to a waiver ot de- mand and notice, and parol proof was admitted to show that it was the under- standing of the parties that the demand and notice necessary by law to charge the indorser should be dispensed with. And it was said by Johnson, J. : " Had the defendant omitted one word from his undertaking, it would have been diffi- cult to maintain the affirmative of this proposition. But what are we to under- stand him to intend when he says : ' I will consider myself bound in the same manner as if said notes had been, or should be,, legally protested ? ' Except as to foreign bills, a protest has no legal binding effect, and as to them it is evi- dence of demand, and incident to legal notice. It either, then, had this mean- ing, or it had none. This reasoning, it may be said, goes no further than to a waiver of the demand ; but what effect is to be given to the word ' bound ' ? It must be to pay the debt, or it means nothing." It was held by. the court that, if this reasoning were inconclusive, the evidence admitted proved that it was the real intention of the parties to give this etfcct to the agreement. * Ball V. Greaud, 14 La. Ann., 305 ; Bird v, Le Blanc, 6 La. Ann., 470 ; Wall v. Bry. I La. Ann., 312. 140 EXCUSE FOR WANT OF PRESENTMENT. § IO96. Maine, by statute, waiver of demand and notice must be in writing.^ § 1096. Construction of waivers. — A waiver is not to be construed to extend beyond the fair and reasonable import of its terms. Therefore, a waiver of notice, which is a sep- arate and distinct step from the presentment, is not re- garded as waiving the presentment or demand upon the drawee or maker.^ The drawer or indorser may have had confidence that the drawee, acceptor, or maker would honor the bill or note upon its presentment ; or the holder may have insisted on not incurring the risk of diligence re- quired in giving prompt notice. Whatever motive may have actuated the waiver of notice, it does not expressly or inferentially extend to a waiver of the demand, and that must be duly made in order to charge the drawer or m- dorser. The words, " I hold myself accountable, and waive all notice," do not imply an extension of the waiver to the demand ; but merely an accountability without notice, leav- ing the demand still as a condition precedent.^ When time is extended by the waiver, as, for instance, where it is said, " We waive protest and notice, and hold ourselves responsible for payment on a certain future day, to which this note is extended by consent," the waiver applies to all steps of demand, protest, and notice at maturity, and also as to such steps at the prolonged or extended maturity of the paper.'* § 1097. State7nent of grounds of waiver. — The fact that the waiver of protest, demand, or notice states the reasons or grounds of such waiver does not affect it, and where the * Thomas v. Mayo, 56 Me., 40. "^ Sprague v. P'letcher, 8 Oregon, 367 ; Voorhees v. Atlee, 29 Iowa, 49 ; Scull V. Mason, 7 Wright, 99 ; Buchanan v. Marshall, 22 Vt., 561 ; Lane v. Steward, 20 Me., 98 ; Drinkwater v. Tebbets, 17 Me., 16; Berkshire Bank v. Jones, 6 Mass., 524; Backus v. Shipherd, 11 Wend., 629; Story on Bills, §§ 371, 375 ; Story on Notes, § 272 ; contra, Matthey v. Gaily, 4 Cal., 62. ' Burnham v. Webster, 17 Me., 50. * Blanc V. Mutual N. B., 28 La. An., 921. To same effect see Forster v. Jur- dlson, 16 East., 105; Ridgeway v. Day, 13 Penn. St., 288. 5§ 1098, 1099. SPECIAL WAIVERS. I4I waiver ran : " Notice, demand, protest, and due diligence waived on account of the war and insurrection," during the late civil war in the United States, it was held absolute upon Its face, and that the liability of the indorsers were absolutely fixed by dishonor.* § 1098. Parol testimo7iy as to waiver. — Where there is a written waiver of demand upon the face of the bill or note, but not of notice, it may be shown by parol testimony that there was also a verbal waiver of notice, and so where there is a written waiver of notice a verbal waiver of de- mand may be proved. If a waiver of both the conditions (of demand and notice) may be proved by parol, we are aware of no good reason why that kind of proof should be excluded to show a waiver of one condition where a waiver of the other is made a part of the indorsement itself."^ § 1099. Whether guaranty is waiver. — Any language which implies a guaranty renders the party using it a guar- antor, and consequently such party is not entitled to de- mand and notice as such guarantor. But it has been held that the words "surety" or "security,"^ or "backer"^ placed after an indorser's name, is no waiver of demand and notice, on the ground that they were intended to secure to the parties the privileges of sureties as well as of indors- ers. The authority of these cases, however, is doubted.^ The expressions " accountable," " eventually account- able,"^ and "hold ourselves responsible for payment," "^ imply a waiver of demand and notice, and so does the word "holden."^ And where an indorser wrote, "I assign the ' Neal V. Wood, 23 Ind., 524 (1864). " Drinkwater v. Tebbets, 16 Me., 17 ; Mills v. Beard, 19 Cal., 161 ; Edwards on Bills, 635. See atite, § 1093. ^ Bradford v. Corey, 5 Barb., 461, Paige, J. * Seabury v. Hungerford, 2 Hill, 80. * i Parsons N. & B., 579. ' Turber v. Caverly, 42 N. H., 74 ; McDonald v, Bailey, 14 Me., loi ; Burn- ham V. Webster, 17 Id., 50. ' Blanc V. Mutual National Bank, 28 La., 922 ; see Small v. Clarke, 51 Cal., 227. * Bean v. Arnold, 16 Me., 251 ; Blanchard v. Wood, 26 Id., 358. 142 EXCUSE FOR WANT OF PRESENTMENT. § IIOO. within note to J. T., and hold myself responsible for the payment of the same, the maker to have two years to pay the same, unless he prefers to pay sooner — interest on the same to be paid annually," it was held a waiver of demand and notice.^ § IIOO. Whether questions of waiver are of law or of fact. — Whether particular conversations amount to a waiver or not has been held by the United States Supreme Court to be a question of fact for the jury, and not one of law for the court.^ But whether or not distinct words used amount to a wa-iver or not, would be, we should think, a question of law ; although, if intermixed with others about which the testimony is not clear and concurrent, it would be a question of fact for the jury to determine whether or not there was a waiver. In Massachusetts, it has been said by Shaw, C. J. : " Though questions of due diligence and waiver were originally questions of fact, yet having been reduced to a good degree of certainty by mercantile usage, and a long course of judicial decision, they assume the character of questions of law ; and it is highly important that they should be so deemed and applied, in order that rules affect- ing so extensive and important a department in the trans- actions of a mercantile community may be certain, practical, and uniform, as well as reasonable, equitable, and intelli- gible.^ § 1 10 1. Laches of a holder by delay may be waived, but the waiver should be distinctly proved. Where a draft was drawn in Ohio on New York, on July loth, 1857, and before presentment was lost ; and on August loth the drawer gave the holder another precisely similar, post-dated July loth, 1857, and wrote across it "duplicate," and the latter presented it on August 14th, and was refused pay- " Airey v. Pearson, 37 Mo., 424. "^ Union Bank v. Magruder, 7 Pet., 287 ; see Carmichael v. Bank of Pennsyl- vania, 4 How. (Miss.), 567. ^ Creamer v. Perry, 17 Pick., 332. §§1102,1103. SPECIAL WAIVERS AFTER EXECUTION. I43 ment, the drawees having failed the day before — it was held that the second draft was given as a substitute for the first, and to take its place, and that the plaintiff's delay was fatal ^ SECTION 11. SPECIAL WAIVERS AFTER THE EXECUTION OF THE BILL OR NOTE. § 1 102. The waiver may not only be written upon the bill or note by the party at the time he signs it, but as well at any time before maturity ; and when made after the exe- cution of the instrument, no new consideration is necessary to support it.^ All that the holder contracts to do in order to bind the indorser is to use due diligence in making pre- sentment and demand of payment of the acceptor or maker, and in giving the indorser notice in the event of his default. Due diligence, in the absence of any agreement or under- standing betv/een the parties, fixes the time within which such presentment must be made and notice given ; but when the indorser himself relaxes the rule, due diligence requires no more than that his own terms be complied with. , § II 03. As to waiver before mattirity by condiccl, act, or agreement. — Any act, course of conduct, or language of the drawer or indorser calculated to induce the holder not to make demand or protest or give notice, or to put him off his guard, or any agreement by the parties to that effect, will dispense with the necessity of taking these steps.^ ' Benton v. Martin, 40 N. Y., 345. - Wall V. I3ry, i La. Ann., 312, Slidell, J., saying : " The indorsement of the defendant was made some months antenor to the indorsement and signature of the waivers The defendant urges that it was not binding, because made without consideration. The plea that the waiver was without consideration can not avail the defendant. It was made before the maturity of the note ; the holder may have regulated his conduct, in not protesting the note, by the de- fendant's waiver, confiding in it ; and to relieve him from it now would be sanc- tioning a breach of good faith, and permitting that party to gain by his own disingcnuousness." Story on Notes, § 271. ' Boyd V. Bank of Toledo, 32 Ohio St., 526, approving text. See also Moyer's A.ppeal, 87 Penn. St., 129. 144 EXCUSE FOR WANT OF PRESENTMENT. ^ I IO4. Where the party told the holder eighteen months before maturity not to protest it, as it should be paid at maturity, it was held a waiver of demand and notice.^ So where the in dorser informed the holder that the maker had absconded, and requested forbearance.^ So where, on the first day of grace, the indorser requests time, and says that an arrange- ment will be made, notice is waived ; ^ so where the drawer,* or the indorser,^ informs the holder that the bill will not be paid, or that he can not pay it when due, it is a waiver of demand, protest, and notice. So where the drawer of a bill tells the holder to hold it without presentment an in- definite time, he takes the risk of the drawee's solvency ; and if he fails in the meantime the want of presentment is excused.^ So where the indorser of a note tells the holder to let it run and he will pay it when called for.'^ So where the drawer told the holder that his residence was immaterial, and that he would inquire whether the bill was paid.^ § 1 104. Where the indorser, before the note fell due wrote to the holder stating that the maker had failed, acknowledging his liability, and asking indulgence until funds could be realized, it was held a waiver of demand and notice.^ So where the indorser, before the note fell due, was informed that the maker wished it to remain another year, and replied that he was willing.^" So where the in- dorser, being informed that the maker had failed, told the holder that there would be no trouble about it, and that he would pay it." So where the indorser before maturity says that he will pay it, or arrange it, or uses any equivalent * Sigerson v. Mathews, 20 How., 496. = Leffingwell v. White, i Johns' Cas., 99. ' Gove v. Vining, 7 Mete, 212. * Minturn v. Fisher, 7 Cal., 573. ' Hunter v. Hook, 64 Barb., 468. « Sheldon v. Chapman, 31 N. Y., 644. ' Hale v. Danforth, 46 Wis., 555. ^Phipson V. Kneller, i Starkie, 116, Lord Ellenborough saying: "He thereby takes upon himself the onus of making inquiry and dispenses with notice." See znfe, § 1094; 2 Ames B. & N., 469. Benjamin's Chalmers' Digest, 199. ' Spencer v. Harvey, 17 Wend., 489. " Sheldon v. Horton, 53 Barb., 23. " Whitney v. Abbot, 5 N. H., 378. §II06. SPECIAL WAIVERS AFTER EXECUTION. 1 45 expression.^ So where the indorser tells the holder to give himself no uneasiness, that the note will be paid at matu- rity, that he is collecting money for the maker, and will see it paid.^ So an agreement by the indorser to pay, if the note can not be collected of the maker by due course of law, binds him without demand or notice.^ So where the indorser after maturity agreed with the maker to take up the note, to give back to him the property for which the note was given, and to return the note without further con- sideration, it was held that he was liable without demand or notice/ § 1 105, Putting impedi7nent iii way of de^nand and notice. — So where the party puts any obstacle in the way of, or prevents demand and notice, or makes an arrange- ment which will render demand unavailing, it operates as a waiver of demand and notice ; as where the indorser ob- tained possession of the note before maturity and withheld it until after that tirne.^ So where the drawer of a check ^ or bill "^ stops its payment ; where the indorser had agreed with the maker for value to extend the time for a year, and had transferred the note to the holder without informing him of it ; * and where the indorser failed to apply funds deposited with him by the drawer to meet the bill.^ § 1106. Agreements for extension of time. — Where the indorser agrees to an extension of time of payment it waives demand, protest, and notice j^*' so an agreement to attend ' Lary v. Young, 8 Eng. (Ark.), 401 ; Bruce v. Lytle, 13 Barb., 163 ; Marshall V. Mitchell, 35 Me., 221 ; Leonard v. Gary, 10 Wend., 504; Boyd v. Bank of Toledo, 32 Ohio St., 526 ; Edwards on Bills, 633, ^ Bryan v. Wilcox, 49 Cal., 47. = Backers v. Shepherd, 11 Wend., 629. * Andrews v, Boyd, 3 Mete, 434. ' Havens v. Talbott, 11 Ind., 323. "Purchase v. Mattison, 6 Duer, 587; Jacks v. Darrin, 3 E. D. Smith, 557. ' Lilley v. Miller, 2 Nott & McCord, 257. But it has been held to apply only to notice. Hill v. Heap, Dow. & R. N. P., 57. * Williams v. Brobst, 10 Watts, in. " Curtis v. Martin, 20 111., 557. '" Ridgeway v. Day, 13 Penn. St., 208 ; Barclay v. Weaver, 19 Penn. St., 396 ; Farmers' Bank v. Wakles, 4 Harr. (Del.), 429 ; Amoskeag Bank v. Moore, 37 N, H., 539- Vol. II.— 10 146 EXCUSE FOR WANT OF PRESENTMENT. § IIO7. and take care of the note ; * or an agreement for a renewal. But a mere request for a renewal has been held no waiver of notice.^ And where notes indorsed for accommodation are not protested, and no notice is given, the signing of new notes for accommodation, which are given in renewal, is no waiver of notice.^ Where the drawer of a dishonored bill gave the holdei his own note for the amount, proof of notice was held to be dispensed with, and laches unavailable as a defence.^ This seems to us clearly right, but the giving of a bond has been held to be only prima facie evidence of a waiver.' The fact that an indorser appeared at a meeting of credi- tors, and assumed the character of a creditor for a large sum, including the note sued on, has been held no waiver of de- mand and notice ; '^ but it has been well observed that it mieht be regarded as evidence of such waiver.^ A declaration by the drawer of a check, who is paying teller of the bank on which it is drawn, three days before maturity, that it w^ould not be paid ; ^ and a declaration by the indorser of a check that the maker could not pay it, and had made an assignment preferring him,^° have been considered as waivers of demand and notice. Inquiries and attempts by an indorser to get the maker to pay have been held no waiver," but the contrary has been held where the indorser himself undertook to present a bill after maturity.^^ § 1 107. As to zvaivers on the day of maturity. — The waiver may be made on the day of maturity as well as at 'Taunton Bank v. Richardson, 5 Pick., 436. ^ First National Bank v. Ryerson, 23 Iowa, 508. ' Sussex Bank v. Baldwin, 2 Harr., 487 ; Cayuga County Bank v. Dill, 5 Hill, 404. ■* Oswego Bank v. Knower, Hill & D., 122. * Leonard v, Hastings, 9 Cal., 236, " Ralston v. Bullitts, 3 Bibb, 261 ; Mills v. Rense, 2 Litt., 203. ' Miranda v. City Bank, 6 La., 740. * i Parsons N. & B., 591. • Minturn v. Fisher, 7 Cal., 573. '" Taylor v. French, 4 E. D. Smith, 458. '' Cram v. Sherburne, 14 Me., 48. '^ Hussey v. Freeman, 10 Mass., 84, § II08. SPECIAL WAIVERS AFTER EXECUTION. 1 47 any other time ; and where on that day the indorser requests the holder not to protest the note/ or admits liabiHty and offers to arrange the matter, asking indulgence,' it has been held a waiver of demand. So where, in response to inquiry by the holder, the indorser tells him that it will be of no use to call upon the maker, demand and notice are waived.' And where the indorser of two bills, falling due the 4th and 5th of April respectively, called on the holder on the 4th, and told him that the bills would not be paid, but it was not worth while to trouble him with a twopenny post letter to give notice, as it was not worth the money, and he would bring the plaintiff some money next week in part payment of the bills, it was thought that it would have dispensed with notice, but would not support an allegation of due notice.^ In New York an accepted offer by the indorser to the holder to renew the note on terms which the former proposed, was held no waiver of notice ; ^ but the court was divided, and the decision has been justly criticised and con- demned.^ In a subsequent case in that State, where, upon the maturity of a valid note, a renewal was given under an usurious agreement, an indorser of both notes was held not discharged from liability on the first because of failure to give notice of presentment, and non-payment of the second.'' § 1 108. And when the indorsers, on the last day of grace, wrote to the holder in Boston, where the note was payable at a bank, from St. Louis, where the indorsers resided, knowing that the maker had failed to provide for payment, expressing annoyance at the fact, and saying, " We hold ourselves responsible for the payment of this note, and shall see that it is done at an early day," the United States Su- ' Scott V. Greer, 10 Pehn. St., 103. But see Prideaux v. Collier, 2 Stark., 57. This latter case has not escaped the criticism of Professor Parsons (see i N. & B., 592, note_^). ^ Moyer's Appeal, 87 Penn. St., 129. ^ Barker v. Barker, 6 Pick., 8a * Burgh V. Legge, 5 M. & W., 418. ' Cayuga Co. Bank v. Dill. 5 Hill, 404, * I Parsons N. & B., 593 ; Boyd v. Bank of Toledo, 32 Ohio St., 526. ' Leary v. Miller, 61 N. Y., 489. 148 EXCUSE FOR WANT OF PRESENTMENT. § IIO9. preme Court held that they were liable, although no de^ mand of payment was made and no notice was given ; and although, from the relative location of the indorsers and the holder, the latter could not receive the letter for several days. Of course this waiver was not after maturity, with knowledge of the holder's laches, as the indorsers, at what- ever hour they wrote the letter, had no knowledge that there had been a failure to present and send notice of dis- honor. But their promise to pay with knowledge of the maker's laches in not providing for its payment, was con- sidered sufficient.^ Clearly, the mere presence of an in- dorser at the time of presentment and refusal of payment is no waiver of notice.* Where on the day of maturity the indorsers wrote on the note, " We hereby waive protest on this note, and hold ourselves responsible for the payment of the same, which is hereby extended thirty days," it was held that neither protest nor notice at the end of thirty days was requisite.^ SECTION III. BY WHOM AND TO WHOM WAIVER OF DEMAND, PROTEST, AND NOTICE MUST BE MADE. § 1 109. The words or acts constituting a waiver must, of course, be those of the person entitled to require that 'the regular steps of demand, protest, and notice shall be taken ; for it would be a solecism to permit one person to waive away the rights of another.^ Therefore, if one indorser write a waiver over his name, it does not affect another ;^ and the acts and declarations of * Yeager v. Farwell, 13 Wall., 12, Davis, J. " Grant v. Spencer, i Montana, 136. ' Blanc V. Mutual Bank, 28 La. Ann., 921. * May V. Boisseau, 8 Leigh, 164, Tucker, P. 'Central Bank v. Davis, 19 Pick., 373. See § 1092a. § mo. BY AND TO WHOM WAIVER MUST BE MADE. I49 the maker* or acceptor ^ can not affect the drawer or in- dorsers, as the case may be, unless they adopt them as theirs also. § 1 109^. Waiver by a partjicr. — One partner may gen- erally waive demand, protest, and notice for the firm, even after dissolution of the firm ; ^ but if the firm were already discharged, the promise by one partner to pay, made after dissolution, would bind him only,'' and after the dissolution of the firm there w^ould be no authority in one partner to bind a dormant partner by such waiver.^ And it has been held that if a firm indorse a note for accommodation, one partner can not bind the others by any promise he might make for payment, since as to that they are not partners.^ § ii09<5. Waiver by agent. — The acknowledgment by the party's agent, attorney, or clerk having the management of his case, is the same as his own.''^ § 1 1 10. Promise to stranger does not operate as waiver. — The promise to pay, in order to constitute a waiver, should be made to the party entitled to demand pay- ment, and if made to an entire stranger, it is not evi- dence of a waiver of laches f but it might be evidence that due presentment was made and notice given.^ And so it seems a direct waiver of protest or notice will not bind if made to a stranger. ^° But when the promise is made to the > Lee Bank v. Spencer, 6 Mete, 308 ; Pierce v. Whitney, 29 Me., 188. * Ex parte Bignold, 2 Mont. & A., 633. 'Darling v. March, 22 Me., 184; Star Wagon Co. v. Swezey, 52 Iowa, 394. *Hart V. Long, i Rob. (La.), 83. ' Manney v. Colt, 80 N. C, 300. •Baer v. Leppert, 19 N. Y. S. C. (12 Hun), 516. ' Standage v. Creighton, 5 Car. & P., 406. * Miller v. Hackley, 5 Johns, 375 ; Olendorf v. Swartz, 5 Cal., 580. National Bank v. Lewis, 50 Vt., 622 ; 28 Am. Rep., 514, 517, and note ; Devendorf v. West Va. O. & O. L. Co., 17 W. Va., 175. But in Byles on Bills [*292], it is said the promise may be made to a stranger. ° Potter V. Rayworth, 13 East., 417, Lord Ellenborough saying: "Whether the promise to pay was made to the plaintiff, or to any other party who held the note at the time, it was equally evidence that the defendant was conscious of his liabilitv to pay the note, which must be because he had due notice of its dis- honor.'" Devendorf V. West Va. O. & O. L. Co., 17 W. Va., 175. " National Bank v. Lewis, 50 Vt., 622. 150 EXCUSE FOR WANT OF PRESENTMENT. § I HO. holder, it inures to the benefit of all who acquire the bill of note through him ; ' and so will any agreement or under- standing or arrangement between an indorser and the maker inure to the benefit of an indorsee in a suit against the indorser.^ ^Kennon v. McRea, 7 Port. (Ala.), I75; Rogers v. Hackett, i Post., 100; Potter V. Rayworth, 13 East., 417 ; Gunson v. Metz, i B. & C, 193 ; 2 Dow. & R., 334- ^^ Williams v. Brobst, 10 Watts, in ; Marshall v. Mitchell, 35 Me., 221 ; Cur tiss V. Martin, 20 111., 557 ; i Parsons N. & B., 611 ; Devendorf v. West Va. O & O. L. Co., 17 W. Va., 175. CHAPTER XXXIII. SPECIAL CIRCUMSTANCES OF EXCUSE WHICH SHOW AN IN- ABILITY ON THE PART OF THE HOLDER TO M.\KE DUE DEMAND, PRESENTMENT, OR PROTEST, OR GIVE DUE NOTICE. SECTION I. WHEN THERE IS NO PERSON IN EXISTENCE UPON WHOM DE- MAND CAN BE MADE, OR WHO IS LEGALLY BOUND. §1111. In tht Jirst place, where there is no person in existence upon whom demand can be made, or none who is legally liable, the presentment is excused, for the reason that it is either an impossibility, or that it would be a fraud upon the holder to require it. And firstly, when there is no person in existence upon whom demand can be made. Thus where the maker has died before maturity, and there is no personal representative of whom payment could be demanded, it can not of course be made ; but it would be otherwise if a personal representative had been appointed.^ Where the maker and his whole family had been drowned two days before the maturity of the note, and there was no will, and no letters of administration taken out, the want of demand was excused,^ And so in all cases, where there is an actual party bound as promisor, but no one then existing who represents him, the delay in making demand is excused. But it is no excuse for want of notice to the drawer or indorser.^ ' Chitty on Bills (13 Am. ed.) [*436-7] : i Pars. N. & B., 444. 445- ' Haslett V. Kunhardt, Rice, 189. • Price V. Young, i McCord, 339. This was a suit against an indorser of a note, the maker of which had died before maturity. The excuse alleged for want of demand was that there was no legal representative on whom it could be (151) 152 INABILITY TO MAKE DUE DEMAND. §§1112,1113. § 1 1 1 2. But where there is no principal party then or at any time existing, who is legally bound upon the bill or note, it would seem that both presentment and notice are excused. Thus when an agent signed his principal's name after his death, there could be no demand, and, therefore, the in- dorser would be bound without it.^ § 1 1 1 3. When note is void, and indorser knows it, de- mand and notice excused. — So where the note is void as between the maker and payee, on account of an illegal consideration, the indorser may be held without any proof of demand or notice ; ^ and the general principle is, that whenever the principal party is not bound, the indorser is bound without demand or notice.^ The payee, when he indorses the note, warrants, by the very act of indorsement, that the maker is legally liable to pay it, knowing, as he necessarily must, that such is not the case. The holder, in the belief of its truth, might look only to the maker, and fail to take the usual steps to charge the indorser ; and if, when he became aware that the maker was not legally bound, he could not recover against the indorser, the latter would be protected by his own fraud, and the holder suffer by the confidence placed in him. Thus, in Massa- chusetts,^ where a note was void for usury between maker made. The court said : " Where a demand can not be made, the law does not dispense with notice. The circumstances which prevented it, and the notice, are still required. It was the duty of the holder in this case, admitting that a de- mand could not have been made, to have given the defendant notice in as short a period, after having ascertained that the demand could not be made, as she could have been required to do so, if a demand had been made. Suppose the demand had been made on the 26th of October, and no notice to the defendant had been given until the- loth or 15th of November, could this have been con- sidered a reasonable time when the parties were so contiguous to each other as to have enabled the plaintiff to have given the notice in five hours, or at most in one day ? I presume not. The law is express, that the notice shall be given as soon as shall be conveniently practicable." ' Burrill v. Smith, 7 Pick., 291. "^ Bayley on Bills, ch. vn, sec. 2, p. 205 ; i Parsons N. & B., 444, 445. ' Perkins v. White, Ohio S. C, January, 1881 ; Central L. J., vol. 12, p. 263. * Copp v. M'Dugall, 9 Mass., i ; see also Chandler v. Mason, 2 Vt., 193. $ lll^a. PERSON UPON WHOM DEMAND MADE. I53 and payee, and the holder failed in suit against the maker on that account, it was held that he could hold the in- dorse!" without any proof of demand or notice. Sewall, J., compared it to the case of a bill drawn without funds, the indorser of the note standing in the relation of drawer, and the maker or acceptor, and said : " When the promise or acceptance is void, as it is in case of usury between the drawer and acceptor, if he will resort to that defence against his promisee, the contract becomes, as it respects the indorser, a draft accepted without funds — that is, in the case of a promissory note." The like doctrine has obtained m New York, where it is held that the indorser of a forged check is liable without demand or notice ; ^ and in England, where it is held that the indorser of a bill drawn on an improper demand is not entitled to notice ; ^ and it would extend to any case in which there was no legal principal bound, as where the maker or acceptor was an infant, married woman, or lunatic,' or was a fictitious person, the indorser knowing it.* § 1113^. Whether indorser is bound as such without de- maud or notice when he has 7io knowledge of infirmity in the bill or note. — Knowledge of the infirmity rendering the note void, on the part of the drawer or indorser, is consid- ered by high authorities essential to charge them without demand or notice — the transaction amounting in such case to a fraud.^ And an accommodation indorser of a fictitious bill purporting to be drawn by an agent on his principal, it has been held is entitled to notice if he possessed no knowl- edge of the fraud, Mansfield, C. J., saying : " He has only placed himself in the common situation of an indorser"; and ' Turnbull v. Bovvyer, 40 N. Y., 456. "" Cundy v. Marriott, i B. & Ad., 696. ' Burrill v. Smith, 7 Picl<., 291 ; i Parsons N. & B., 445. * Farmers' Banl< v. Vanmeter, 4 Rand., 553 ; i Parsons N. & B., 460. ' " The infancy of the maker or acceptor," says the learned editor of Ames on Bills and Notes, vol. I, 469, " of course forms no excuse for non-presentment of a bill or note," citing Wyman v. Adams, 12 Cush., 210. See the remarks of Pi of. Parsons on this question, i Parsons N. & B., 444, note. 154 INABILITY TO MAKE DUE DEMAND. §§ I I 13(5, 1 1 14. Gibbs, J. : ** He is entitled to notice that he may have his remedy against them," i.e, " those who ought to pay." ^ But every indorser warrants the instrument to be vaUd, and ex- actly what it seems to be ; and whether he knows the con- trary or not, it seems to us that he is absolutely bound, if his warranty fails, without demand or notice,^ at least to the extent of refunding the consideration paid on the ground that he has passed a thing which does not answer to its description.^ § 1113^. The doctrine that the indorser warrants the in- strument to be valid, and must therefore be held as indorser if it turns out otherwise, without his knowledge, has recently received critical examination in New York, where it was held by the Court of Appeals that it would not apply to an accommodation indorser who received no part of the proceeds, and therefore was under no obligation to refund on the ground of failure of consideration. The court, in its instructive opinion, deprecated the nice distinctions dis- pensing with notice.* SECTION II. THE IMPRACTICABILITY OF FINDING THE PARTY TO WHOM PRESENTMENT SHOULD BE MADE, OR NOTICE GIVEN, OR ASCERTAINING HIS RESIDENCE OR PLACE OF BUSINESS. § 1 1 14. In the second place, the want of due presentment, or due notice, will be excused when the holder, after exer- cising due diligence, can not find the party to whom present- ment should be made or notice given, or ascertain his place of residence or business. When this excuse is relied upon, ' Leach v. Hewitt, 4 Taunt., 731. See Carter v. Flower, 16 M. & W., 747, and Farmers' Bank v, Vanmeter, 4 Rand., 561. " I Parsons N. & B., 560. See vol. I, §§ 669, 669a. ' See vol. I, §§ 730 et seq., 740a. * Susquehanna Valley Bank v. Loomis, 85 N. Y., 207 (1881). See vol. I, §§ 669 669a. ^1115. IMPRACTICABILITY OF FINDING THE PARTY. 1 55 It becomes often a question of nicety to determine whethei or not tlie steps taken by the holder to fmd the party to whom presentment should be made or notice given, or to ascertain his place of residence or business, amounted to the due diligence which the law exacts, and it is therefore important to define in what such diligence consists.^ " It would be very hard, when the holder of a bill does not know where the indorser is to be found, if he lost his remedy by not communicating immediate notice of dishonor of the bill, and I think the law lays down no such rigid rules. The holder must not allow himself to remain in a* state of passive and contented ignorance ; but if he uses due dili- gence to discover the residence of the indorser, I conceive that notice given as soon as this is discovered is due notice of the dishonor of the bill, within the usage and custom of merchants."" § 1 1 15. What constitutes diligence. — Due diligence in making presentment for payment, and in communicating notice, consists, as a general rule, in making inquiries of such accessible persons, as from their connection with the transaction, or place, or parties, are likely to be informed, and in acting in accordance with the information derived from them.^ The holder is not bound to inquire further than a reasonable and prudent man should, and every pos- * See on this subject, Story on Bills, § 351. « Bateman v. Joseph, 2 Camp., 463 ; 12 East., 433. Lord EUenborough ; Gar- vier V. Downie, 33 Cal., 176. ' Lambert v. Ghiselin, 9 How., 452. In this case inquiry was made of a per- son trading- at a particular place, who said that the indorser lived in the same place with him. Held sufficient. It was held, also, that if due diligence were used in sending notice, and it turned out to have been sent to the wrong place, it was not necessar)' for the holder on ascertaining the fact to send another to the right place. In Bank of Utica v. Bender, 21 Wend.. 643, inquiry of the drawer as to residence of his accommodation indorser, and acting on the infor- mation given, was held sufficient, although the notice went to the wrong place. So where inquiries were made at the banks of the place where the bill was dated, and the information received acted on, it was likewise held sufficient, though no- tice went amiss. Chapman v. Lipscombe, i Johns. 294. So where inquiry was made of the second indorser (Ransom v. Mack, 2 Hill. 587) ; and of the maker's son (Sturgis v. Derrick, Wight, 76) ; it sufficed in each case. Greenwich Bank V. De Groot, 14 N. Y. S. C. (7 Hun), 212 ; Harris v. Robinson, 4 Howard. 156 INABILITY TO MAKE DUE DEMAND. § III5. sible exertion is not exacted of him. " It is enough to send the notice to the place where the information received rea- sonably requires him to send it. If the place it reaches is the wrong one, it is not his (the holder's) fault," is the language of the U. S. Supreme Court.^ An inquiry of the officers of the bank where the note was discounted is suf- ficient, if there be no others near likely to know the indors- er's residence, when seeking to send him notice.^ And so inquiry of a person who was well acquainted with the resi- dence of the defendant, who hunted in the neighborhood, and frorti whom the notary usually obtained information, and notice sent accordingly, was deemed sufficient to charge the indorser, although there was in fact no post-office at the place of the address given, but one near to which it was the duty of the postal agents to send letters so ad- dressed.^ But an inquiry at the bank where the paper was deposited for collection, and consulting a directory, would not alone be sufficient.* In a New York case, Daniels, J., said :^ " Both the rule of the commercial law and of the statute, requires that the holder shall obtain the information which diligent inquiry can secure, concerning the residence of the party to be charged by the service of notice. And that is not shown by merely consulting the directory, when other sources of accurate information may be within the convenient reach of the person whose duty it may be to secure it, through which it can be obtained." Acting on information received ' Harris v. Robinson, 4 Howard, 336. See also Central N. B. v. Adams, 1 1 S. C, 452. " Harris v. Robinson, 4 How., 336. McLean, J., dissenting, on the ground that notary should have inquired of the holder, and saying: " It is a new princi- ple in the law of agency, that the knowledge of the principal shall not affect him, provided he can employ an agent who has no knowledge on the subject." The particular point decided in this case has been dissented from. See Fitler v. Mor- ris, 6 Whart., 406. ' Central N. B. v. Adams, 11 S. C, 452. * Packard v. Lyon, 5 Duer, 82; see Gilchrist v. Downell, 53 Mo., 691. " Greenwich Bank v. DeGroot, 14 N. Y. S. C. (7 Hun), 213 (1876). To same effect see Baer v. Leppert, 19 N. Y. S. C. (12 Hun), 516. § IIl6. IMPRACTICABILITY OF FINDING THE PARTY. 1 57 from the maker of a note, after consulting the directory, would be sufficient, although a wrong address were given.' § I II 6. Inquiry sJiould be made of parties to the instrti- ment. — In seeking the acceptor or maker to make pre- sentment of the bill or note, due diligence would necessitate an inquiry of the indorser or other party to the instrument, when such party can be conveniently found, before dishon- oring it by protest for non-payment, it being presumed from the relations of the parties that they would be likely to know the whereabouts of each other.^ And for the same reasons, in seeking to ascertain the whereabouts of the in- dorser or drawer in order to communicate notice, inquiries should be made of the maker or acceptor.^ It is desirable that this rule should be strictly observed, as well for the sake of uniformity as for the reason that it secures diligence. There may be exceptions to its applica- tion, but as a rule it is worthy of application. The holder should not fail to communicate any knowledge he may have as to the residence or place of business of the party to whom the notary is to make presentment or give notice, and if he does not do so he will be bound by any conse- quent mistake made by the notary, and the drawer or in- dorser will be discharged.'* And the holder will always be presumed to know the residence or place of business of his immediate indorser.^ § II 1 7. When there is more than one indorser, and he can not eive the desired information as to the whereabouts of maker or acceptor, the inquiry should be continued to the other indorsers.^ There may be exceptions to the rule, how- 'Gawtry v. Doane, 51 N. Y., 92. "Wheeler v. Field, 6 Mete, 290; Grafton Bank v. Cox, 13 Gray, 505 ; Porter V. Judson, I Gray, 175. ^ ' Whitrldge v. Rider, 22 Md., 558 ; Weakly v. Bell, 9 Watts, 273 ; Waters v. Brown, 15 Md., 285 ; Earnest v. Taylor, 25 Tex. (supp.), 37 ; Harrison v. IJobin- son, 4 How., 336. ^ Smith V. Fisher, 24 Penn. St., 222; Haly v. Brown, 5 Penn. St., 178 ; Fitler V. Morris, 6 Whart., 406 ; Lawrence v. Miller, 16 N. Y., 235. ^ Lawrence v. Miller, supra. *Hill V. Varrell, 2 Green!., 233; Gilchrist v. Donnell, 53 Mo., 591. In this 158 INABILITY TO MAKE DUE DEMAND. § I II 8. ever. As, for instance, when the maker or acceptor has left the State ; ^ and it would not, we think, be necessary to pursue the inquiry of the maker, indorser, or other party, if, from previous answers of parties likely to know, the holder had received any information sufficiently reliable. Where the notary, desiring to give notice, finding the in- dorser's house closed, inquired of the nearest resident, and was told that he was out of town on a visit, for how long informant did not know, it was held that further inquiry was unnecessary.^ But it would be advisable in all cases not to leave room for such questions to be raised. § I II 8. When place of hisiness of acceptor or 'niaker is closed. — If the doors of the business office of the acceptor case a notary public not knowing the residence of an indorser, on the day of pro- test made inquiry at the bank of St. Louis, where the note was payable, and at the place of business of another indorser, and examined the city directory to ascertain the residence, but without success. He thereupon placed the notice in the city post-office. The evidence showed that other indorsers could have given the desired information, and that one of them lived in East St. Louis, immediately across the river. Held, that it was the duty of the notary to inquire at" least of all the parties to the note, if accessible ; and that he might have prosecuted his inquiries for that purpose for several days ; and there was no search made, such as the law requires, and that putting the notice in the post-office under the circumstances amounted to nothing. Wheeler v. Field, 6 Mete, 290. In this case the notary inquired at the office of the third indorser the whereabouts of the maker and the other indorsers, and was told that the third 'indorser was out, but that a person living near by could give the desired information. This person on being asked did not know where the parties lived. The notary then protested the note ; and it was held that the third indorser was discharged, Wilde, J., say- ing: " It can not be doubted that if inquiries had been made of the payee or the other indorsers, the maker's place of residence might have been ascertained." [But in England inquiry of the last and next to last indorser, as to the where- abouts of the first indorser, was held sufficient. Browning v, Kinnear, Gow., 81 ; Chitty on Bills, *453.] 'Grafton Bank v. Cox, 13 Gray, 505, Merrick, J., saying: " If the maker had at the maturity of the note resided in Boston, or in the State, or at any place to which the holder would have been bound to resort to demand payment of him, and there was reason to suppose that the indorser had knowledge ol such resi- dence, the omission to inquire of him concerning it would have been a failure to use diligence, and would have had the effect to discharge the indorser from his liability." HVilliams v. Bank U. S., 2 Pet., 100. In i Am. Lead. Gas., 405, it is said : " The holder may rely upon information derived from the agent of the indorser to be ag'ected, or from the drawer of an accommodation bill or maker of an ac- commodation note, indorsed and discounted for his benefit, or from his agent, or from a subsequent indorser who professes to know and is interested to speak truly ; but not on the statements of mere strangers having no connection with the parties, and no probable knowledge of them, unless it appear that no bettei information can be had." § IIlS. IMPRACTICABILITY OF FINDING THE PARTY. 1 59 or maker are closed, and there be no one there to answer the demand after repeated calls, it has been held by high authority that the bill or note may be protested without making further inquiries ; for he is bound to have a suita- ble person there to answer inquiries and pay his bills and notes, if there demanded.* And in the case of a bill ac- cepted by a firm, in such a case it would not be necessary to call individually upon one of the partners who has a residence in the city, or make any further inquiries for the acceptors than the repeated calls at their office.^ It would be safer, however, to make some further effort to find the payor when the doors are found closed, as the authorities are not uniform on this question.^ If the ac- •Baumgarden v. Reeves, 35 Penn., 250, Thompson, J., saying: "Wliere the presentation and demand has been attempted to be made at the maker's place ot business, and there is no e to answer, and there is no proof that the party had any other place of business, or had removed, the authorities estimate this as equivalent to actual presentation and demand A different case might be presented if the proof was that the call was at the residence of the maker and his house was shut up." See also Berge v. Abbott, 83 Penn. St., 159:1 Parsons N. & B., 457 ; Story on Bills, § 352 ; Story on Notes, § 235 ; Bynum v. Apperson, 9 Heisk., 625. Placing notice in post-office addressed to indorser is sufficient after inquiry at place of business, during business hours, and finding it closed. John v. City N. B., 62 Ala., 529. * ^ Watson V. Templeton, 11 La. Ann., 137 ; Wiseman v. Chiapella, 23 How., 368, Wayne, J., saying: " All merchants register their acceptances in a bill book. It can not be presumed that they will be unmindful of the days when they are matured. Should their counting-rooms be closed on such days, the law will pre- sume that it has been done intentionally to avoid payment, and, on that account, that further inquiries need not be made for them before a protest can be made for non-payment. Cases can be found, and many of them, in which further in- quiries than a call at the place of business of a merchant acceptor has been deemed proper, and in which such inquiries, not having been made, has been de- clared to be a want of due diligence in making a demand for payment ; but the rulings in such cases will be found to have been made on account of some peculiar facts in them which do not exist in this case. And in the same class ot cases it has been ruled that the protest should contain a declaration by the notary that his call to present a bill for payment had been made in the business hours of the day ; but in no case has the latter ever been presumed in favor ot an acceptor whose place of business has been so closed that a demand for pay- ment could not be made there upon himself, or upon some one left there to at- tend to his business." Shed v. Brett, i Pick., 413, the case of a note in which no place of payment was specified. But see Granite Bank v. Ayres, 16 Pick., 394- ^Collins V. Butler, 2 Stra., 1087 ; i Parsons N. & B., 457, note/; Story on Bills, § 352; Ellis v. Commercial Bank, 7 How. (Miss.), 294. In Otto v. Bel'den, 28 La., 302, suit was brought against the indorser of a note who resided in the city. The court said : " The certificate of the notary is, that he went several times to the office of the drawer (maker) to demand payment thereof, and that l6o INABILITY TO MAKE DUE DEMAND. § II 1 9. ceptor's or maker's place of business has been permanently dosed, and he has a domicile in the city or town, present- ment should be made there/ This ruling intimates, as we think, the true distinction to be taken. If the place of busi- ness be permanently closed, it would be right to seek the payor at his domicile in the same place, if he have one, as that would be the place where he would be most likely found. But as long as he has a place of business, it is his duty to keep some one there to respond to business de- mands. That remains the place where he would be naturally and properly sought, and when he closes his doors, it is presumable that he declines to meet the usual business engagements. § I II 9. When place of payment is closed. — If the holder, on the day of maturity, finds the bank or other place of payment closed, he is not bound to make any further de- mand to charge either drawer^ or indorser.^ If the paper is payable at a certain bank that has ceased to exist, or at the counting-room of a firm which has dissolved before its maturity, it will certainly be sufficient to make presentment to the bank which has succeeded the former institution, if such there be,'' or at the counting-room of the succeeding firm, if such there be.^ Where a note was payable at " the Bank of the U. S. at Mobile," and before its maturity that bank had been sold out to the " Bank of Mobile," and he found the doors closed, and no one in or about the premises of whom the demand could be made. No demand was made of the maker. Therefore the indorser is discharged." See also Story on Notes, § 238. 'Granite Bank v. Ayres, 16 Pick., 392 ; Talbot v. Nat. Bank, 129 Mass., 67 See ante, § 637. ' Hine v. AUely, 4 B. & Ad., 624; Central Bank v. Allen, 16 Me., 41 ; Apper- son V. Bynum, 5 Cold., 349 ; Rogers v. Langford, i C. & M., 637 ; Sands v. Clarke, 19 L. J. C. P., 84; Edwards on Bills, 498 ; see Howe v. Bowes, :6 East., 112; 5 Taunt., 30; Lane v. Bank of West Tenn., 9 Heisk., 419; Erwm v. Adams, 2 La., 318. = De Wolf V. Murray, 2 Sand., 166; Derg v. Abbott, 83 Penn. St., 158. * Central Bank v. Allen, 16 Me., 41 ; Roberts v. Mason, i Ala., 373 ; Bynum V. Apperson, 9 Heisk., 637. ' Sanderson v. Oakey, 14 La., 373. «5lI2I. IMPRACTICABILITY OF FINDING THE PARTY. l6l ceased to have a place of business in Mobile, it was held that presentment at the Bank of Mobile was sufficient.' The like rule prevails as to notice. Where the holder, on the day of maturity, found the indorser's dwelling-house shut up, the doors locked, and the family out of town, as he learned from the next neighbor, on a visit of unknown duration, it was held that due diligence had been exercised to give notice, and the indorser was liable.^ So where the cashier found the drawer's counting-room closed, and no one there to answer, it was held sufficient.^ § 1 1 20. Inability to find the maker or acceptor does not excuse want of notice to drawer or indorser ;* but inability to find the drawer or indorser, or ascertain his whereabouts, after exercising due diligence, does excuse want of no- tice, because it is then impossible.^ But the holder must continue his inquiries from day to day, and give notice as soon as he does ascertain the party's whereabouts — the ex- cuse being co-extensive only with the necessary delay ; and the impediment being only temporary, the duty revives with its cessation.^ Delays of one day,^ of three days,® of nine days,^ of over two months,^^ of four months," have, under the particular circumstances, been excused. The imprisonment of the party is no excuse for want of demand, protest, or notice.^*^ § 1 121. Extent of inquiry needful. — When inquiry is among the public generally, it should not be abandoned until all prospect of results disappears. Where inquiry was * Roberts v. Mason, i Ala., 373. " Williams v. Bank" U. S., 2 Pet., 96. ' Crosse v. Smith, i M. & S., 545. See ante, § 1016. * I Parsons N. & B., 527. '' Ibid. ® See ante, chapter xxx. ' Browning- v. Kinnear, Gow,, 81. * Bateman v. Joseph, 2 Camp., 461 * Baldwin v. Richardson, i B. & C, 245. '^ Firth V. Thrush, 8 B. & C, 387. " Stiirgis V. Derrick, Wight, 76 ; see i Parsons N. & B., 527, note k, '■Story on Bills, §318. Vol. II.— II l62 INABILITY TO MAKE DUE DEMAND. § IT 22. made by the notary in a place of persons at the hotel bar- room, on the street, and at the post-office, it was held not sufficient, and the court said : " If he had been told by some credible person, who would be likely to know the fact, he might have acted upon that information without pushing his inquiries further. But until some one is found who professes to be able to give the required information, it will not do to stop short of a thorough inquiry at places of public resort, and among such persons as would be most likely to know the residence of the indorser." ^ If the busi- ness men of a place give distinct information that the party sought resides at a certain other place, such information may be acted upon with safety, though erroneous.^ " Or- dinary diligence in a case like this can mean no more than that the inquiry shall be pursued until it is satisfactorily answered."^ § 1 122. If the party to be notified is travelling, or is ab- sent from home for any reason, and his present address is known to the holder, or if his absence from home is known, and the holder has any means of learning his address, or of ascertaining whom he has left behind to attend to his busi- ness, it would probably be his duty to send notice accord- ingly.^ But if a party leaves home without taking the usual and proper precautions to facilitate sending business communications to him, undoubtedly this is his fault, and he can relieve himself from no responsibility by such fault, and will be held to all parties as if duly notified, provided due diligence be used.*^ § 112-^. If after due diligence neither the maker nor his usual place of residence or business can be found, present- ment to him will of necessity be excused, and the indorser 'Spencer V. Bank of Salina, 3 Hill, 520. See Peet v. Zanders, 6 La. Ann., 364. - Brighton Market Bank v. Philbrick, 40 N. H., 506. ' Bank of Utica v. Bender, 21 Wend., 643, Bronson, J.; ante, §1117. * I Parsons N. & B ; 493. " Ibid. § 1 1 24- RECEIVING THE BILL OR NOTE TOO LATE. 1 63 held liable without it. Thus, where the maker of a note is a sailor who has no established place of abode, and is at sea when the note matures, proof of these facts will constitute excuse for non-presentment.^ But if he has a place of resi- dence where his family are living when the note matures, it will be necessary to present it there.^ SECTION III. RECEIVING THE BILL OR NOTE TOO LATE AS EXCUSE FOR WANT OF PRESENTMENT AND NOTICE. § 1 1 24. In the third place, where the payee, or subse- quent indorsee, does not transfer and indorse the bill or note until so near its maturity that it is then impracticable on account of the distance from, or inaccessibility to, the place where the maker or acceptor has his place of business, or residence, or where the bill or note is payable, the payee, or other indorser so transferring it, will be presumed to have waived the taking of these steps which they must have known were impossible.^ This excuse, however, will only avail as between the immediate parties who have transferred and received the instrument at so late a period ; for as to the previous parties who transferred it long enough before maturity to leave adequate time for its due presentment, they have a right to insist on the strict performance of their obligations by those who are subsequent holders, and it is the folly of such holders to take the instrument so late that they can not hold all the parties liable upon it.^ This ' Moore v. Coffield, i Dev., 247 ; Taylor v. Snyder, 2 Den., 145. ^ Whittier v. Graffam, 3 Greenl., 82 ; Dennie v. Walker, 7 N. H., 199. ' I Parsons N. & B., 456 ; Story on Bills, § 326 ; Story on Notes, §§ 203, 265. (But all of the American cases cited by Story in his note do not enunciate the doctrine). The broad doctrine is stated in Freeman v. Boynton, 7 Mass., 483, and some early cases, that distance is in itself an excuse for delay, and that the holder may wait for the maker to come and pay. See Haddock v. Murray, i N. H., 140 ; Barker v. Barker, 6 Pick., 80. But they find no favor in the latter au- thorities. * Ibid. ; Bayley on Bills, chapter vil, sec. i, p. 149 ; Story on Notes, § 265 ;. Mason v. Pritchard, 9 Heisk., 798. 1 64 INABILITY TO MAKE DUE DEMAND. § 1 1 25. doctrine is favored by the later text writers, and seems en tirely sound, and thougli Chitty states a different one, it does not seem to be sustained by the case he cites to its full extent.^ SECTION IV. SICKNESS OF OR ACCIDENT TO THE HOLDER. ^ 1 1 25. In \\\& fourth place, when sudden illness or death of or accident to the holder or his agent prevents the pre- sentment of the bill or note in due season, or the commu- nication of notice, the delay is excused, provided that pre- sentment is made and notice given as promptly afterward as the circumstances reasonably permit.^ This doctrine rests upon the same principle as that which excuses want of punctuality when overwhelming calamities or accidents of a general nature prevent. Pothier states that where the holder transmits a bill to a distant correspondent for pre- sentment and payment, and the latter dies suddenly on the eve of the time when the bill ought to be paid or protested for dishonor, it will be sufficient if the presentment is made ' In Anderton v. Beck, 16 East., 248, it appeared that, on December 26th, plaintiff received in Yorkshire a bill on London, payable there the 28th. He kept it till the 29th, and then sent it to the Lincoln Bank, which forwarded it to London without delay, and it was presented for payment on January 2d. The court decided that the holder had been guilty of laches in keeping the bill from the 26th to the 29th, and had lost his remedy against drawer and indorser. In Chitty on Bills (13 Am. ed.), [*339], 440, it is said : " But the circumstance of the holder having received a bill very near the time of its becoming due consti- tutes no excuse for a neglect to present it for payment at maturity, for he might renounce it if he did not choose to undertake that duty, and send the bill back to the party from whom he received it ; but if he keep it, he is bound to use rea- sonable and due diligence in presenting it But it has been considered in France, that if an indorser himself transfers a bill so late to the holder as to render it impracticable to present it precisely at maturity, he can not take ad- vantage of a delay in presentment so occasioned by himself, though the prior indorser and the drawer may." See also Thomson on Bills (Wilson's ed.), 297. = Story on Bills, § 308 ; Chitty on Bills (13 Am. ed.) [*330, 451, 491], 370, 509, 556; Thomson on Bills (Wilson's ed.), 280, 368; I Parsons N. & B., 267- Ed- wards on Bills, 649 ; Duggan v. King, Rice, 239 ; White v. Stoddard, 11 Gray, 258^ Aymar v. Beers, 7 Cow., 705; Lord Kenyon, C. J., in Hilton v. Shepherd, 6 East., 16 ; Chitty, Jr., 710. See ante, chapter xvil, § 478, vol. i. § 1 1 26. SICKNESS OF OR ACCIDENT lO THE HOLDER. 1 65 within a reasonable time after the holder is informed of the accident, and is enabled to give orders to receive the money. And he puts the sudden illness of the holder or his agent on the same footing.' It is said by Mr. Chitty that " it has been considered that the detention of the bill by contrary winds, or the holder having been robbed of the bill, or the like, would afford an adequate excuse, provided he present it as soon afterward as he is able."^ He adds, however " But a notice of the reason why the bill itself can not be pro- duced should be given ; and a demand of payment should, if possible, be made on the very day the instrument falls due ; and if it be a foreign bill, it should be duly protested, in case the drawee should refuse payment." In a subse- quent portion of his treatise, he places the circumstance of the robbery of the bill upon the same footing as its loss or destruction, and as not excusing delay in demand or notice.^ And we can not see that the robbery is distin- guishable from the loss or destruction of a bill or note, in which event demand should be made upon a copy, and notice given accordingly. § 1 126. There seems to be no dissent to the opinion that the sudden illness or death of the holder or his agent is a sufficient excuse for delay. Where an agent, intrusted with a note to collect, died four days before its maturity, after a month's sickness, and the note was discovered by his exec- utrix a month after his death, in a desk where it was locked up, and he immediately caused presentment and notice, the indorser was held liable.* And when the holder himself was dead at the time the note matured, and there was no presentment or notice, there being no personal rep- resentative to act in the premises, it was held that, as the proper steps were taken as to presentment and notice within ' Pothier De Change, n. 144; Chitty on Bills (13 Am. ed.), 509. note a ; Story on Bills, § 309. ' Chitty on Bills (13 Am. ed.) [*3S9l. 439- 'Chitty on Bills (13 Am. ed.) [491]. 556- * Duggan v. King, Rice, 239, 1 66 INABILITY TO MAKE DUE DEMAND. § 1 1 27. a reasonable time after a representative was appointed, the indorser was charged/ § 1 127. The illness, in order to constitute a sufficient ex- cuse, must be that of the holder or his agent, and of such a character as to prevent due presentment and notice by the exercise of due diligence. And where an indorser.was called from home, in consequence of the dangerous illness of his wife, and left his house in care of a lad, without authority to open letters, it was held that he had lost re- course against his prior indorsers by the consequent delay in giving notice.^ He should have left some one in charge with authority to open letters. •White V. Stoddard, 11 Gray, 258 ; Story on Bills, § 365. ^Turner v. Leach, Hilary Term, 1818; Chitty on Bills (13 Am. ed.) [*452]. 509 ; I Parsons N. & B., 532 ; Thomson on Bills (Wilson's ed.), 368. CHAPTER XXXIV. SPECIAL CIRCUMSTANCES OF EXCUSE P'OR WANT OF PRE- SENTMENT, PROTEST, AND NOTICE, ARISING FROM THE CONDUCT OF THE PARTY. SECTION I. WHEN PARTY HAS RECEIVED MEANS TO TAKE UP THE BILL OR NOTE. § 1 1 28. In the first place, the receiving by the drawer or indorser of money from the acceptor, maker, or other party for whose benefit the bill or note was made, for the avowed purpose of taking up the bill or note' at its matu- rity, dispenses as to such drawer or indorser with the neces- sity of a presentment to the acceptor or maker, for the ob- vious reason that the indorser becomes himself the person who should meet it. And so, receiving any other prop- erty, with the agreement that he shall apply its proceeds to paying the bill or note at its maturity, has the same effect* The indorser in such cases has no remedy over against any one. His arrangement with his principal substitutes him in that principal's place ; and it would be a fraud for him to throw back upon him the burden which he had as- sumed wiien provided with the means to bear it. ' Ray V, Smith, 17 Wall., 418 (see post, % 1143); Wright v. Andrews, 70 Maine,' 86; Bond v. Farnhani, 5 Mass., 170 (demand and notice held waived); Cornay V. Da Costa, i Esp., 302; Watkins v. Crouch, 5 Leigh, 522; May v. Boisseau, 8 Leigh, 185, 196 ; Story on Notes, § 281 ; Bayley on Bills, ch. \MI, sec. 2, p. 202. (167) 1 68 EXCUSE ARISING FROM CONDUCT OF PARTY. § I 1 29. These reasons apply with equal force to notice ; and that, as well as the demand, under such circumstances, is dis- pensed with.^ SECTION II. WHEN PARTY HAS RECEIVED SECURITIES OUT OF WHICH TO PROVIDE FOR PAYMENT. § 1 1 29. In the second p\3.ce, the receiving of security or indemnity from the maker, or other party for whose bene- fit the bill or note was executed by the indorser, has been often held to operate as a dispensation of demand and no- tice as to him. But there is great contrariety in opinion and decision on this subject, and many subtle refinements have been introduced in contradistinguishing particular cases. When the acceptance of the security is accompanied by any express agreement that the indorser is himself to provide for the payment of the bill or note, the dispensa- tion is clear, whether he undertakes to do so out of the se- curity, or to look to that for reimbursement. And so it is clear, also, when an agreement to this effect is implied by all the circumstances of the case. But in the absence of proof of any express agreement, the question whether or not demand and notice, or either, have been dispensed with, has been thought by some to turn on the intention of the parties, and by others on the effect of taking the security ; and the time it was taken, its character and sufficiency, the form of the assignment, and whether or not it comprised all of the maker's property, have been considered as mate- rial elements in determining it. § 1 130. (i) AssigfDfient of all the maker s property. — The doctrine is laid down by many authorities that the accept- ance of an assignment of all the maker's property, by the in- ' Ibid.; Stor>' on Notes, § 357 ; Story on Bills, §§ 316, 374; Wright v. An- drews, 70 Maine, 86. § I 130. WHEN PARTY HAS RECEIVED SECURITIES. 169 dorscr, to secure him against his liabiHty, is a waiv^er of all right to require demand, protest, and notice,^ even when it is insufficient for that purpose.^ Under such circumstances, it is urged, the indorser prevents the holder from obtaining pay- ment of the maker, by taking into his own hands all his available means ; and he must be considered as holding out that he has assumed the responsibility of payment upon himself.^ But it should be remembered, that if the indors- er's liability is not fixed, the consideration of the assignment, so far as he is concerned, fails. He can not then exercise any right of lien upon it, and it reverts at once to the maker, and is liable for his debts. The indorser is precisely in the same situation as if no assignment had been taken,'* and so is the maker. Besides, even where the whole property has been assigned, the maker may have new accessions,^ or he ' Watkins v. Crouch, 5 Leigh, 522, obiter, Tucker, P. ; Duvall v. Farmers' Bank, 9 Gill & J., 31 ; May v. Boisseau, 8 Leigh, 212,, obiter, Tucker, P. ; Kramer V. Sandl'ord, 4 Watts & S., 328, Gibson, C. J. ; Swan v. Hodges, 3 Head., 251, held, must be all or enough ; Edwards on Bills, 637 ; i Parsons N. & B., 560, but see 571. " Watkins v. Crouch, 5 Leigh, 522, Tucker, P. (as to notice only) . 'Bank of South Carolina v. Myers, i Bailey, 412, the indorser had taken from the maker a confession of judgment which covered his whole estate ; hetd, a waiver of demand and notice. See the remarks of the American editor of Chal- mers on Bills and Notes. Benjamin's Chalmers' Digest, 197. * Dufour V. Morse, 9 La., 333, Martin, J., said : " Here the indorser received nothing but a mortgage for his indemnification. He might well expect that the duty and interest of the maker would prompt him to prevent the protest of the note. He knew that the only obligation he had incurred toward the holder of the note, was to pay it in case the maker did not, and after being duly and legally notified of the failure and neglect of the maker to take it up ; toward the latter the indorser incurred no obligation. The mortgage was a useless paper in the hands of the defendants. The inchoate and conditional obligation which resulted from the indorsement never became perfect and absolute. The indorser, nor those who represent him in this case, have not suffered, nor can they now suffer, any injury for the indemnification of which they could resort to the mort- gage. The defendants are precisely in the same situation as they would be if no mortgage had been taken." * Watkins v. Crouch, 5 Leigh, 522, Cabell, J. : " The indorser's right to notice from the holder depends on another principle, namely, his remedy over against the maker. And this principle applies as forcibly to a case where a part only of a note remains so unpaid or unprovided for. Again, the assignment on this case was made about a mt>nth before the note was to fall due. It is impossible for us to say that no accession was made, in that interval, to the maker's means of payment ; and, of course, we can not say that notice to the indorser would have been unavailing." 170 EXCUSE ARISING FROM CONDUCT OF PARTY. VJII3I may be successful in negotiations, which render him per- fectly ready to pay. These circumstances are worthy of consideration,^ but they are not the controlling reasons for requiring demand and notice.^ § 1 131. A sufficient answer to the argument, that the indorser ought to be bound in such cases, may be given in the observation, that the holder loses nothing that he can subject to the payment of the debt, and any arrangement merely for the indorser's indemnity is a matter entirely be- tween him and his principal. The case of Bond v. Farnham, 5 Mass., 170, has often been quoted as authority for the doctrine that the assignment of all the maker's property, even when insufficient, is a waiver of notice,^ and its influ- ence has been sensibly felt in relaxing the requirement of demand and notice in the United States. But there were particular features in that case which have not been suf- ficiently distinguished, and like the case of Cornay v. Da Costa, i Esp., it has been made the pillar of a doctrine which it by no means upholds. The maker had assigned all his property to the indorser, who took it, as Chief-Jus- tice Parsons said, " for the express purpose of meeting this and his other indorsements," and it was held that he could not afterward " insist on a fruitless demand upon the maker, or on a useless notice to himself to avoid payment of de- mands, which, on receiving security, he has undertaken to pay." Thus understood, the principle decided conforms to the doctrine of the text, and though it has been supposed that the case has been overruled by more recent decisions in Massachusetts', there seems to us no conflict between them.* ' I Parsons N. & B., 567. "" Kramer v. Sandford, 4 Watts & S., 828, Gibson, C. J. : " The chance of the maker's acquiring other property to which he might resort, if the funds in his hands should fall short, is so inconsiderable as to fall within the maxim da mini7nis." ^Barton v. Baker, i Serg. & R., 334; Watkins v. Crouch, 5 Leigh, 522, Tucker, P. " I Parsons N. & B., 560. The learned author thinks it irreconcilable with Creamer v. Perry, 17 Pick., 332 ; but it seems to us otherwise. § I 13 I- WHEN PARTY HAS RECEIVED SECURITIES^ I7I The case of Creamer v. Perry ^ meets, as it seems to us, fully the argument that an assignment of all the maker's property to a trustee accepted by the indorser waives de- mand and notice, the true construction of the act being, as said by Chief-Justice Shaw, "to secure and indemnify him against his legal liabilities. And as his liability as indorser of the note was conditional, and depended upon his having seasonable notice of its dishonor, his cllim upon the prop- erty depended upon the like contingency." Even where there is an assignment or mortgage directly to the indorser himself, unless it were in a form to show that it was to en- able him to take up the note, and he assumed to do so, it is now held in Massachusetts that it would not amount to- a waiver of demand or notice,^ and the strict rule is of late finding favor.^ The opinion of Chief-Justice' Nelson in an often-quoted case might seem to sustain a contrary doctrine, and has ' 17 Pick., 332. " Haskell v. Boardman, 8 Allen, 39. The maker executed mortgages of all his real and personal estate to the indorsers, the condition being that the grantor should " fulfil and perform all contracts which the said grantees have heretofore signed, indorsed, or executed for the said grantor, and which said grantees shall hereafter sign, indorse, or execute for said grantor as indorsers, guarantors, sureties, or otherwise, and save the said grantees harmless from all costs and expense in consequence thereof." There was due demand, but notice was not received in due season. The indorsers were held discharged, Bigelow, C. J., saying : " There was no evidence offered at the trial on which a waiver of notice by the indorsers could be legally found. The mortgage relied on to show such waiver was not made to enable the mdorsers to pay the notes, nor were they authorized to appropriate the property thereby conveyed to such purpose. The defect of the conveyances was only to secure the defendants against the legal liabilities assumed by them in behalf or on account of the promisor. Their lia- bility as indorsers was conditional only, dependent on the contingency of their having due and seasonable notice of the dishonor of the notes. Their claim on the property for indemnity was dependent on the like contingency. On this point the case is within Creamer v. Perry, 17 Pick., 332." " In Wilson v. Senier, 14 Wis., 380, the court said : " Nothing short of a gen- eral assignment and actual transfer of all the maker's effects, or the receipt of money or property by him for the purpose of satisfying the debt, and with an understanding that he is to do so — in which case he changes place with the maker and becomes himself the principal— has ever been held to create such dispensation, and the disposition of the court has been to restrict rather than to enlarge the doctrine." Moses v. Ela, 43 N. H., 560 ; Woodman v. Eastman, 10 N. H., 367. 172 EXCUSE ARISING FROM CONDUCT OF PARTY. ' § II 3 2. been so considered ; but it will be seen that it does not necessarily require that construction.^ § 1 1 32. Where there was an assignment in trust to the indorser himself as trustee, or co-trustee, of all the maker's property, upon trust, to dispose of it, and pay the maker's debts in a certain order, first satisfying the notes and debts on which the indorser and a certain firm were liable as sure- ties or indorsers, the acceptance of it was held a waiver of demand and notice ; and under such circumstances it might be reasonably inferred that the indorser assumed the pay- ment upon himself.^ § 1 133. (2) Sufficiency of the security. — The sufficiency of the security is by many authorities made the criterion of the question whether or not presentment and notice are dispensed with ; and the reasoning by which the conclusion is reached by some that full security or indemnity dispenses with these conditions is, that in such cases *' it is plain that the indorser can receive no damage from the want of a due presentment," as said by Justice Story in his work on Promissory Notes,^ and by a number of judges in render- ing decisions.'* Others place the doctrine on the implied * Spencer v. Harvey, 17 Wend., 489, Nelson, C. J., said : " Notice was sup- posed to have been dispensed with, on the ground that the indorser had taken indemnity of the malcers by means of a judgment upon which execution has been issued ; but it is extremely uncertain if anything will be realized out of the prop- erty. The security is ah'eady in litigation in chancery. The mere precaution by an indorser of taking security from his principal, has never been adjudged to operate as a dispensation of a regular demand and notice. It is, no doubt, a common occurrence, yet such effect has never been imputed to it. There must be something more, such as taking into his possession the funds or property ot the principal, sufficient for the purpose of meeting the payment of the note ; or he must have an assignment of all the property, real and personal, of the makers for that purpose. The notice is dispensed with when funds are received, upon the ground that the object for which it is required to be given, namely, to enable the indorser to obtain indemnity from his principal, has already been attained. Partial or doubtful security falls short of this, and leaves the rule requiring no- tice in full force." " Mechanics' Bank v. Griswold, 7 Wend., 165. * Story on Notes, § 281 ; see also Story on Bills, § 374. No distinction is made between demand and notice in this particular. * Watkins v. Crouch, 5 Leigh, 522, Carr, J. (security was insufficient) ; Mar- shall V. Mitchell, 35 Me., 221, Welles, J. {obiter); Walker v. Walker, 2 Eng. (Aik.), Oldham, J. (presentment and notice held waived) ; Nelson, C. J. (the §1134- WHEN PARTY HAS RECEIVED SECURITIES. I73 assumption of the indorser to pay} If the question of damage determined an indorser's liability, it would be plain that sufficient indemnity fixed it ; but when the maker is utterly insolvent, and indeed as well when he remains per- fectly solvent, the indorser can in neither case suffer damage by default in demand or notice. § II 34. When the maker or acceptor is insolvent, he may lose nothing by default in demand and notice. If he is perfectly solvent, and has merely neglected payment, the indorser is indemnified against loss. True, there are con- tingencies under which he might lose, in the one case, as friends might have assisted the insolvent ; and in the other, as misfortune might overtake the solvent. But might not the indemnity depreciate, or be destroyed, or the oppor- tunity to use it be lost ? It seems to us a total misconcep- tion of the obligation of an indorser to place his liability at all upon any question involving the pecuniary circumstances of his principal ; or of security to himself, unless in taking the security he has stepped into the principal's shoes. And indeed when he has thus stepped into his principal's place, unless there be some privity with the holder in the arrange- ment, it is rather from his obligation to his principal, which the law transposes to the holder, than from any other con- sideration, that the holder is permitted to recover against him. Chancellor Kent,^ as well as Justice Story already quoted, security was insufficient) ; Durham v. Price, 5 Yerg., 300, in which case the court instructed the jury that if the defendant had full indemnity, or promised to pay after maturity, with knowledge of the facts, demand and notice were waived. Barrett v. Charleston Bank. 2 McMullan, 191 ; Develing v. Ferris, 18 Ohio, 170; Kyle V. Green, 14 Ohio, 495. In Beard v. Westerman, 32 Ohio St., 29, it was held that demand and notice were unnecessary to charge an indorser who at maturity had sufficient property of the maker in his possession held as security against his liability. In Second Nat. Bank v. McGuire, 33 Ohio St., 295, where property was insufficient to pay the note, it was held that the holder was not thereby exonerated from demand and notice. In Smith v. Lounsdale, 6 Oregon, 157, it was held that if indorser had sufficient security before or at maturity, he would be deemed to have waived demand and notice. Stephenson v. Primrose, 8 Port. (Ala.), 155 ; Spencer v. Harvey, 17 Wend., 489, Nelson, C. J. (the secu- rity was insufficient). ' Watkins v. Crouch, 5 Leigh, 522, Tucker, P. " 3 Kent Com. 113. 174 EXCUSE ARISING FROM CONDUCT OF PARTY. § II35 has considered ample indemnity a dispensation with demand and notice ; but on the other hand, Professor Parsons,^ and other eminent jurists, have reached the conclusions which we express, and the grounds that these conclusions rest upon seem to us entirely unassailable. It was well said in a New York case, by Ingraham, J. : " Mere security for the indorsement affords no reason for dispensing with demand. On the contrary, it furnishes a stronger reason why the indorser who holds the security should be informed of the non-payment. Without notice thereof he might suppose it to have been paid, and in con- sequence of such neglect have parted with his security."^ And to the same effect in Connecticut, where the indorser held the goods for which the note was given as security, and there had been laches as to notice, Bissell, J., said : " From the fact that no notice was given, he would have a right to presume that the note was paid by the maker, and might thus be induced to part with his security."^ § 1 1 3 5. '' ff the secin'ity be to the ftdl aniount of the note, the indorser will be held liable, without notice, for the full payment of the note ; if the security be partial, he will be bound /r^ taittoj' says Mr. Justice Story in his treatise on Promissory Notes;'' but he quotes no authority for such a doctrine, and we have not found it so much as intimated by any other writer or jurist. And it seems, on the contrary, to be universally conceded that, unless the security is full, or comprises all the maker's estate,there is no waiver of demand,^ ' I Parsons N. & B., 571. In Kramer v. Sandford, 4 Watts & S., 329, a judg- ment bond was taken from the maker by the indorser in double the amount of the note, and judgment had been entered, and execution issued, and levied on sufficient personal property to pay the note, but it was held no waiver of demand, protest, or notice, Gibson, C. J., delivering the opinion of the court. "^ Taylor v. French, 4 E. D. Smith, 458 ; see also Seacord v. Miller, 3 Ker., 55. ' Holland v. Turner, 10 Conn., 308. Where the indorser took mortgage to secure the note in suit, and another, from the maker, held no waiver. Woodman V. Eastman, 10 N. H., 359. * Story on Notes, § 357. ^ Burrows v. Hanegan, i McLean, 309 ; Watkins v. Crouch, 5 Leigh, 522 Kyle V. Green, 14 Ohio, 495 ; Brunson v. Napier, i Yerg., 199 ; Wilson v. Senier § I 137- WHEN PARTY HAS RECEIVED SECURITIES. 175 and, with a single exception,^ the concession seems equally universal as to notice.^ But even that exception does not adopt Story's doctrine. And where the sufficiency or the entirement of the assignment is urged as a waiver, proof of such sufficiency, or that it comprises the maker's entire es- tate, must be given. ^ § II 36. Distinctioji as to demand and notice. — The opin- ion has been intimated that an insufficient assignment ac- cepted by the indorser would operate a waiver of notice, but not of a regular demand. And it is based on the ground that the object of notice is to put the indorser on the alert, which can not be necessary when he has been warned by the assignment, w^hile the demand is a part of the holder's contract, which he must comply with strictly.* But the distinction rests on no well-defined idea. Knowl- edge and alertness are not notice, and unless the indorser has placed himself in the maker's place, in which event neither demand nor notice would be necessary, he can not be regarded as waiving any right as an indorser. And it has been so held.^ § 1 137. Some of the cases, while recognizing the prin- ciple that the criterion is whether or not the indorser has obligated himself to take up the note, consider that when he has received an assignment of the w^hole estate of the inaker,^ or has received an assignment adequate to meet the 14 Wis., 380 ; Holman v. Whiting-, 19 Ala., 708 ; Woodman v. Eastman, 10 N. H., 359. In Brandt v. Mickle, 28 Md., 436, it was held that a transfer of part of the maker's property to the indorser did not dispense with demand and notice, although it covered all he had when the note fell due. Spencer v. Harvey, 17 Wend., 489, Nelson, C. J. ; Chitty on Bills (13 Am. ed.) [*44i], 496 ; i Parsons N. & B., 569, 570. ' Watkins v. Crouch, 5 Leigh, 522, Tucker, J. ' Ante, § 1134. ' Benedict v. Caffe, 5 Duer, 226 ; Duvall v. Farmers' Bank, 9 Gill & J., 31 ; Marshall v. Mitchell, 34 Me., 227. " Watkins v. Crouch, 5 Leigh, 522, Tucker, P. * Denny v. Palmer, 5 Ired., 610, Ruffin, C. J. ' Barton v. Baker, i Serg. & R., 334 (1S15). In this case James Brown & Co. were makers of the note, and a few months before it was due, Armat Brown, one of the partners, made an assignment of his whole estate, for the purpose, 176 EXCUSE ARISING FROM CONDUCT OF PARTY. § I 1 38. note,* that he places himself in the maker's shoes, and im- pliedly assumes its payment. But there have been circum stances connected with the transaction, in some of the cases at least, which strengthened that presumption on the part of the court ;^ and for the reasons already stated, we can not perceive that the mere assignment of all of the maker's estate, whether it be sufficient or not, in itself creates an implied obligation on the part of the indorser to pay the note. § II 38. (3) When security given at time of indorsenie7tt. — When the security is given at the time the indorser be- comes a party to the paper, whether it be in the form of collaterals deposited with him, or of a deed transferring real or personal property to trustees, to indemnify and hold him harmless, it could hardly be reasonably inferred that the indorser intended to dispense with any diligence on the part of the holder either in respect to demanding payment at maturity, or notifying him in case of default. The proper construction, as it seems to us, of the indorser's re- ceiving such security, would be that if he became liable to pay the bill or note, he would resort to it as indemnity, and not to dispense with any of the conditions precedent to the fixing of such liability upon him. If he designed in the outset to be unconditionally bound he would naturally sign as a co-maker if it were a note, and as drawee and acceptor amongst other things, of indemnifying the indorser against his indorsements on account of James Brown & Co. The sufficiency of the assignment did not ap- pear, nor was it adverted to. Tilghman, C. J., said : " It is confessed that due notice was not g^iven ; but the plaintiff contends that, under the circumstances of the case, notice was not necessary Now, by the taking of this assign- ment, it is not unreasonable to presume that the defendant took upon himself the payment of the indorsed notes, especially as when he did receive notice (ten days after the note fell due), although he knew and remarked that it was out of time, he did not deny his responsibility, but said that his ability to pay would depend upon the arrival of a vessel. I agree, therefore, with Bond v. Farnham, 5 Mass., 170, where it was held that in such a case the indorser dispenses with notice." Kramer v. Sandford, 4 Watts & S., 328, Gibson, C. J. ' Watkins v. Crouch, 5 Leigh, 522. In this case the assignment was to a trustee, and, amongst other purposes, to indemnify the indorser to the extent of one-fourth of the note. It was held no waiver of demand. ^ Barton v. Baker, i Serg. & R., 334, supra. § I 139- WHEN PARTY HAS RECEIVED SECURITIES. I 77 if it were a bill, or with express waiver of demand and no- tice written over his signature ; and in becoming an in- dorser he indicates sufficiently by the very form of his con- tract that he requires due demand and notice before he will be charged. If demand is not made, or notice not given, we should say that the contingent liability against which he was indemnified had not accrued, and the consideration of the indemnity failing, it would revert to the party who had made it. But these inferences may be all met with proof that it was the agreement of the parties that the indorscr should pay the note, and that the security was given either to provide the means of payment or to reimburse him.^ § 1 1 39. (4) When security given after indorsement and before disJionor. — When the security is given after the in- dorsement, during the currency of the instrument — that is, before its maturity — and nothing but the mere naked fact of its acceptance by the indorscr appeared, the inference, as it seems to us, would arise that he became apprehensive that the party who was primarily liable might be unable to meet it, and that to provide for the contingency of having the liability devolved upon him, he had taken the security as indemnity against such liability ; but that liability still being contingent upon due demand and notice, the mere fact that the indorscr had guarded himself against personal loss, in whole or in part, would still seem to us to create no presumption that he designed to change the nature of his contract, and dispense with the conditions necessary to make his liability absolute. There is no privity with the holder in the subsequent arrangement between the principal and his indorscr. The indorscr does not change his con- tract, but only protects himself from loss, and it is going very far to say, that a transaction with one person, of itself affects his contract with a third. There may be circum- stances, however, connected with the indorsement, or with ' Bond V. Farnham, 5 Mass., 170. Vol. TI.— 12 178 EXCUSE ARISING FROM CONDUCT OF PARTY. § II 40. the acceptance of security, which indicate an intention of the indorser to dispense with demand and notice ; or from which such intention may be so strongly presumed that it would operate as a fraud upon his principal or the holder, to discharge him. These views are borne out by high authority.^ " The true criterion," as expressed by Chief- Justice Gibson, " seems to be the obligation to take up the note." ^ §1140. (5) When security is given afte}' dishonor. — As a general rule, it is the settled doctrine that where security is taken after dishonor of the instrument, the drawer or in- dorser taking it does not thereby waive the right to show any laches of the holder in respect to presentment or no- tice.^ In Massachusetts, where the indorser took two as- signments, the one before and the other after maturity, and it appeared that neither demand nor notice were in proper time, Shaw, C- J., said : "The second assignment does not affect the question ; it does not appear to have been made till several days after the note became due." * And it has been said, in New York, that where the indorser takes an assignment after maturity, even supposing himself liable to pay the same, it will not amount to a waiver of the objec- tion to want of due presentment or notice, " since it can not justly be inferred that he intends, at all events, to make himself liable for the payment of the note, but he takes the security merely contingently, in case of his ultimate lia- bility." ^ Where, however, it is distinctly shown that the drawer or indorser, taking security after maturity, knew at the time of the holder's laches in respect to presentment or ' Haskell v. Boardman, 8 Allen, 38; Taylor v. French, 4 E. D. Smith, 458 ; I Parsons N. & B., 571, 572 ; Kramer v. Sandt'ord, 4 Watts & S., 329. " Kramer v. Sandford, 4 Watts & S., 328. " Story on Notes, § 278 ; i Pars. N. & B., 595. * Creamer v. Perry, 17 Pick., 332. To same effect see May v. Boisseau, 8 Leig-h, 164 ; Tower v. Durell, 9 Mass., 332 ; Richter v. Selin, 8 Serg. & R., 425. * Otsego Co. Bank v. Warren, 18 Barb., 290. § 1 141. WHEN PARTY HAS RECEIVED SECURITIES. I 79 notice, the fact that he took the security would be a ci'rcum stance of evidence to show a waiver of the objection, though not conclusive, or perhaps even presumptive proof. Such, at least, is the view which seems to us correct. Further, we do not think the law could justly go, but the doctrine of the text, as above stated, is not without dis- sent.^ Taking an assignment of all the maker's property by the indorser to cover his liability to him, after dishonor, does not waive the want of notice, the note not being mentioned in the deed.^ § 1 141. (6) Form of assignment and character of secu- rity. — The form in which the security is given may often be an important matter of consideration in determining whether or not the indorser assumed the payment of the note. When the property has been placed directly in his hands, and he has power to convert it immediately into money, slighter circumstances might suffice to complete the proof of such assumption by him, than when it has been conveyed to a trustee.^ In the latter case, unless there was plain language to in- dicate the contrary, the presumption would be strong that the trust was created as an indemnity in the event of liabil- ' Debuys v. Mollere, 15 Mart. (La.), 318. And in i Parsons N. & B., 619, it is said : "There is certainly ground to contend that if an indorser takes security after maturity, this is evidence of demand and notice ; for why should a person take these steps to secure himself unless his liability actually existed.-^ " ^ Walters v. Munroe, 17 Md., 154, Goldsborough, J., saying: "The deed to Funsten " (the trustee) " was executed after the note had fallen due, and the question is, whether such a deed dispenses with proof of notice to the indorser. And we think a sufficient answer is, that this note is nowhere mentioned or re- ferred to in the deed. But, then, it is said, if the defendant admits he was fully indemnified, that will excuse the want of notice. Whatever effect such an ad- mission might have, if made by a party with full knowledge of the facts which discharge him from liability on the note, it is unnecessary for us to decide. In this case, the declaration of Munroe " (the indorser) " relied on is, ' that he was fully indemnified for all his liabilities for Harrison ' " (the maker), "which must be understood to refer to his legal liabilities, and can not be construed to deprive him of his legal defence in this case, based upon want of notice, without which he was not legally liable." 'Story on Notes § 282 ; Denny v. Palmer, 5 Ired., 610. l8o EXCUSE ARISING FROM CONDUCT OF PARTY. § I I42 ity being fixed ; and in the former that presumption would still exist, if nothing but the mere assignment appeared, but it might be much more easily overcome by circum- stances.* § 1 142. The character of the security may also have a material bearing on the question. If before maturity the maker placed in the indorser's hands a sufficient sum of money, the latter's intention to assume the payment would be presumed ; and if the security were bills, or notes falling due before maturity, or other securities readily made avail- able, slighter circumstances would prove the assumption than if it consisted of real or personal property, which is not so easily convertible into money. And some of the cases have intimated that the acceptance of securities readily convertible is in itself an implied assumption to pay the note.^ A confession of iudgment is />rima /acz'e, but not conclu- sive evidence of waiver of laches in respect to demand and notice. " It may be evidence of an acknowledgment of liability, but is not conclusive evidence. It is not a legal presumption. It is capable of being explained and repelled by the circumstances under which it was given." ^ § 1 143. Where the money or the security is received to meet a particular indorsement or indorsements, there is no waiver of demand or notice as to any other.* In England it has been held, that where the acceptor 'May V. Boisseau, 8 Leigh, 195. Brockenburgh, J., said: "It must be ob- served that there is a great difference between an absolute conveyance and a mere conveyance to a trustee, as an indemnity. In this case the property was not put into the hands of Peter Boisseau to pay off these particular debts, but into the hands of a trustee as an indemnity. It was designed, too, to indemnify not only against these supposed indorsements, but against various other suretyships on which Peter was bound for Edward, and to secure a debt due from Edward to Peter, and a debt and an annuity due from Edward to his mother, Priscilla Boisseau." See also Tucker, P., p. 213 ; s. C. and Cabell, J., p. 204, and Cornay /. DaCosta, i Esp., 303. ^ Dufour V. Morse, 9 La., 333 ; Kramer v. Sandford, 4 Watts & S., 328. ' Richter v. Selin, 8 S. & R., 425. * Prentiss v. Danielson, 5 Conn., 175 ; Bond v. Farnham, 5 Mass., 170. § 1 144- WHEN MAKER OR ACCEPTOR HAS ABSCONDED. l8l told the drawer a few days before maturity that he could not pay the bill, and that the latter must take it up, and gave him a part of the money for that purpose ; and the drawer received the money and promised to take it up ; nevertheleijs he might still set up want of due presentment, and the money received as had and received to plaintiff's use.^ This decision is quoted with apparent approval,^ but it seems to us unjust. The fact that the indorser has funds in his hands belong- ing to the maker, which he is merely authorized to apply to the payment of the note, but which he has not received for that avowed purpose, nor agreed to apply to that purpose, is no waiver of presentment, protest, or notice.** SECTION III. WHEN MAKER OR ACCEPTOR HAS ABSCONDED. § 1 144. In the third place, the absconding of the maker or acceptor is a valid excuse. When the payor of the bill or note has actually abscond- ed between its execution and its maturity, and especially when he is notoriously insolvent, inquiries are unnecessary. Presentment to him personally is of course impossible, and presentment at his last place of residence or business is altogether unnecessary. The mere fact of absconding is all that it is necessary for the holder to show. This doc- trine is well settled in England,'* and by the current of American authorities;^ and Massachusetts is perhaps the ' Baker v. Birch, 3 Camp., 107 ; Chitty, Jr., on Bills, 848. " Chitty on Bills (13 Am. ed), [*338], 379; i Parsons N. & B., 587. ' Ray V. Smith, 17 Wall., 416. ■* Bayley on Bills, chap, vii, sec. i, p. 196 ; Anonymous Ld. Raym., 743. " It is clear," says Chitty (13 Am. ed.) [*367j, 412, "that if the drawee has never lived at the place of address, or has absconded, this circumstance will sufficiently excuse the holder from not making- further inquiries after him." ' In T.ehman v. Jones, i Watts & S., 126, the court said : " Where indeed the drawer of a note or the drawee of a bill has merely removed from the place uf 1 82 EXCUSE ARISING FROM CONDUCT OF PARTY. § II 44. only State in which a contrary view is taken. The earlier authorities in that State were of the same tenor,^ but the more recent cases have adopted a more rigid theory, plac- ing the absconding debtor upon the same footing as one merely removing into another jurisdiction.^ It is to be re- gretted that there is any departure from a principle so rea- sonable and so well settled. Even when he had absconded to another place in the same State or country, the excuse for non-presentment would be sufficient, unless the holder knew where he was, in which case he should seek him.^ But the absconding of the drawee, acceptor, or maker is no excuse for want of notice to the drawer or indorser, who all the more need to be put upon their guard.* When the drawer or indorser has himself absconded, notice should be left at his last place of abode, or left with the person representing his estate ;^ but if he had no fixed his residence indicated by the bill, it is the business of the holder to inquire for him and ascertain where he is gone, in order that he may follow him ; but when he has secretly fled, an application at the place would lead to no information in respect to him ; and the law requires nothing which is nugatory." Gillespie v. Hannahan, 4 McCord, 503 ; Wolfe v. Jewett, 10 La. Ann., 383 ; Taylor v. Snyder, 3 Den., 145 ; Duncan v. ]\IcCullough,4 Serg. & R., 480 ; Bruce v. Lytle, 13 Barb., 163; Ratcliff V. Planters' Bank, 2 Sneed, 425, 455; Hunt v. Maybee, 3 Seld., 266 ; Story on Bills, § 351. ' Putnam v. Sullivan, 4 Mass., 45 ; Hale v. Burr, 12 Mass., 85 ; Shaw v. Reed, 12 Pick., 132 ; Widgery v. Munroe, 6 Mass., 449. These cases were positive and clear; and in one of them. Hale v. Burr, 12 Mass., 89, it was said : " It is well settled that if the promisor absconded before the day of payment, or has con- cealed himself, the necessity of a demand is taken away. Due dihgence to find him is all that is required in the latter case ; and in the case of absconding, even that is not necessary." ''Pierce v. Gate, 12 Gush., 190 (1853). In this case the doctrine is reversed, the court overruling instructions that " if the maker had absconded, leaving no visible property subject to attachment, no presentment of the note to the maker, or demand at' the dwelling-house, or other inquiry for him, was necessary." The contrary doctrine was deemed so well settled, that the question was not discussed. See i Parsons N. & B., 450. A return to the former ruling has been anticipated in Redfield & Bigelow's Gases, 452 ; but in Grafton Bank v. Gox, 13 Gray, 504, it has been reiterated. ^ Reid v. Morrison, 2 Watts & S., 401 ; Duncan v. McGuUough, 4 Serg. & R., 480. In Redfield & Bigelow's Gases, 339, it is said : " If the absconding is any excuse at all, it should be without reference to the locality of the hiding place unless this is within the jurisdiction, and the holder knows where it is." * May V. Goffin, 4 Mass., 341. *• Ex parte Rohde, Mont. & M., 430; i Parsons N. & B., 528. § 1 145- WHEN MAKER OR ACCEPTOR HAS REMOVED. 183 place of abode, or it be unknown, and undiscovered after reasonable inquiries, and there be no known representative of his estate, want of notice is altogether excused.^ SECTION IV. WHEN THE MAKER OR ACCEPTOR HAS REMOVED HIS DOMICILE TO ANOTHER STATE OR A FOREIGN COUNTRY. § 1 145. In the fotu'th place, if between the time a note is made or a bill accepted and its maturity, the maker or acceptor removes from the place at which he resided and transacted business to another State or country, no obliga- tion is imposed upon the holder to go out of his own State in order to make a demand upon him personally, or at his new place of residence or business. It will be sufficient under such circumstances to make a demand at the payor's last place of residence or business, and when that has been done due diligence requires no more.^ Whether or not it requires this much is questioned, and it has been held that when the payor has gone into a foreign jurisdiction, no demand whatever, is necessary, either upon him personally or at his last place of residence or business, such removal placing him, according to this view, in the same position as if he had absconded.^ But a mere •Story on Notes, § 356. " McGruder v. Bank of Washing-ton, 9 Wheat., 598 ; Taylor v. Snyder, 3 Den., 145 ; Adams v. Leland, 30 N. Y., 309 ; Foster v. Julien, 24 M. Y., 28 ; Anderson V.Drake, 14 Johns, 114; Dennie v. Walker, 7 N. H., 199; Gist v. Lybrand, 3 Ohio, 308; Reid v. Morrison, 2 Watts & S., 401 ; Grafton Bank v. Cox, 13 Gray, 503 ; Wheeler v. Field, 6 Mete, 290 ; Central Bank v. Allen, 16 Me., 41 ; Gillespie v. Hannahan, 4 McCord, 503; Whittier v. Graham, 3 Greenl., 32; Herrick v. Baldwin, 17 Minn., 209; Cromwell v. Hynson, 2 Esp., 211 ; 3 Kent Com., 96; Chitty (13 Am. ed.), 318, 413; Story on Bills, § 451. ' Gist V. Lybrand, 3 Ohio, 307, in which case it is said : " Whether a demand should be made at any other place is not made a point, or adjudicated upon in that case (McGruder v. Bank of Washington). But it seems to us a clear consequence of the decision, that such a demand is unnecessary. The fact ot removal commits the indorser, and dispenses with all demand, unless a particu- lar place be appointed for the payment of the note in the note itself." Dennie V. Walker, 7 N. H., 199 ; Foster v. Julien, 24 N. Y., 28 (Mason, J., dissenting) ; Eaton V. McMahon, 42 Wis., 487. 184 EXCUSE ARISING FROM CONDUCT OF PARTY. § II46. removal would not warrant the supposition that the payor had not made arrangements to meet his obligations at his previous domicile ; and the better opinion is that the holder would not exercise due diligence w^ithout presenting the bill or note at his last place of residence or business.^ It would be sufficient, however, to present it at the last place of business, without inquiry at his last residence, or of the indorser as to his present residence.^ If he leaves no one at his last place of residence on whom demand can be made, in the place where he last resided, no demand is necessary to charge an indorser.^ § 1 1 46, When the removal is to another locality within the same State or country, it is the duty of the holder to seek and demand payment of the promisor, at his new place of residence or business;^ but when he has crossed the line into another State or country, it matters not how near his new place of residence may be to his former one ; the mere fact that he has passed into a foreign jurisdiction is sufficient to excuse non-fuUilment, either upon him personally or at his new place of residence or business.^ This latter doctrine was applied by the United States Supreme Court where the ' Wheeler v. Field, 6 Mete, 290; Grafton Bank v. Cox, 13 Gray, 503 ; i Par- sons N. & B., 452 ; Redfield & Bigelow's Cases, 330, "^ Grafton Bank v. Cox, 13 Gray, 503. ^ Brown v. Petrie, Iowa S. C, June, 1881, 9 N. W. Reporter, 190. ^ Louisiana Ins. Co. v. Shamburgh, 7 Mart. (La.) N. S., 260, the maker having removed from New Orleans to Plaquemine, in Louisiana. Anderson v. Drake, 14 Johns, 114, the maker having removed from New York City to Kingston, in New York State. '' McGruder v. Bank of Washington, 9 Wheat., 598, Johnson, J., saying : " We think that reason and convenience are in favor of sustaining the doctrine that such a removal is an excuse from an actual demand. Precision and certainty are often of more importance to the rules of law than their abstract justice. On this point there is no other rule that can be laid down which will not leave too much latitude as to place and distance. For his absconding or removal out of the kingdom, the indorser is held in England to stand committed, and although from the contiguity, and in some instances reduced size of the States, and their union under the general government, the analogy is not perfect, yet it is ob- vious that a removal from the seaboard to the frontier ^izX^?,, ox vice versa, would be attended with all the hardships to a holder, especially one of the same State with the maker, that could result from crossing the British Channel." To same effect, see Gillespie v. Hannahan, 4 McCord, 503 ; Widgery v. Monroe, 6 Mass., 449. § I 146. WHEN MAKER OR ACCEPTOR HAS REMOVED. 185 maker removed from the District of Columbia to a new residence in Virginia only nine miles distant, and it seems well established,^ though not without some dissent. In some cases, however, it has been held that in the event of a permanent removal beyond the State line, the holder must use reasonable efforts to ascertain the new place of residence, and give notice there.^ In respect to notice, when the drawer or indorser entitled to it has left the State, it is sufficient to leave it at his last place of residence.^ * See supra. ^ Barker v. Clark, 20 Me., 156 ; Phipps v. Chase, 6 Mete, 491. ' Herrick v. Baldwin, 17 Minn., 209. CHAPTER XXXV. SPECIAL WAIVERS OF PRESENTMENT, PROTEST, AND NOTICE; AND OF THE EVIDENCE THEREOF, BY PROMISES TO PAY, AND PART PAYMENTS AFTER MATURITY. SECTION I. WAIVER BY PROMISE OF THE DRAWER OR INDORSER TO PAY MADE AFTER MATURITY WITH KNOWLEDGE OF HOLDER'S DEFAULT. § 1 147. In the first place, promises to pay after matu- rity, or acknowledgments of continued liability and obliga- tion to pay, with knowledge that the usual steps of demand, protest, or notice were not duly taken, are almost universally regarded as absolutely fixing the liability of the drawer or indorser making them, and he will not afterward be per- mitted to set up the defence that the demand or protest were not made in point of fact, or the notice not given.^ The doctrine, as thus laid down, is settled in England and in the United States, indeed almost wherever the law mer- chant prevails, though the particular grounds upon which • Yeager v. Falwell, 13 Wall, 12 ; Sigerson v. Mathews, 20 How., 496; Rey- nolds V. Douglass, 12 Pet., 497 ; Thornton v. Wynn, 12 Wheat., 183 ; Salisbury V. Renick, 44 Mo., 554; Hughes v. Bowen, 15 Iowa, 446; Martin v. Winslow, 2 Mason, 241 ; Spurlock v. Union Bank, 4 Humph., 336 ; Hazard v. White, 26 Ark., 280; James v. Wade, 21 La. Ann., 548 ; Walker v. Rogers, 39 111., 279 ; Mathews v. Allen, 16 Gray, 594 ; Smith v. Curlee, 59 111., 221 ; Tardy v. Boyd, 26 Grat., 637 ; Carter v. Sprague, 51 Cal., 239; Givens v. Merchants' National Bank, 85 III, 444; Ross v. Hurd, 71 N. Y., 14; Trimble v. Thorne, 16 Johns, 152 ; Duryee v. Dennison, 5 Johns, 248 ; Scott v. Meeker, 20 Hun, 163; Fell v. Dial, 14 S. C., 247 ; Armstrong v. Chad wick, 127 Mass., 156 ; Gove v. Vining, 7 Met., 212 ; Moyer's Appeal, 87 Penn. St., 129 ; Smith v. Lounsdale, 6 Oregon, 80; Story on Bills, §§ 280, 320, 373; Story on Notes, 274, 275 ; 3 Kent. Com. lect., 44 ; I Parsons N. & B., 594 ; Byles on Bills (Sharswood's ed.), 349 ; Ed« wards on Bills, 650, 651, 652 ; 2 Ames B. & N., 505, notes. (186) §1147^- WAIVER BY PROMISE MADE AFTER MATURITY. 187 it rests are the subject of difference of opinion, and there are authorities denying it altogether.^ § 1 147^. Discussion of the principle that promises to pay with knowledge of laches bind party without demand or notice. — The objection to it is placed upon the ground that the drawer or indorser is absolutely discharged by default of the holder in respect to making due presentment and giving notice ; and that, being no longer a party to the contract, he can not renew his liability by a new promise, unless it be supported by a new consideration.^ This argu- ment is a forcible one, but it has not impressed the courts, with few exceptional cases, as valid, and may be regarded as overruled and obsolete. And when we refer to the fun- damental principles upon which the requirements of demand and notice are based, it seems more plausible than sound. The object of demand and notice is to secure the drawer or indorser from loss — not actual loss necessarily, but from any possible loss by delay in making the demand of pay- ment of the principal party, and notifying the indorser of his default. The law presumes an injury, or at least his exposure to injury, when these steps have not been taken ; but, as it exacts them rigidly from the holder, it allows him the advantage of any assurance from the drawer or indorser that no injury has been suffered, and that he will not avoid his Hability by the mere chance of suffering it. Waiver is not, therefore, the revival of the claim of recourse against him, but a declaration that there was no ground for the only plea on which it could be discharged.^ Indeed, while it is everywhere said that the indorser's liability is condi- tioned upon due demand and notice, it should be remem- bered that the condition is not a strict and absolute condi- ' Lawrence v. Ralston, 3 Bibb (Ky.), 102 ; Donelly v. Howie, Hayes & J., 436 (Irish Court of Exchequer). See also Cathcart v. Gibson, i Rich. (S. S.), 10 Huntington v. Harvey, 4 Conn., 124; 2 Ames B. & N., 504. ° Story on Notes, § 275 ; i Parsons N. & B., 611. ' Thomson on Bills (Wilson's ed.), 377 ; Edwards on Bills, 650, 651. l88 WAIVERS BY PROMISES TO PAY. §1148. tion precedent as conditions in contracts construed by the common law. We have already seen that even overruling necessity does not exonerate a contractor at common law, while it is a well-settled excuse for non-compliance with the requirement of demand and notice. And in the same liberal spirit, and for the benefit of trade, the obligation of the indorser is regarded rather as voidable by non-fulfilment of these conditions than as actually avoided. If he chooses to affirm rather than disaffirm his liability, it can injure no one to leave him to the exercise of his discretion.^. § 1 148. It makes no difference, when the promise to pay is made with knowledge of laches, that the party making it did not know its legal effect as a waiver,^ or that he had a legal defence to the bill or note,^ for it is a maxim that ig- norance of the law excuses no one. The contrary notion has been long since exploded,"* though at one time it found favor.^ And it makes no difference at what particular time the promise is made. It may be after suit brought,® and even while a motion for a new trial is pending.''' ' In Ross V. Hurd, 71 N. Y., 14, the holder and maker of a note went to the indorser who had been discharged by want of demand and notice, and on the holder agreeing to an extension, the indorser said, " Then I will waive protest." Held that this authorized recovery against the indorser. - Third National Bank v. Ashworth, 105 Mass., 503; Mathews v. Allen, 16 Gray, 594 ; Hughes v. Bowen, 15 Iowa, 446 ; Cheshire v. Taylor, 29 Iowa, 492 ; Davis V. Gowen, 17 Me., 387 ; Beck v. Thompson, 5 Har. & J., 537 ; Pate v, McClure, 4 Rand., 164 ; Richter v. Selin, 8 Serg. & R , 425 ; Kennon v. McRea. 7 Port. (Ala.), 175 ; Bilbie v. Lumley, 2 East-, 469; Stevens v. Lynch, 12 East., 38 ; Chitty on Bills (13 Am. ed.) [*503], 447 ; Story on Bills, § 320; 2 Ames B. & N., 505. = Givens v. Merchants' Nat. Bank, 85 III., 444, Scholfield, C. J. : " The plaintiff in error says he was not aware at the time he made these promises that he had any legal defence to the note If it was because of his ignorance of the law, it can not avail him, and he must be charged with full knowledge." * Tebbets v. Dowd, 23 Wend., 379. ' Chatfield v. Paxton, N. P., quoted in Bilbie v. Lumley, 2 East., 469 ; Free- man V. Boynton, 7 Mass., 483 ; Warder v. Tucker, Id., 449. ^ Oglesby v. Steamboat Co., 10 La. Ann., 117 ; Hart v. Long, i Rob. (La), 83. ' Hart v. Long, i Rob. (La.), 83. ft 1 149. WAIVER BY PROMISE MADE AFTER MATURITY. 1 89 § 1 149. Proof of knowledge — how far essential to proof of waiver. — Knowledge on the part of the drawer or in- dorser that/die holder has been in default, in not making due presentment and giving notice, is an element of the waiver as indispensable as the promise itself, according to the American text writers on the subject, and the great body of the adjudicated cases.^ Thus, it has been decided by the United States Supreme Court that where an in- dorser of a note, on being informed that the maker had not paid it, observed that " he knew he had not to pay it ; that it was the concern of himself (the indorser) alone ; and that the maker had nothing to do with it," was an admission of liability, but that the plaintiff could not recover against him without proving that he was apprised of his laches in not making a regular demand of payment.^ ' Thornton v. Wynn, 12 Wheat., 183. And to same effect, holding that it must be proved in addition to the promise itself, see Spurlock v. Union Bank, 4 Humph., 336; Ford v. Dalian, 3 Cold., 67; Ticknor v. Roberts, 11 La., 14; Blum V. Bidwell, 20 La. Ann., 43 ; Walker v. Rogers, 40 111. 278 ; Van Wickle V. Downing, 19 La. Ann., 83 ; Baskerville v. Harris, 41 Miss., 535 ; Harvey v. Troupe, 23 Miss., 538 ; Farrington v. Brown, 7 N. H., 271 ; Hunter v. Hook, 64 Barb., 469 ; Jones v. Savage, 6 Wend., 658 ; Gawtry v. Doane,48 Barb., 148 ; U. S. Bank v. Southard, 2 Ham, 473 ; Barkalow v. Johnson, i Ham, 397 ; Bank U. S. V. Leathers, 10 B. Mon., 64 ; Walker v. Rogers, 39 III, 279 ; Cheshire v. Taylor, 29 Iowa, 492 ; Sigerson v. Mathews, 20 How., 464 ; Davis v. Gowen, 387 ; Salisbury v. Renick, 44 Mo., 454 ; Otis v. Hussey, 3 N. H., 346 ; Newberry V. Trowbridge, 13 Mich., 264; Freeman v. O'Brien, 38 Iowa, 406; Kelley v. Brown, 5 Gray, 108; Baer v. Leppert, 12 N. Y. S. C. (5 Hun), 453; i Parsons N. & B., 601 ; Story on Bills, § 320 ; Lilly v. Petteway, 73 N. C, 358 ; Williams V. Union Bank, 9 Heisk., 441 (1872), in which case it was held that it must ap- pear that the party promising was under no misapprehension as to the law or the facts. In Arnold v. Dresser, 8 Allen. 435, Bigelow, C. J., saying: " No such waiver is made where an indorser promises to pay the note in ignorance of the fact that he has been discharged by the laches of the holder in not making due demand of the promisor, or where such promise is made under a misapprehen- sion or mistake of facts concerning the due presentment and demand of the note." See ^os/, § 1161. ^ Thornton v. Wynn, 12 Wheat., 183. "These declarations," said the Su- preme Court, " amounted to an unequivocal admission of the original liability ot the defendant to pay the note, and nothing more. It does not necessarily ad- mit the right of the holder to resort to him on the note, and that he had re- ceived no damage from the want of notice, unless the jury to whom the conclu- sion of the fiict from the evidence ought to have been submitted, were satisfied that the defendant was also apprised of the laches of the holder in not making a regular demand of payment of the note, by which he was discharged of re- sponsibility to pay it. The knowledge of this fact formed an indispensable part of the plaintiff's case, since without ft, it can not be inferred that the defendant intended to admit the right of the plaintiff to resort to him, if, in point of fact, he had been guilty of such laches as would discharge him in point of law." I go WAIVERS BY PROMISES TO PAY. § II50. Even where the party wrote a written acknowledgment, addressed to the plaintiffs counsel, stating, " I hereby hold myself accountable for the payment of a note signed by J. Brown, payable to me, and indorsed by me," etc., it was held insufficient, no proof of knowledge of laches appear- ing.^ And it is said and held that even if the drawer or in- dorser pays the amount of the bill or note, in ignorance that he has been discharged by laches, he may recover it back.^ § 1 150. There is certainly strong ground for contending that upon principles of estoppel, proof of a distinct promise to pay after maturity (no question of fraud or deceit arising) should in itself close all controversy as to demand, protest, and notice. The drawer or indorser may not only waive the fact that demand, protest, and notice were not duly made or given, they may also waive proof that they were made or given. And when he promises to pay the bill or note, such promise imports an unconditional assumption of it ; and a dispensation with whatever preliminary evidences might be necessary to charge him with its payment. The holder is thereby advised that the party raises no question as to his liability, and to permit him when sued to require other proofs of what he has recognized, might enable him to practice a fraud by lulling the holder to quiet reliance on his promise, and then springing the defence upon him un- awares. If there were a failure as to demand and notice, there might be excuses which the holder would come pre- pared to prove if the promise had not intimated that it was unnecessary. Or there might be witnesses wiiom he would have summoned, or testimony which he would have pre- served, if not thus warned that the indorser acknowledged his liability. And good faith would seem to suggest that if the party deliberately promises to pay, he shall not af- ' Farrington v. Brown, 7 N. H., 271. ' Story on Promissory Notes, § 361 ; Crutchers v. Wolf, 2 Mon., 88. §1151. WAIVER BY PROMISE MADE AFTER MATURITY. I9I tervvard go behind that promise and deny facts which it presuppose^, and is impHedly based upon.^ Nevertheless, it may be said per contra, that to consider the promise to pay as evidence p7'ima facie of due demand and notice, or of kno\vledo:e of the want of the one or the other, and to throw the burden of proving want of dihgence and igno- rance thereof, with due circumspection- taken to prevent surprise to the plaintiff, are all that is essential to protect him ; and the authorities which adopt this equitable inter- mediate view are perhaps upon the whole best calculated to effectuate justice.* § 1 151. In Virginia it was held, that where the drawer of a protested bill who was sued, called for proof of notice, and it was proved that when he was applied to for payment he acknowledged that the debt was a just one, and said he would pay it, it was a waiver of all notice, though nothing was said about notice in the acknowledgment ; and that in- structions that, " unless the said acknowledgment was made with a knowledge of all the facts of the case as to the laches of the holders of the said bill, the said evidence was not to be received," were properly refused by the court below.^ And in a subsequent case the doctrine was reiterated.* It ' Debuys v. Mollere, 15 Mart. (La.), 318, Mathews, J., saying: "The indorser must have known whether he was duly notified of the protest. If he w^ere not, by promising to pay he waived the advantage which such negligence would otherwise have given ; if he did not receive regular notice he is liable under his subsequent promise." See Bogart v. M'CIurg, 11 Heisk., 105. ^ See post, § 1 1 52 et seq. ^ Walker v. Laverty, 6 Munf., 487 (18 10). No authorities quoted. Devendorl V. West Va. O. & O. L. Co., 17 W Va., 175. See Cardwell v. Allen, 33 Grat., 166. * Pate V. McClure, 4 Rand., 169 (1826), Carr, J., saying: " Alexander McClure says, in direct response to a particular interrogatory in the bill, that immediately on the return of the bills he gave due notice of the protest, both to Lynham and Pate ; and this is strongly corroborated by the correspondence. But in truth, the case is taken wholly off that ground by the various subsequent promises to pay and acts of sanction and ratification given and done by Pate — promises and acts covering an interval of twelve years, and done in the most solemn manner with full knowledge of the facts." [The court evidently does not mean knowl- edge of any laches, which it thought had not been committed, but knowledge o< non-payment.] "After this," continues the judge, "it is equally repugnant to reason and to law, that he should claim to be discharged for want of notice, and 1 192 WAIVERS BY PROMISES TO PAY. ^ 1 1 52. will be observed, that in neither of these cases was there any proof of any laches ; but the doctrine which they rec- ognize is, that such proof is absolutely precluded by the waiver. SECTION 11. PROMISE TO PAY AS PRESUMPTIVE EVIDENCE OF KNOWLEDGE OF LACHES. § 1 152. When it is conceded or proved that there were laches in respect to the demand, protest, or notice, the prom- ise to pay after maturity should be regarded as prima facie evidence that the party making it knew of such laches, when- ever such knowledge is deemed necessary to constitute a waiver. It is a promise against interest. The drawer or in- dorser should know when the instrument to which he was a party fell due. His promise to pay presupposes it to be overdue and unpaid. And if he has not received notice, he has every reason to suppose that it was not sent, and that the steps which should precede it were not taken.* If he received notice of due dishonor, and nevertheless de- mand and protest were not duly made, it might be other- call on the other party to prove that he proceeded in strict conformity with all the niceties of the law merchant. If he had intended to place himself on this ground, the time was when the bills came back and he was pressed for payment of them. He should then have said, ' Show that in all things you have proceed- ed strictly ; that the bills have been regularly protested, and due notice of pro- test given to me.' Nor will it avail him to say that he was ignorant of the law ; every man is bound to know the law." ' " The weight of authority," says Chancellor Kent, " is that this knowledge may be inferred as a fact from the promise under the attending circumstances, without requiring clear and affirmative proof of the knowledge." 3 Comm. lect., 44. In Thomson on Bills (Wilson's ed.), p. 381, it is said, " There must be proof of knowledge of the failure '' ; and p. 384, " Though it should not be proved, it will be presumed that he knew of the failure " ; Chitty on Bills (13 Am. ed.), [*504-5], 570 ; i Parsons N. & B., 603 ; Hopley v. Dufresne, 15 East., 275 (1812) ; Taylor V.Jones, I Camp., 105 ; Turnbull v. Hill (Scotch case), Thom., 381 ; Barkalow v. Johnson, i Harr., 397, Hornblower, C. J., saying: "The in- dorser knew indeed whether he had or had not received a notice of demand and non-payment." Landrum v. Trowbridge, 2 Mete. (Ky.), 283 ; Loose v. Loose, 36 Penn. St., 538 ; Nash v. Harrington, i Aik., 39; Debuys v. Mollere, 15 Mart, (La.), 318; ante, § 1150, note i. $ 1154- PROMISE TO PAY AS PRESUMPTIVE EVIDENCE. 1 93 wise. As a general rule, however, the American decisions require separate proof of knowledge in all cases.* And it has been held that a promise to pay, with knowledge that no notice was given, would not be a waiver unless there was also knowledge that due demand was not made.'* § 1 153. Inferences as to knowledge in respect to present- ment and notice. — The inference is not so strong as to knowledge of laches respecting the presentment as to the notice, but still strong enough, we think, to bear out the views expressed. Where there has been due presentment, and a promise to pay afterward resisted on the ground of no notice, the presumption that it was given, or that if not given the promisor knew the fact, would be very strong.^ Where it is alleged that there was neither presentment nor notice, the promise to pay would still lead, we think (for the reasons already given), to the same conclusions,* though respecting the presentment, high authority, which recog- nized the inference respecting notice, has thought differ- ently.^ § 1 1 54. Distinctio7i between promises to pay in respect to notice of 7ion-payment and notice of non-acceptance. — A distinction may well be taken between the effect of a prom- ise to pay, in regard to the inference of notice, in cases of non-payment and non-acceptance, where a bill has been 'See ante, § 1149; Ford v. Dallam, 3 Cold., 67; Trimble v. Thorn, 16 Johns, 152 (overruled by Tebbetts v. Dowd, 23 Wend., 379) ; New Orleans Bank v. Harper, 12 Rob. (La.), 231 ; Lilly v. Petteway, 73 N. C.. 358. ° Low V. Howard, 1 1 Cush., 268. "Ladd V. Kenney, 2 N. H., 340; Chitty on Bills (13 Am. ed.), [*504-5], 570. * Croxen v. Worthen, 5 M. & W., 5. An action against maker of a note pay- able at a specified place. There was no evidence of presentment there, which was charged in the declaration, but the defendant had promised to pay by in- stalments. Alderson, B., said: "The defendant is supposed to know the law; he knows, therefore, that he is not liable unless the note has been duly presented. With that knowledge he undertakes to pay it. Is not that evidence for the jury that he knows it has been presented } " ' Thornton v. Wynn, 12 Wheat., 183, Washington, J., saying : " That due notice was not given to the defendant, he could not fail to know ; but a regular demand of the maker of the note could not be inferred from the admissions of the de- fendant." Vol. II.— 1-, 194 WAIVERS BY PROMISES TO PAY. § 1 1 55. presented for acceptance before it becomes due. In the former case (non-payment) the party is supposed to have known when the bill became due, and must actually know, or might readily have ascertained, whether or not there had been laches ; and, therefore, the inference arises from a promise to pay, of a regular presentment for payment and of due notice. But in the latter case (when the bill was dishonored for non-acceptance), the fact of a bill having been presented for acceptance before it fell due, and dis- honored, lies peculiarly in the knowledge of the party pre- senting it ; and there is no inference that a party who prom- ises to pay after the bill falls due, would have known of the refusal to accept, or of the neglect to give notice of such non-acceptance. Therefore, in such cases, the promise to pay would not be in itself a waiver of laches, nor presump- tive evidence of diligence.^ This doctrine is held in Eng- land as well as in the United States.^ § 1 155. When proof of knowledge, apart from any pre- sumption which the promise to pay may give rise to, is re- quired, all the circumstances may be looked at, and it may be made out inferentially by the relations, acts, and expres- sions of the parties, and the time which had elapsed after maturity when it was made.^ Where the indorser applied for an extension of time after suit brought in which due presentment was alleged, it was thought sufficient evidence to go before a jury of knowledge.* Where the drawer, knowing that notice had not been sent, himself took the bill and demanded it of the drawee some time after it was due, it was inferred that he must have known the failure in making a previous demand.^ 'Landrum v. Trowbridg-e, 2 Mete. (Ky.), 283; Bank of Tennessee v. Smith, 9 B. Mon., 609; Phillips v. McCurdy, i Har. & J., 187, - Blessard v. Hurst, 5 Burr., 2670 (1770). The promise to pay was made without knowledge that the holder had presented for acceptance, and not given notice of refusal till after payment had been likewise refused. Goodall v. Dolley, I T. R., 712. 'Martin v. Winslow, 2 Mason, 241 ; Givens v. Merchants' Nat. Bank, 85 111., 444- ■■Hopley V. Dufresne, 15 East., 275. ' Cram v. Sherburne, 14 Me., 48. § 1 1 57* Pl^OMISE TO PAY AS EVIDENCE OF DILIGENCE. 1 95 SECTION HI. PROMISE TO PAY AS EVIDENCE OF DILIGENCE, OR WAIVER OF PROOF OF NEGLIGENCE. § 1 1 56. We have already seen the double aspect in which a promise to pay after maturity may appear, and that when relied on as a waiver of laches, knowledge of such laches by the promisor must accompany it. But when no laches are proved or conceded, it assumes another aspect. Instead of proving demand and notice, the holder proves an acknowledgment of liability, and a promise to discharge it — a liability presupposing and based upon demand and notice, or dispensation with them. It is, therefore, pre- sumptive evidence that demand was duly made and notice duly given, and sufficient in itself to the plaintiff's recovery, unless it be rebutted.* § 1 157. Order hi which burden of proof shifts. — A fail- ure to discriminate between the promise to pay as a waiver of demand and notice, and as a waiver of proof of demand and notice, has led to much confusion in the adjudicated cases. There is certainly great force in the view that a distinct promise to pay, made after maturity, ought to be regarded either as conclusive evidence that there was due demand and notice, which the promisor is estopped to rebut, or as an absolute waiver of all proof to that effect.^ But a ma- jority of the cases consider it prima facie evidence of de- > Tebbetts v. Dowd, 23 Wend., 379 ; Lewis v. Brehme, 33 Md., 412 ; Hazard V. White, 26 Ark., 280; Dickerson v. Turner, 12 Ind.. 223 ; Edwards on Bills, 652. The objection has been urged that a promise to pay, when made by parol, is within the statute of frauds, being a promise to pay the debt of another. The liabilities of drawers and indorsers are governed by the law mer- chant, and are not, as we think, at all affected by the statute of frauds. See ante, § 567. And it seems to us that there is nothing in this objection. In an action on the promise to pay, it was sustained, however, in Peabody v. Harvey, 4 Conn., 119. But in an action on the note, it was decided to be un- availing, in U. S. Bank v. Southard, 2 Harr., 473. ' See ante, § 1150, Byles on Bills (Sharswood's ed.) [*29i], 450. 196 WAIVERS BY PROMISES TO PAY. § II5S. mand and notice merely, and open to rebuttal ; and that if the defendant does rebut it, with proof of laches, the plain- tiff must rejoin with proof that the defendant had knowl- edge of the laches, his position being shifted from a reliance on his own diligence, to proof that his negligence was waived. This view has been illustrated with great power in New York (in Tebbetts v. Dowd), and is adopted in other cases,^ and is, upon the whole, as it seems, the best calcu- lated to effectually protect the interests of all parties. The order in which the burden of proof shifts, and is borne, may therefore be stated as follows : (i). Plaintiff must prove demand and notice. (2). By proving a promise to pay after maturity this "^xooi prima facie is supplied. (3). Defendant rebuts this proof by showing laches in respect to demand or notice. (4). Plaintiff makes sufficient rejoinder by showing that defendant had knowledge of laches when promise to pay was made. It has been held that even where the promise to pay was in writing, it is only pri7na facie evidence, and open to re- buttal^ § II 5 8. E^iglish autJiorities. — In England, there is no doubt that acknowledgment of liability or a promise to pay by the drawer or indorser after maturity is sufficient evidence of due demand, protest, and notice. Thus, where the drawer said when demand was made that he would be glad to pay as soon as his accounts with his agents were cleared, Lord Ellenborough said : " By the promise to pay he admits his liability ; he admits the existence of every- thing which is necessary to render him liable. When called upon for payment of the bill he ought to have ob- ' Tebbetts v. Dowd, 23 Wend., 379 ; Loose v. Loose, 36 Penn. St., 588 ; Nash V. Harrington, i Aik., 39; Bruce v. Lytle, 13 Barb., 163 ; Dorsey v. Watson, 14 Mo., 59 ; Thomson on Bills (Wilson's ed.), 383, 384. ■" Commercial Bank v. Clark, 28 Vt., 325. § 1 158. PROMISE TO PAY AS EVIDE^XE OF DILIGEXCE. I97 jected that there was no protest. I must therefore presume that he had due notice, and that a protest was regularly drawn up by a notary." ^ And demand, protest, or notice have been presumed where the indorser promised a subse- quent indorser to pay;* where the indorser said " he had not regular notice, but as the debt was justly due he would pay it"; ^ where the drawer and indorser wrote a letter promising a payment ; * where the drawer entered into an agreement to pay the bill by instalments.^ And it has been held that an offer on the part of an indorser to com- promise by paying one-half of a bill of exchange, or secur- ing the payment of it, dispensed with proof of notice, there being no evidence on the subject of notice.^ But this seems to go too far, and is dissented from by high au- thority ; ' and an offer to pay costs and the residue on time has been held insufficient to dispense with proof of notice, Lord Denman, C. J., saying: "The defendant might, if time had been given him, have been willing to have waived any objection with respect to the notice of dishonor." ^ But the English decisions are not at all clear or reconcil- able. In one case, where the drawer had written a letter promising to see the bill arranged, and had also promised to give a judgment for the amount, but swore that he knew nothing of the dishonor until a fortnight after maturity, the judge told the jury that they must arrive at the conclu- sion that notice was given the day of maturity, but if they believed the defendant they must find for him. A verdict for the plaintiff was sustained.® In another case a verdict 'Gibbon v. Coggen, 2 Camp., 188 ; Taylor v. Jones, 2 Camp., 105 ; Stevens v. Lynch, 2 Camp., 332; 12 East., 38; Hopes v. Alder, 6 East., 16; Croxen v. Worthen, 5 M. & W., 5. ' Potter V. Rayworth, 13 East., 417. 'Lundie v. Robertson, 7 East., 231. * Wood V. Brown, i Stark., 217 ; Campbell v. Webster, 2 C. B., 258. ' Gunson v. Metz, i Barn. & Cres., 193. •Dixon V. Elliott, 5 Car. & P., 437; see Edwards on Bills, 652, 653, note; Metcalf V. Richardson, 73 E. C. L. R., 1070. 'Phillips on Evidence, vol. 2, p. 24; Chitty, Jr., on Bills, 1619, note a. * Standage v. Creighton, 5 Car. & P., 406. •Jones v. O'Brien, 26 E. L. & Eq., 283., T98 WAIVERS BY PROMISES TO PAY. § II 59, for the defendant was directed, although he had used lan- guage which the court thought equivalent to a promise to pay.' But where it appears that there were laches in respect to demand, protest, or notice, and that the drawer or indorser could not from his situation have known the fact, or was really ignorant of it, the holder can not recover.^ Thus, where the day after a bill was dishonored in London, and before the fact of its dishonor could be known in York- shire, the drawer's clerk called in Yorkshire upon the in- dorser prior to the holder, and a conversation took place as to the bill being likely to come back, and the clerk said : " I suppose there will be no alternative but my taking up the bill, and if you will bring it to Sheffield on Tuesday I will pay the money"; and the indorser did not receive either the bill or notice until some days after the Tuesday, and notice of dishonor was not given to the drawer in due time : it was held that such promise was not sufficient to dispense with due notice of dishonor to the drawer,^ § 1 1 59. Circumstances ope^^ating as presumptive evi- dence of de?na7id and notice. — There are other circum- stances which operate as presumptive evidence of due demand, protest, and notice. Thus a written admission of notice would waive the necessity of proof, but it might be explained away by showing that it was made under mistake, and that the holder was duly warned not to rely on it.* So an agreement by the indorser with the maker to take back the note and return the prop- erty for which it was given, is evidence from which a jury might infer demand and notice ; and it would also oper- ate as a waiver if there were laches.^ So the insertion ' Chapman v. Annett, i Car. & K., 552. -Blesard v. Hirst, 5 Burr., 2670; Pickin v. Graham, i Cromp. & Mees., 725; Stevens v. Lynch, 2 Camp., 332; Chitty on Bills (13 Am. ed.) [^504], 570. ^ Pickin V. Graham, supra. See Yeager v. Falwell, 13 Wall., 12. * Commercial Bank of Albany v. Clark, 28 Vt., 325. * Andrews v. Boyd, 3 Mete, 434. § Il6r. PROMISE TO PAY AS EVIDENCE OF DILIGENCE. 199 of a bill in a schedule of liabilities by an insolvent/ or the recognition by an indorscr of an account with a request that the bill be charged separately,*^ would afford presump- tive evidence of demand and notice. § 1 160. The courts have gone so far in admitting circum- stances to go to the jury as evidence of demand and no- tice, that Professor Parsons very justly observes:^ " Some of the cases have almost gone so far that the only safe course for an indorscr or drawer, when payment is demand- ed of him, would be expressly to deny both presentment and notice. Thus, for instance, a verdict against the drawer of a bill was sustained where the only evidence of notice was, that the defendant, two days after maturity, sent a person to the plaintiff to say that he had been defrauded of the bill, and should defend any action upon it."'* So, objecting to payment upon any other grounds than laches in respect to presentment and notice;^ and so failure to produce a letter containing, as alleged, notice of dishonor, and the production of which was called for.^ So an answer by the drawer on being informed of non-payment by the acceptor that he would see the acceptor about it.' § 1 161. Ignorance of material facts affectifig pro7nise. — In Massachusetts, it has been held that if the indorscr promises to pay, without knowledge of material facts affecting his liability, as, for instance, that an agreement had been made by the holder by which he was discharged, he will not be bound, although he knew of the laches re- specting demand and notice.^ This view depends upon the principles which regulate the liabilities of all sureties, and ' Hyde v. Stone, 20 How., 170; see contra, Jones v. Savage, 6 Wend., 658. " Bank U. S. v. Lyman, 20 Vt., 666. ' i Parsons N. & B., 616. * Wilkins v. Jadis, i Moody & R., 41. ' Curlewis v. Corfield, I Q. B., 814; i Gale & D., 4S9. ' Roberts v. Bradshavv, i Stark., 28. * Metcalfe v. Richardson, 73 E. C. L. R., loio; Edwards on Bills, 652, 653. * Low V. Howard, 10 Cush., 159. See Arnold v. Dresser, 8 Allen, 435, and ante, § 1 149 and note. 200 WAIVERS BY PROMISES TO PAY. § II 62. is sustainable without reference to the peculiar doctrines respecting demand and notice. And it concurs with the English doctrine on the subject.^ SECTION IV. WHAT AMOUNTS TO AN ACKNOWLEDGMENT OR PROMISE TO PAY. § II 62. The burden of proof is upon the plaintiff to show clearly and distinctly the acknowledgment of liability and promise to pay the bill or note.^ But it matters not what particular phrase may be used, so that it amounts to such acknowledgment or promise. Where the indorser of a note said to the plaintiff's agent, who called on him and inquired what he was going to do, "that in a few days he would see the agent and arrange it," the United States Su- preme Court said : " This was an unconditional promise to pay the note, which no one could misunderstand, and which he could not repudiate at any subsequent period." ^ So where the drawer said he would see the bill paid;* and where the drawer said, on being informed of the dis- honor of the bill, "it must be paid";^ but where an in- dorser, on being asked what would be done with the note, replied that " it will be paid," it was thought that " from the general tenor of his conversation, it could not be in- ferred that it was his intention, knowing of his discharge, to waive his defence, and promise to pay the note, or see it paid at all events," and that it might have been " a mere assertion of his expectation that it would be paid by the promisor." ^ So it was considered sufficient where the drawer prom- • Stevens v. Lynch, 12 East., 38 ; 2 Camp., 332 ; see Story on Bills, § 320. ^ Creamer v. Perry, 17 Pick., 332. ' Sigerson v. Mathews, 20 How., 496, * Hopes V. Alder, 6 East., 16. ' Rogers v. Stephens, 2 T. R., 713. '• Creamer v. Perry, 17 Pick., 332. §1163. WHAT AMOUNTS TO AN ACKNOWLEDGMENT. 201 ised to pay when it was in his power ; ^ and where the n> dorser said he would pay as soon as he could, but he doubted when that would be;^ so a promise to pay in a few days with a request for delay ;^ a promise to arrange with the drawee so that the draft should be paid ; ^ a promise to pay if the note could not be collected of the maker by suit ',^ an acknowledgment by the drawer, with a promise to send funds with which to take up the bill ;^ a promise by the indorser that he would set the matter to rights, when he returned ;'^ a promise to pay in a few months ;^ or by in- stalments on short time.^ § 1 163. There imist be an absolute promise to operate a waiver of laches. — If the remark of the party do not amount to a promise, or is a conditional promise unaccepted, it will not suffice as a waiver of absence of due demand or notice. Thus, where the indorser said, on being arrested, it was true the note had his name on it, but he had security, though he wished for time to pay it, it was held insufficient. So where he said he would rather pay the note than be sued ; ^" or, if I am bound to pay it, I will ; " or that he would see what he could do, and endeavor to provide effects ; ^'•^ or where the indorser remarked to a third party, talking gen- erally, that he would take care of the bill, or see it paid ; ^^ so a reply that the indorser knew of no defence is not a promise ; ^^ nor is any equivocal answer. ^'^ " The promise must be unequivocal, and amount to an admission of the risfht of the holder ; or the act done must ' Donaldson v. Means, 4 Dall., 109. ' Rogers v. Hackett, i Fost., 100. ' Hopkins v. Liswell, 12 Mass., 52. * Bryam v. Hunter, 36 Me., 207 ; see Moyer's Appeal, 87 Penn. St., 129. " Lane v. Stewart, 20 Me., 98. ' Read v. Wilkinson, 2 Wash. C. C, 514. ' Anson v. Bailey, Boll, N. P., 276. * Hart v. Long, i Rob. (La.), 83. ' Union Bank v. Grimshaw, 15 La., 321 ; Croxen v. Worthen, 5 M. & W., 5. '" Keyes v. Fenstermaker, 24 Cal., 329. " Dennis v. Morrice, 3 Esp., 158, '^ Prideaux v. Collier, 2 Stark., 57. " Miller v. Hackley, 5 Johns, 375. " Griffin v. Goff, 12 Johns, 423. " Borradaile v. Lowe, 4 Taunt., 93 ; Sherrod v. Rhodes, 5 Ala., 683. 202 WAIVERS BY PROMISES TO PAY. § 1 1 64. be of a nature clearly importing a like admission of the richt. If it be defective in either respect, or if it be a con- ditional offer of payment unaccepted, then, and in such a case, the holder has no right to insist upon it as a waiver. So if the promise be qualified, it must be received with its qualification, and can not be insisted upon as an absolute waiver."* If the promise is conditional, the acceptance of it must be proved in order to make it binding. And where it ap- peared that the indorser offered to give his own note, which was not accepted, it was held no waiver.* So an offer to pay part cash and give his note for the balance ;^ or to pro- cure a renewal ;* or to pay in depreciated bank bills,^ or in Confederate States currency.^ § 1 1 64. Circumstances cottpled with qiialzjied promises. — But qualified or conditional promises to pay, taken in con- nection with other circumstances, have been held presump- tive evidence that due demand was made and notice given."'' Edwards says ^ of such a promise : " As an admission, it is evidence for the jury like any other conversation ; if the liability of the drawer or indorser be conceded by him, the concession is quite as good evidence of demand and notice as a promise to pay ; for, as we have said, the promise to pay is deemed an admission of liability — an admission that the bill or note has been presented in time, and that due notice of non-payment has been given. And there is ' Story on Bills, § 321 ; Grain v. Colwell, 8 Johns, 384 ; Kennon v. McRea, 7 Port. (Ala.), 175 ; Ross v. Hurd, .71 N. Y., 14; Tardy v. Boyd, 26 Grat., 637, Christian, J. : " If the conduct or acts of the indorser be equivocal, or the lan- guage used be of a qualified or uncertain nature, the indorsee will not- be held responsible." " Sice V. Cunningham, i Cow., 397; Agan v. McManus, 11 Johns, 180. ' Barkalow v. Johnr.on, i Harr., 397 ; but see Dixon v. Elliott, 5 Car. & P., 437- * Laporte v, Landry, 17 Mart. (La.), 359. ^ Newberry v. Trowbridge, 13 Mich., 637. « Tardy v. Boyd, 26 Grat., 637. '' Dixon v. Elliott, 5 Car. & P., 437- * Edwards on Bills, 655. § I 165. WAIVER BY PART PAYMENT AFTER MATURITY. 203 no reason why the same admission may not be made by a negotiation for time, or by any other act or language that acknowledges the obligation to pay the note or bill." In Tennessee it is held that if the indorser knew he was dis- charged by want of notice, cither an admission of liability or promise to pay would bind him.^ SECTION V. WAIVER BY PART PAYMENT AFTER MATURITY. § 1 165. In the second place, the part payment of a bill or note after its maturity, by the drawer or indorser, is an acknowledgment of liability, and therefore alone and unexplained is presumptive evidence that the liability was duly fixed according to la\v.^ And if it be shown that such part payment was made with knowledge of laches of the holder in respect to demand, protest, or notice, it is settled that it constitutes a waiver of such laches, and binds the party making it absolutely.^ And it is held, in some cases, that a part payment is a distinct concession of liability, and that whenever the drawer acknowledges himself to be liable to payment, the necessity of proving demand and no- tice is dispensed with, because such acknowledgment carries with it internal evidence that the drawer knew that due diligence had been used by the holder, or even if it had not, that still the drawer confessed that he was under an obliga- tion to pay.^ But it has been held that part payment will ' Bogart V, McClurg, 11 Heisk., 614. * Vaug-hn v. Fuller, 2 Stra., 1246. Lee, C. J., said that part payment by the indorser made proof of demand upon the maker unnecessary. Holford v. Wil- son, I Taunt., 12, held that part payment warranted the jury in presuming that due notice had been given the drawer. Whitaker v, Morrison, i Fla., 25, held waiver of notice; Chitty on Bills [*5oo], 564, 565. ^ Sherer v. Easton Bank, 33 Penn. St., 134; Williams v. Robinson, 13 La., 419 ; Harvey v. Troupe, 23 Miss., 538, ^ Levy V. Peters, pSerg. & R., 125, Tilghman, C. J. ; Curtiss v. Martin, 20 111., 557 ; Bank U. S. v. Lyman, 20 Vt., 666 ; Read v. Wilkinson, 2 Wash. C. C, 514; Bibb v. Peyton, 12 Sm. & M., 575 ; Lane v. Steward, 20 Me., 98; see Whitaker v. Morrison, i Fla., 25 ; i Parsons N. & B., 608, 609 ; see Story on Bills, § 320. 204 WAIVERS BY PROMISES TO PAY. § 1X66. not operate as a waiver unless the indorser knew of the in- sufficiency of the demand or notice.^ § 1166. It seems to us that part payment after maturity stands upon precisely the same footing as a promise to pay. It is simply the executed act, while the promise is executory. Therefore it is /r2;;2«/«^z> evidence that the party was duly charged by demand and notice. If he shows that he was not so charged, it is still prima facie evidence that he knew of the holder's laches. But when he shows in rebuttal that he paid the part supposing there was no laches, and that in fact there was, it becomes unavailing, being paid under a mistake of fact, and may be recovered back, negligence not impairing the right of recovery.^ § 1 1 67. An offer to pay a part of the bill or note, without any objection made as to demand and notice, has been held sufficient to dispense with proof of demand and notice ; ^ but it has been held otherwise where the drawer, on being arrested, offered as a compromise to give his bill at two months,* and where the plaintiff's attorney offered to pay a part cash and secure the residue ;^ and such offers when re- fused seem to signify nothing but tenders of compromise, and not to be alone either acknowledgments of due demand and notice, or waivers of laches. § 1 1 68. Where the promise is only as to part of the sum, it is only a waiver pro tanto. Thus where the drawer of a bill for ^200, who had not received notice, said : " I do • Newberry v. Trowbridge, 13 Mich., 264. => See as to negligence not affecting the right to recover money paid under mistake, National Bank of Commerce v. National M. B. Ass'n, 55 N. Y., 211 ; Lawrence v. American Nat'l Bank, 54 N. Y., 435 ; post, § 1220. ' Dixon V. Elliott, 5 Car. & P., 437 ; Margetson v. Aitken, 3 Car. & P., 388 ; Harvey v. Troupe, 23 Miss., 538 ; Smith, C. J., said : " A promise to pay gener- ally, or a promise to pay a part, or a part payment made, with a full knowledge that he has been released from liability on the bill by the neglect of the holder, will operate as a waiver, and bind the party who makes it for the payment of the whole bill." * Cuming v. French, 2 Camp., 106. ^ Standage v. Creighton, 5 Car. & P., 406. § 1 1 68. WAIVER BY PART PAYMENT AFTER MATURITY. 20$ not mean to insist on want of notice, but I am only bound to pay you £70," Abbott, C. J., said : " The defendant does not say that he will pay the bill, but that he is only bound to pay ■£70. I think the plaintiff must be satisfied with the:^7o."^ If the part payment were made by the indorser as agent of the maker, or were otherwise explained, it would not operate as a waiver. ^ Story considers that part payment is ordinarily a sufficient excuse for the omission of notice, be- cause it evinces that the party so paying could not have sued on the note on payment thereof, and is in fact the true party for whose benefit the note was made.^ » Fletcher v. Froggatt, 2 Car. & P., 569 (12 E. C. L. R.) * Whitaker v. Morrison, i Fla., 25. * Story on Notes, § 359. CHAPTER XXXVI. CIRCUMSTANCES WHICH WILL NOT EXCUSE FAILURE TO MAKE PRESENTMENT OR PROTEST, OR GIVE NOTICE. § 1 1 69. Circumstances not infrequently arise under which the making presentment of the bill or note, or giving no- tice of its dishonor, would seem to be a useless formality, or a peculiarly onerous task, and which on these accounts have been often urged as excuses for failure to make such presentment, or give such notice ; but they are of a charac- ter which the law does not recognize as sufficient to exon- erate the holder from taking the usual steps in order to charge an indorser. They may be classified as follows : (ij The want of injury to the party. (2) The bankruptcy or insolvency of the acceptor or maker. (3) The loss or mislaying of the bill or note. (4) The appointment of drawer or indorser as executor or administrator. (5) The transfer of the bill or note as collateral security. (6) The death of the maker or acceptor. (7) The misdating of a bill or note by a foreign resi- dent. SECTION I. THE WANT OF INJURY TO THE PARTY. § 1 1 70. In \}i\Q first place, the want of prejudice or injury to the drawer or indorser is never a sufficient excuse for de- fault in making presentment or protest, or giving notice of (206) § I 170. WANT OF INJURY TO THE PARTY. 207 dishonor.* In some of the early cases, and indeed in some modern cases, and treatises also, the holder is said to be ex- cused for his failure in making presentment and giving no- tice, when there are no funds in the drawee's hands, on the ground that there could be no prejudice or injury to the drawer or indorser,^ and at one time the question of injury seems to have been the criterion whether or not present- ment or notice was excused.^ The reports exhibit frequent expressions of regret that the strict rule requiring present- ment and notice has been even so far relaxed as to admit the exception arising from the want of funds ; ■* and it is now perfectly well settled that the question of injury does not enter at all into the consideration. The law requires presentment and notice as conditions precedent to the fixed liability of the drawer and indorser, not merely as an in- demnity against actual injury, but as security against a pos- sible injury, which might result from the holder's laches.""^ It is true, that when the drawer has no funds in the drawee's hands, he can, as a general rule, suffer no injury from want of presentment or notice ; but drawing in such a case would be a fraud, and it is for that reason, rather than the absence of actual injury, that presentment and no- ' Chitty on Bills (13 Am. ed.) [*439, 436], 490; i Parsons N.& B., 551, 630 ; Foster v. Parker, Law R„ 2 C. P. Div., 19 (1876), Lindley, J.: " He (the indorser) would be damnified in tlie legal sense if he had a remedy over against any of them (prior parties), and was not bound, as between himself and them, to meet the bill." ^ Cory V. Scott, 3 B. & Aid., 519 ; Mechanics' Bank v. Griswold, 7 Wend., 165 ; Commercial Bank v. Hughes, 17 Wend., 94; Edwards on Bills, 446, 636; Story on Bills, § 280. ^ Meggadow v. Holt, 12 Mod., 15 (1691) ; Mogadara v. Holt, i Show., 317; Chitty, Jr., on Bills, 57, 182. * Ex parte Heath, 2 Ves. & B., 240 ; Clegg v. Cotton, 3 Bos. & P., 239 ; Carter V. Flower, 16 M. & VV., 743. ^ Hill V. Martin, 12 Mart. (La.), 177, Porter, J., said : " The plaintiff read from Chitty, p. 151, to show that when the indorser was not injured by want of notice the laches to give it was cured. The rule is stated in a note to the edition of 1809, but it is not law." Foster v. Parker, 2 C. P. Div., 18 ; 19 Moak's E. R., 293, Denman, J. ; French v. Bank of Columbia, 4 Cranch, 141, Marshall, C. J. ; May V. Cotiin, 4 Mass., 341 ; Nash v. Harrington, 2 Aitkens, 9 ; Hill v. Heap, Dow. & R., 15; Bickerdike v. BoUman, i T. R., 405 ; Edwards on Bills, 636; Story on Bills, § 306. 208 WHAT WILL NOT EXCUSE FAILURE TO PRESENT. § II 7 1. tice are excused.* Where it was endeavored to show ex- cuse for want of notice by showing want of injury, Lord Kenyon said : " I can not hold the law to be so. The only case in which notice is dispensed with, is where there are effects of the drawer in the drawee's hands. This would be extending the rule still further than ever has been done, and opening new sources of litigation, in investigating whether in fact the drawer did receive a prejudice from the want of notice or not.^ SECTION II. THE BANKRUPTCY OR INSOLVENCY OF THE ACCEPTOR OR MAKER. § 1 171. In the second place, the bankruptcy and insolv- ency of the drawee of a bill, however well known, consti- tute no excuse for neglect to make due presentment there- of for acceptance,^ or to give due notice of its dishonor * to the drawer and indorsers if it is not accepted. And the same rule applies as to the necessity of presentment for payment to the acceptor of a bill or maker of anote,^ and as to notice of its dishonor by non-payment.® This doctrine rests upon the twofold ground that it is a part of the contract of drawer and indorser that the bill or note should be pre- sented for acceptance or payment, as the case may be, and due notice given if it be dishonored ; and further, that it can not be definitely settled without a presentment that the instrument will be dishonored, as through friends or re- sources unknown to others, the principal party may derive the means for payment. * An/e, chapter xxxi, sec. i. * Dennis v. Morris, 3 Esp., 158. 'Chitty on Bills (13 Am. ed.) [*33o], 369. * Chitty (13 Am. ed.) [*33o], 369. "Chitty [*354]. 396; Story on Notes, § 286; Story on Bills, §§ 318, 326, 346 I Parsons N. &; B., 446. ^ Story on Notes, § 367 ; i Parsons N. & B., 528. §1172. BANKRUPTCY OF ACCEPTOR OR MAKER. 2O9 § 1 1 72. The English and American cases are now uni- form on this subject/ and it was long ago said : " It sounds harsh that a known bankruptcy should not be equivalent to a demand or notice, but the rule is too strong to be dis- pensed with," ^ though at one time a different view ob- tained.^ The same rule applies where the insolvency arises be- tween drawing or indorsing and maturity ;■* and where the insolvency is known to the party at the very time when he signs his name,^ expectation or knowledge of the drawer or ' Nicholson v. Gouthit, 2 H. Bl., 609; Bowes v. Howe, 5 Taunt., 30 ; Warring- ton V. Furbor, 8 East., 242 ; Esdaile v. Sowerby, 1 1 East., 1 14 ; Thackeray v. Blackett, 3 Camp., 164; Smith v. Becket, 13 East., 187 ; Cory v. Scott, 3 B. & Aid., 619; Leach v, Hewitt, 4 Taunt., 731 ; Free v. Hawkins, 8 Taunt., 92; Russell V. Langstaffe, Doug, 496; Armstrong v. Thurston, 11 Md., 14S ; May V. Coffin, 4 Mass., 341 ; Clair v. Barr, 2 Marsh, 255 ; Benedict v. Caffee, 5 Duer, 226 ; Watkins v. Crouch, 5 Leigh, 522 ; Hunt v. Wadleigh, 26 Me., 271 ; Barton V. Baker, i S. & R., 334 ; Hightower v. Ivy, 2 Port. (Ala.), 308 ; Denny v. Palmer. 5 Ired., 610 ; Nash v. Harrington, 2 Aik., 9. The maker was insolvent and in prison. See Chitty on Bills [*438] ; Bank of Seaford v. Connowav, 4 Houston, 206. But cofttra. Bogy v. Keil, i Mo., 743; Strothart v. Parker, i Overton. 260. ^Nicholson v. Gouthit, 2 H. BL, 609 ; Chitty [*449]. ' De Berdt v. Atkinson, 2 H. Bl., 336. In Jackson v. Richards, 2 Caines, 343, Kent C. J., said : " Within two years subsequent to the decision (in De Berdt V. Atkinson) the same court decided directly the contrary in the case of Nichol- son V. Gouthit. I think the reasoning in the last decision the best, and ought to be followed." ^Crossen v. Hutchinson, 9 Mass., 205. ' In Brown v. Ferguson, 4 Leigh, 53, it was said by Tucker, P. : " It has been long since settled that notice, or rather knowledge, by anticipation will not dis- pense with the necessity of notice of non-payment. Even the known insolvency of the drawee will not have that effect ; for as many means of securing payment may exist through the assistance of friends, or otherwise, it is reasonable that the drawer or indorsers shall have notice that the holder designs to look to them, in order that they may have the opportunity of availmg themselves of such means. Knowledge of the fact of insolvency, or that a bill will be dishonored, is one thing, and notice of protest for non-payment is another. For, until the drawer or indorser receives such notice, he has no reason to conclude that resort will be had to him. He is lulled into security, instead of being awakened to the necessity of providing for his own indemnity." In the same case (4 Leigh, 49), Carr, J., said : " Upon the reason and justice of the case, I at first felt doubts whether the drawer was entitled to strict commercial notice. There is no doubt that he was authorized to draw the bill, for the jury find that the drawees owed him the sum for which it was drawn. This, under the general rule, would en- tiUe the drawer to notice. But it is also found that, before the bill was presented for acceptance, the drawees having been advised of it, wrote a letter to the drawer on the subject, in answer to which letter he (the drawer) writes : ' I am sorry you will be unable to retire the draft. When the draft is nearly due, you can draw on me at sixty days, to enable you to take it up.' It is found also that when the time for paying the bill drew near, the drawees did draw on Ferguson Vol. II.— 14 2IO WHAT WILL NOT EXCUSE FAILURE TO PRESENT. § I 173. indorser that the bill or note will not be paid are not ex- cuses, for knowledge is not notice.^ The bankruptcy and insolvency of the drawer or indorser is no excuse for want of notice to him ; it should be given to his assignee.^ SECTION III. THE LOSS OR MISLAYING OF THE BILL OR NOTE. § 1 1 73. In the third place. — The loss or mislaying or destruction of a bill or note payable on a day certain, so that, at its maturity, the holder is not able to deliver it up to the acceptor or maker, upon its being paid, is, as a gen- eral rule, no excuse for want of a demand of payment of ac- ceptor or maker, or of due notice to drawer or indorser.^ Due demand should be made, accompanied by a tender of (the drawer) for the purpose of meeting it ; that this bill was sold on condition that Ferguson should accept it, and was sent on and presented to him and dis- honored by him. These facts seemed to me to show clearly that Ferguson (the drawer) had, if not a perfect knowledge, the strongest grounds to conclude that Foster and Moore (the drawees) would not pay the bill he had drawn on them, and therefore was not entitled to strict notice. An examination of the subject, however, has satisfied me that my first impressions are in opposition to the fixed and settled law of the subject. Nicholson v. Gouthit, 2 H. Bl., 609, is the lead- ing case on the point, which has been since uniformly followed. In Esdaile v. Sowerby, 11 East., 117, the indorser of a bill had full knowledge of the bank- ruptcy of the drawer, and the insolvency of the acceptor, before and at the time when the bill became due ; yet the court held that this did not dispense with the necessity of giving such indorser regular notice of the dishonor of the bill. The case of Staples v. O'Kines, i Esp. R., 332, seems directly in point to the present case. In an action against the drawer of a bill, the defence was want of notice ; the plaintiff called the acceptor, who proved that, when the bill was drawn, he was indebted to the defendant in more than the amount, but that he then repre- sented to the defendant that it would not be in his power to provide for the bill when it should become due, and that it was, therefore, then understood between them that the drawer should provide for it ; and it was contended that this superseded the necessity of giving the drawer notice, but Lord Kenyon held that it did not, and nonsuited the plaintiff. There are many more cases to the same point. The authority of these adjudications, and the reason on which they are founded, satisfy me that the drawer, in the case before us, was entitled to regular notice of the non-payment of the bill." Farnum v, Fowle, 12 Mass., 89; Sandford v, Dillaway, 10 Mass., 52 ; AUwood v. Hasledon, 2 Bail., 457. ' Cases ante, p 202, note 5. ^ Ex parte Johnson, i Mont. & A., 622, ' Story on Notes, 290 ; Story on Bills, § 348. § 1 1 74- LOSS OR MISLAYING OF BILL OR NOTE. 211 indemnity to maker or acceptor, and then should he refuse, due protest should be made (where requisite) and due notice given. But the acceptor or maker is not bound under such circumstances to pay the amount due by the bill or note, if lost or mislaid, although he may at his elec- tion do so ; for he is entitled in all cases to have the bill or note delivered up to him as a voucher upon payment thereof.^ The proper remedy for the holder in case of a refusal to pay is in equity.^ If the instrument be destroyed, however, he may recover at law, and there are some other exceptional circumstances under which he may do so, else- where considered.^ In respect to a bill drawn at sight, and which must be presented within a reasonable time, the loss thereof will excuse a reasonable delay ; * and if, upon its loss, a second one be given by the drawer, necessary delay in presenting that will be excused.^ But where the word " duplicate " was written on the second draft, it was deemed, in view of extrinsic facts, to import that it was made as a substitute for, and to take the place of, the original ; and the defend- ant having been discharged from liability upon the original, by laches as to presentment, the plaintiff could not recover on the duplicate.^ § 1 1 74. St©ry, upon the authority of Pothier, lays down the doctrine, that if the holder has lost or misplaced the bill before acceptance, he should still apply for acceptance thereof, and upon refusal protest the bill.''' We know of no other authority for this doctrine. ' See chapter XLVI, on Lost Bills and Notes, and chapter xxxvill, on Pay- ment ; Thomson on Bills, 204 ; Story on Bills, § 348 ; Edwards, 508 ; Lane v. Bank of West Tenn., 435. ' See chapter XLVi, on Lost Bills and Notes. 'See chapter XLVI, on Lost Bills and Notes. * Abom V. Bosworth, I R. L, 403. 'Benton v. Martin, 31 N. Y. (4 Tiff.). 3S2 (1865). "Benton v. Martin, i Hand (N. Y.), 346 (1869) ; 51 N. Y. (7 Sickles), 572 0873)- ' Story on Bills, § 279 ; Pothier de Change, n. 145. 212 WHAT WILL NOT EXCUSE FAILURE TO PRESENT. <^ 1 175- SECTION IV. THE APPOINTMENT OF DRAWER OR INDORSER AS EXECUTOR OR ADMINISTRATOR OF MAKER OR ACCEPTOR. § II 75. In the fourth place, it is well settled that the appointment of the drawer or indorser as executor or ad- ministrator of the maker or acceptor does not excuse the holder from making a demand upon him as personal repre- sentative/ or from giving him notice that he is looked to personally for payment* Demand is indispensable in order to fix the liability of drawer or indorser ; and then, it is said, notice to the indorser is necessary in order that he may be informed that the holder does not mean to resort solely to the estate of which he is personal representative, but to him also in his individual character as indorser ; and that, if he received no notice, he would have a right to conclude that the holder intended to look to the estate only.^ But when demand for payment is made to the rep- resentative of the maker or acceptor, who is also his in- dorser, such person would be bound to make the payment primarily for his principal ; and it might be reasonably in- ferred that in the event of his refusal to do so in that char- acter, the Hke demand applied to him in his individual character. And it would seem to be superfluous to add to it a new and formal notification that he is looked to as in- dorser for payment."* Indeed, knowledge of dishonor ob- tained by communication from the holder amounts to notice, though knowledge derived from a stranger does not ; ^ and it has been held in England, that where a de- mand was made at the house of the acceptor, and it was ' Magruder v. Union Bank, 3 Pet., 87 ; 7 Pet., 287 ; Juniata Bank v. Hale, 16 S. & R., 157 ; Carolina N. B. v. Wallace, 13 S. C, 347 ; Story on Bills, § 376. " Ibid. ' Juniata Bank v. Hale, 16 S. & R., 157. * I Parsons N. & B., 526. * Miers v. Brown, 11 Mees. & W., 372; Tindal v. Brown, i T. R., 167. §1176. APPOINTMENT OF DRAWER AS EXECUTOR. 213 answered by the drawer that the acceptor was dead, and that he was his executor, and requesting that the bill might be allowed to stand over for a few days, and he would see it paid — that this was sufficient notice of dishonor.^ It has been observed that the case cited " does not decide that where the party sought to be charged has become executor of the payor, notice is dispensed with, but that the circum- stance in that particular case constituted notice."^ But it seems to have been considered by the court that informa- tion of dishonor derived in such a manner from the holder necessarily constituted notice. If the maker die, leaving his estate insolvent, neither demand ^ nor notice * will be excused. SECTION V. THE TRANSFER OF THE BILL OR NOTE AS COLLATERAL SECURITY. § 1 176. In \hQ fifth place, if the bill or note has been transferred to the holder by mere delivery without indorse- ment, as collateral security, the transferrer 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 preju- dice by such non-presentment.° And to the same extent ' Caunt V. Thompson, 7 Com. B., 400. Creswell, J., after quoting cases cited in preceding note, says : " In substance, these cases seem to establish, that in order to hold a prior holder responsible, he must derive from some person enti- tled to call for payment information that the bill has been dishonored, and that the party is in condition to sue him ; from which he may infer that he will be held responsible." " Redfield & Bigelow's Leading Cases, 428. ' Gower v. Moore, 25 Me., 16 ; Johnson v. Haith, I Bailey, 482. * Lawrence v. Langley, 14 N. H., 70, ' Van Wart v. Woolley, 3 B. & Cres., 439 ; Swinyard v. Bowes, 5 M & S., 62 ; Story on Notes, § 284 ; Story on Bills, § 372. 214 WHAT WILL NOT EXCUSE FAILURE TO PRESENT. ^ 1177- only can he claim exoneration by failure to give him due notice.^ This circumstance of transfer without indorsement as col- lateral security is generally enumerated amongst the cases in which presentment and notice are dispensed with or ex- cused ; but really it is simply a case in which the transferrer does not come at all within the rule entitling him to notice.^ It is true that Mr. Chitty has several times in his treatise declared that a transferrer by delivery of a note or bill payable to bearer, is ordinarily entitled to regular notice as a party to the bill ;^ but this is incorrect. Declining to in- dorse, he declines to become a party to the bill, and the only liability which he incurs is for the consideration given, which, if the instrument be forged or illegal (and in Eng- land if it be worthless by reason of insolvency of the parties), may be r«ceived back.'' He is in no sense a party, and not entitled to strict demand and notice.^ SECTION VI. THE DEATH OF THE MAKER OR ACCEPTOR. § II 7 7. In the sixth place. — The death of the maker of a note, or acceptor of a bill, is no excuse for want of pre- sentment for payment. In such a case, the holder should make presentment to executor or administrator of the de- ceased, if one has been appointed, and his whereabouts can be ascertained ; ^ or if there be no personal representative, ' Ibid. ' Story on Bills, § 372. » Chitty on Bills (13 Am. ed.) [*443. 479]- * See atite, §§ 732 et seq., vol. i. ' I Parsons N. & B., 503 ; Story on Bills, § 372. « Story on Notes, § 241 : Chitty on Bills [*356], 399; Story on Bills, § 318 ; White V. Stoddard, 11 Gray, 528; Landry v. Stansbury, 10 La., 484; Frayzer v. Dameron, 6 Mo. Ap., 153 ; see chapter XX, on Presentment for Payment, § 591, vol. I, and chapter xvil, on Presentment for Acceptance, § 458, vol. I. §1178. DEATH OF THE MAKER OR ACCEPTOR. 215 the presentment should be made at the house of the de- ceased/ unless, indeed, the instrument be payable at a par- ticular place, in which case presentment there is always sufficient.* Nor is this circumstance an excuse for want of notice to drawer and indorser.^ It may be all the more needful, and should be immediately given. It has been held, however, that the indorser who knew of the maker's death when he indorsed is not entitled to notice ; * but this distinction rests on no sound principle. In like manner, the death of the drawer or indorser is no excuse for want of notice, which should be given to his personal representative.^ § 1 1 78. Effect of drawees death before presentme7it for acceptance. — When the drawee dies before the bill is pre- sented for acceptance, it is generally stated that it will not operate as an excuse for non-presentment for acceptance.' But this may be doubted. The acceptance of the personal representative, to whom it is said the bill should be pre- sented for acceptance, would not be according to the tenor of the bill, whether he bound himself personally, or bound himself to pay out of the decedent's assets ; and as the holder would not be bound (as we think) to take such an acceptance, there is no reason why he should be required to present the bill for such acceptance.''' There is an obvious difference between this, and the presentment to the per- sonal representative for payment. He may have assets, and be ready to pay, and it is due to drawer and indorsers to afford him the opportunity.^ ' Juniata Bank v. Hale, 16 Serg. & R., 157 ; Magruder v. Bank of Georgetown, 3 Pet., 87 ; Story on Notes, § 241 ; Chitty [*356], 398 ; Story on Bills, § 346. ' Chitty P356-7], 399 ; Story on Notes, § 253. ' I Parsons N. & B., 525 ; Edwards, 454, See ante, % 1000 et seq. ; 2 Ames B. & N., 510 ; Lane v. Bank, 9 Heisk., 219. * Davis V. Francisco, 1 1 Mo., 572 ; Edwards on Bills, 489. ' See chapter xxix, on Notice, sec. iv ; Oriental Bank v. Blake, 22 Pick., 206. ' Stor}' on Bills, § 230. ^ See chapter xvil, on Presentment for Acceptance, § 458, vol. I. See also Smith V. Bank, L. R., 4 P. C, 194 ; 2 Ames B. & N., 510. * Edwards on Bills, 454. 2 1 6 WHAT WILL NOT EXCUSE FAILURE TO PRESENT. § II 79- § 1 1 79- But even as to presentment for payment, the death of the maker or acceptor has been held to operate as an excuse. Thus where an executor or administrator is allowed by law a certain time within which to settle up the estate, and is not liable before its expiration, he will seldom hazard the payment of a debt before he has ascertained the condition of the estate, or pay the debt before he is obliged to do so ; and a demand upon him would doubtless be met with a refusal. " And therefore" (as said by Parker, C. J.) " such a demand would be merely a troublesome formality, without any use ; and notice to the indorser that, the promisor being dead, he will be looked to for payment, will in every respect be as advantageous to him as a previous demand upon the promisor."^ In England a different policy and a different rule exist.^ The fact that the indorser is the personal rep- resentative of the maker will not excuse non-presentment to him.^ SECTION VII. THE MISDATING OF A BILL OR NOTE BY A FOREIGN RESIDENT. § ii8o. In the seventh place. — When a foreign resident dates a bill or note in another State, where he executes and delivers it, and if he knew of such foreigner's residence at the time he received the note, or learned it within such period as afforded him time to present it, it would be his duty to do so.* Whether, indeed, the holder would be 'Hale V. Burr, 12 Mass., 86 ; see also Landry v. Stansbury, 10 La., 485 ; Ori- ental Bank v. Blake, 22 Pick., 206. ^ Hale V. Burr, supra. "Magruder v. Union Bank, 3 Pet., 87 ; 7 Id., 287. See ante, § 1175. * Taylor v. Snyder, 3 Den., 145 ; Burrows v. Hannegan, i McLean, 309 ; Bank of Orleans v. Whittemore, 12 Gray, 473, the court saying : " Where the maker of a note, when it is made and indorsed, has a known residence out of the State, which residence remains unchanged at the maturity of the note, demand must be made on him, or due diligence used for that purpose, and notice of non-pay- ment given to the indorser before the indorser can be charged. So it was § Il8o. THE MISDATING OF A BILL OR NOTE. 217 excused, even if misled by the date, is questionable. Cer- tainly the burden would be upon him to show that he was misled. In all cases the holder must exercise due diligence, and the only question is, what does due diligence require ? The holder may, as it seems, presume the party making the note to reside where he has dated it, and may proceed ac- cordingly to inquire for him at that place, and prepare to make presentment there at maturity. If, then, he learns for the first time that he resides elsewhere, his failure to present to him would be excused. Such, at least, seems to us the correct doctrine.^ But if note be dated at one place, and there be a memorandum of the maker's address under his name, or elsewhere upon the paper, due diligence would require inquiry at the place designated.^ There are author- ities which maintain the view that if the maker of a note resides and has his domicile in one State, and actually dates and makes and delivers a promissory note in another State, it will be sufficient for the holder to demand payment thereof at the place where it is dated, if the maker can not personally, upon reasonable inquiries, be found within the State, and has no known place of business there.^ decided by the Court of Appeals in New York, in Taylor v. Snyder, before re- ferred to, and in Spies v. Gilmore, i Comst., 321. In this last case, Bronson, J., said : ' The only excuse which has been offered for not making demand is, that it would have been inconvenient to go or send to Matamoras for the purpose. It is often inconvenient to present tlie note for payment when the maker and holder both reside in the same State ; and yet, when the maker has a known place of residence, and there has been no 'change of circumstances after the giving of the note, mere trouble or inconvenience to the holder has never been held a good excuse for omitting demand. And this is so, however wide asunder the maker and holder may live. If the plaintiff wished to avoid the inconveni- ence of sending to Matamoras, he should have made the note payable in New York, or got an indorsement with a waiver of demand. He has no right to change the contract which the indorser made, for the purpose of promoting his own convenience.' " i Parsons N. & B., 459, note c. » Smith V. Philbrick, 10 Gray, 252 ; Meyer v. Hibscher, 47 N. Y., 270; Stayler V.Williams, 24 Md., 199; Apperson v. Bynum, 5 Cold., 348; Moodie v. Morrall, 3 Const., 367. See especially chapter XX, on Presentment for Payment, §§ ^•j'- et seq., vol. i, and chapter xxix, on Notice of Dishonor, sec. vi, vol. 2. ' Nicholson v. Barnes, Nebraska, S. C. 9 N, W. Reporter, 652. 'Story on Notes, 1236 , Hepburn v. Toledano, 10 Mart. (La.), 643. BOOK V. ACTION ON NEGOTIABLE INSTRUMENTS ; AND DEFENCES, DISCHARGES, AND DAMAGES. CHAPTER XXXVII. ACTION OR SUIT UPON BILLS AND NOTES. SECTION I. GENERAL PRINCIPLES AS TO WHO MAY SUE. § 1181. It is not within the province of this volume to treat otherwise than incidentally of those questions which concern negotiable instruments in a collateral way, rather than being immediately associated with their negotiable qualities. Therefore this chapter will not enter into any minute discussion of the intricacies of pleading and practice involved in the prosecution of a suit upon a bill or note, but confine itself to a statement of the leading general principles of the most important character. § 1181^. Holder with legal title may sue. — Any holder of a bill or note who can trace a clear legal title to it, is en- titled to sue upon it in his own name, whether he possesses the beneficial interest in its contents or not.* If the note be payable to A. or B., it may be sued upon by them jointly or by either one of them.^ If there be a special in- dorsement, or assignment to a particular person, he is the proper person to sue ; and if he is in possession he may sue * Caldwell v. Lawrence, 84 111., 161, § 1 191. ' Westgate v. Healy, 4 R. I., 524. (2l8) § I I 82. GENERAL PRINCIPLES AS TO WHO MAY SUE. 2I9 although his name be indorsed on the paper after the special indorsement or assignment. For in such case his indorse- ment will be presumed to be a mere memorandum, or evi- dence that he had negotiated the paper and then taken it up.^ Agents,^ receivers, assignees,* trustees,^ or personal repre- sentatives^ may sue on a note or bill payable to bearer, or indorsed in blank. And the donee causa mortis of a note payable to the donor's order may use the name of his per- sonal representative, even against his protest.* But a mere depositary of such a note can not maintain suit.''' If the paper be indorsed specially to a particular person, none but such person or his representative can sue.^ A party for accommodation who pays the bill may sue prior parties, but not subsequent ones. If an acceptor or maker for ac- commodation pays the bill he can not sue drawer or in- dorser upon the bill, because, according to its terms, he is liable to them. But he may sue the accommodation party for money paid at his request.^ § II 82. In partnership cases. — If a bill or note be made payable to, or indorsed specially to a firm, all the partners must join in the suit ;^° and if so payable or indorsed to A. & Co., A. can not recover unless he shows that he alone composed the nominal firm." If one of the copartners of a firm should die, suit should be brought by the survivor or * Humphrey ville v. Culver, 73 111., 485. See §1198. " Law V. Parnell, 7 C. B. N. S., 282, §§ 1192, 1192a. ' Smith V. Kendal, i Esp., 231 ; 6 T. R., 123 ; Bowman v. Wood, 15 Mass., 534. * Haxtun v. Bishop, 3 Wend., 13. ' See ante, § 264, vol. I ; 2 Parsons N. & B., 446. ' Grover v. Grover, 24 Pick., 261 ; Sessions v, Moseley, 4 Cush., 87 ; Bates v. Kempton, 7 Gray, 382 ; Brown v. Brown, 18 Conn., 410. ' Sherwood v. Roys, 14 Pick., 172. ' See vol. I, § 692. ' Stark v. Alford, 49 Tex., 260 ; § 1206. '" Guidon v. Robson, 2 Camp., 302 ; Atwood v. Rattenbury, 6 J. B. Moore, 579- " Robb V. Bailey, 13 La. Ann., 457. 220 ACTION OR SUIT UPON BILLS AND NOTES. §1183 survivors ;^ but if the paper be indorsed in blank to a firm, either copartner may fill it up in his own name and sue,^ even though one of the copartners be dead.^ § 1 183. A copartner can not sue a firm of which he is a member, upon a bill or note payable by it to himself, be- cause he would be in fact suing himself ;■* but if a firm make its bill or note payable to the order of a copartner, and the latter indorse it, the indorsee may sue.^ Nor will an indorse- ment by one of a firm which is the payee of a note to an- other, enable the latter to sue thereon in his own name ; for anything less than indorsement of the partnership name is an irregularity and a departure from the legitimate mode of transfer in such cases.^ But if a note indorsed by two of three payees to the third payee and a stranger, be subse- quently indorsed by the third payee, the indorsee may sue in his own name."^ And a firm may indorse to one member who may sue.^ § 1183(2. Joint paj^ties not partners vcwxst all unite in the action if Hving. On the death of one of them the reme- dies for collection survive to those living, who may law- fully receive payment, and sue at law or in equity, as may be appropriate, without uniting the personal representative of the deceased joint party.^ § II 84. In cases of married womeii. — On a bill or note given to a single woman, who afterward marries, the hus- band must join her in the action.^" If she dies, the right of ■ Parsons on Partnership, 447. * Lovell v. Evertson, 1 1 Johns, 52. * Atwood V. Rattenbury, 6 J. B. Moore, 579. * Parsons on Partnership, 510, note. » Thayer v. Buffam, 11 Mete, 398 ; Davis v. Briggs, 39 Me., 304. " Estabrookv. Smith, 6 Gray, 570. ^ Goddard v. Lyman, 14 Pick., 268. * Manegold v. Dulan, 30 Wise, 541. ' Lannay v. Wilson, 30 Md., 536 ; Martin v. McReynoIds, 6 Mich., 70 ; Allen V. Tate, 58 Miss., 586. " Sherrington v. Yates, 12 M. & W., 855 ; overruling M'Neilage v. Holloway, I B. & Aid., 218. ^ I 1 85. GENERAL PRINCIPLES AS TO WHO MAY SUE. 221 action is in her personal representative, not in the husband.^ If the husband dies, the right of action is in her, and not in the husband's personal representative.- So the right of ac- tion survives to the wife, upon a note payable to husband and wife, when the husband dies, and does not pass to his representative.^ On a bill or note made payable to a married woman after marriage the husband may sue alone as payable to him,'* or he may join in an action with his wife.^ If paya- ble to the husband, or to his wife, in the alternative, he should sue.^ The wife can not sue her husband on a note made by him to her after marriage;'' nor on a joint and several note made to her by him and others;^ but in this case if he dies she may sue the others.^ § II 85. If the instrument be payable to " A. for the use of B.," ^° or " on account of B.," ^^ A. is the proper person to bring the suit. One who has paid a note to the payee, who indorsed it to him upon payment, may sue as indorsee against the maker, though he is a party to the note as guar- antor.^^ In some cases it is held that the plaintiff may sue in a fictitious name.^^ A deposit book issued by a savings bank is not negotia- ble, and the assignee of it can not sue the bank in his own name.^^ ' Hart V. Stevens, 6 Q. B., 637. ' Stanwood v. Stanwood, 17 Mass., 57 ; Dean v. Richmond, 5 Pick., 461. ' May V. Boisseau, 12 Leigh, 512 ; Perkins v. Clements, I Pat. & H., 151 ; Draper v. Jackson, 16 Mass., 480. • Burrough v. Moss, 10 B. & C, 558. ' Philliskirk v. Pluckwell, 2 Maule & S., 393. • Young V. Ward, 21 111., 223. ' Sweat v. Hall, 8 Vt., 187. • Richards v. Richards, 2 B. & Ad., 447. * Ibid. "* Barry Co. v. McGlothlin, 19 Mo., 397 ; Cramlington v, Evans, 2 Ventris, 307. " Nelson v. Wellington, 5 Bosworth, 178. " McGregory v. McGregory, 107 Mass., 543. " Epting V. Jones, 47 Ga., 622. See also Ogilby v. Wallace, 2 Hall, 553; Pearce v. Austin, 4 Whart., 489. '* Howard v, Windham Co. S. B,, 40 Vt., 597. 22 2 ACTION OR SUIT UPON BILLS AND NOTES. § II 86. § 1 1 86. Any person not originally a party, but who has paid the bill supra protest, may sue all parties not subse- quent to the party for whose honor he has paid ;* but a banker who pays the acceptance of a customer, payable at his house, but unprovided for, does not stand on the foot- ing of the party paying supra protest, and must sue for the consideration.^ § \\Z6a. Cause of actio7t indivisible. — It is a general principle of law that a party can not divide an ^ntire de- mand or cause of action, and maintain several suits for its recovery ; and a recovery for part of an entire demand will bar an action for the remainder, if due at the time that the first action was brought.^ What constitutes an entire or single demand is often difficult to determine. When a note payable at a future day carries interest payable an- nually or semi-annually, the holder may, before its maturity, recover the interest as it matures without barring an action as to the principal or unaccrued interest.* If the interest be due by a coupon or other separate security, it can be sued for as an independent cause of action.^ Whether when the principal of a note, and its interest (not payable by separate security), are both mature, separate actions may be maintained, for each is controverted, some cases holding that they are maintainable ; ^ others the opposite.' The better opinion sustains the right to the separate actions. ^ Chitty on Bills [*537], 609. ^ Holroyd v. Whitehead, 5 Taunt., 444 ; 3 Camp., 530. ' Nickerson v. Rockwell, 90 111., 460. * Walker v. Kimble, 22 111., 537 ; Goodman v. Goodman, 65 111., 497. * See §§ 1509, 1 5 10, et seq. * Dulaney v. Payne, s. c. 111., Jan'y, 1882; Albany L. J., April I, 1882; Andover S. B. v. Adams, i Allen, 28 ; Sparhawk v. Willis, 6 Gray, 163; Free- man on Judgments, § 238. ^ Howe V. Bradley, 19 Me., 31 ; Parsons on Contracts, vol. 2, 636. § I 187. WHEN INSTRUMENT IS PAYABLE TO AN AGENT 223 SECTION II. WHEN INSTRUMENT IS PAYABLE TO AN AGENT. § 1 187. Who may sue upon instrument payable to an agetit. — Upon the theory that the party entitled to sue is the one in whom the instrument shows the legal title to exist, it has been held that, when the bill or note is payable to a certain person by name, but describing him as agent of another person also named — as, for instance, "A. B., agent for C. D." — the suit must be brought in the name of the agent, and can not be brought in the name of the princi- pal ; ^ and that a fortiori must the suit be so brought when the instrument is simply payable to " A. B., agent," no principal being named.^ But in either case, the better doctrine, as it seems to us, is that either the agent or the principal might sue. If suit were brought by the agent, the possession conforming to the express indication of the paper would clearly sustain the action. If suit were brought by the principal whose name is expressed in the instrument, possession by him would be evidence that he had received from his agent the instrument of which he was entitled to the beneficial interest ; and there could be no good reason why it should be necessary for the principal to continue to use his agent's name, when it is clear from the face of the paper that if so used it would be as the representative of his own.^ And where the principal is undisclosed on the face of the paper, he might also sue in his own name ; but in such case mere possession of the paper would not he suffi- cient evidence that he was the principal intended, and it would be necessary for him to supply that element in his - Cocke V. Dickens, 4 Yerg., 29, the note being payable to C. E. McEwing, agent for the executors of Joseph Branch ; Shepherd v. Evans, 9 Ind., 260 ; Rutherford v. Mitchell, Mart. & Yerg., 261 ; Rose v. Laffan, 2 Speers, 424. "^ Alston V. Hartman, 2 Ala., 699 ; Horah v. Long, 4 Dev. & Bat., 274. ' Binney v. Plumley, 5 Vt., 500 ; Johnson v. Catlin, 27 Vt., 87 ; Arlington v. Hinds, I D. Chip., 431 ; Fairchild v. Adams, 16 Pick., 383. 224 ACTION OR SUIT UPON BILLS AND NOTES. § 1 1 88. title to recover by parol proof.* In the case of instruments payable to bank cashiers it might be different. Delivery of a note to an agent without indorsement would not au- thorize him to sue.^ § 1 1 88. Official agents. — Numerous cases have arisen in which this question has been presented upon bills and notes payable to the official agents of corporations or States ; and the authorities now greatly preponderate in favor of the doctrine, that 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 represents, when such principal is named ; and if the principal be not named, that evidence aliunde is admissible to show who the principal is. Thus, it has been held that a bill or note pay- able or indorsed to "A. B. C, cashier, or order," may be sued upon by the bank of which the payee is cashier, al- though it is not named. ^ A fortiori such would be the case if the bank were named.* But suit could also be sus- tained by the cashier in his own name,^ So it has been held, that a note payable to "J. R., agent of the Southern Life and Trust Co.," might be sued upon by the corpora- tion.® Where the payee "or his successor in office" is named it is specially indicated that the corporation was in- tended ; ;.nd it may sue in its own name.''' And if the * See Rutland, etc., R.R. Co. v. Cole, 24 Vt.. 38. ^ Nicholls V. Gross, 26 Ohio St., 425. ' Baldwin v. Bank of Newburg, i Wall., 239 ; Carton v. Union City Bank, 34 Mich., 279; First National Bank of Angelica v. Hale, 44 N. Y., 395 (1871) ; Bank of New York v. Bank of Ohio, 29 N. Y., 619 ; Bank of Genesee v. Patchin Bank, 19 N. Y., 312 ; Watervliet Bank v. White, i Denio, 609 ; Wright v. Boyd 3 Barb., 523 ; Barney v. Newcomb, 9 Cush., 46 ; Rutland, etc., R.R. Co. v. Cole, 24 Vt., 38 ; see chapter xiil, on Corporations, § 417, vol. 1 ; Pratt v. To- peka, 12 Kansas, 570. * Commercial Bank v. French, 21 Pick., 486. ' Fairchild v. Adams, 16 Pick., 381. ° Southern Life Ins., etc., Co. v. Gray, 3 Fla., 262. '' Trustees, etc., v. Parks, 10 Me., 441. In Board of Supervisors v. Hall, 42 Wise, 59, the note was made payable to " the Supervisors of Ocono County, or their successors in office." It was held a good note to the county, and that the § llSg. WHEN INSTRUMENT IS PAYABLE TO AN AGENT. 225 office is named without mention of the person, as, for in- stance, " payable to the cashier of the First National Bank," the same view would apply.^ Where the note was indorsed to " C. J., President M. P. F.," it was held, the company could sustain suit by proving the note was intended to be transferred to it.^ § 1 1 89. The contrary doctrine, that only the agent can sue, rests upon the view that the official station is merely mentioned to designate the person intended ;^ but the fact in actual business is generally otherwise, and a theory about commercial affairs opposed to commercial practice can not be otherwise than injurious and impracticable. § iiSga. Cases of agent's name used by adoptioii for principal's. — It is undoubtedly a matter of daily practice board of supervisors might sue, the court saying : " A misdescription of the character of the payee will not vitiate, provided it can be collected, who was the party intended." ' Commercial Bank v. French, 21 Pick., 486. - Dupont V. Mount Pleasant Ferry Co., 9 Rich. (Law), 255. ^ Bank United States v. Lyman, 20 Vt., 666. The Bank of United States sued in the U. S. Circuit Court upon a note payable to " Samuel Jaudon, Esquire, cashier, or order." The Court said, per Prentiss, J. : " The promise therefore is to pay him, or the person to whom he shall order it to be paid ; and it would be repugnant to the terms of the instrument to allow the Bank of the United States, or any one else, without his order, to demand and enforce payment of it by suit." But a different view prevails in the State courts of Vermont. Rutland, etc., R.R. Co. V. Cole, 24 Vt., 38. It was held in the following cases, that the agent alone could sue : Horah v. Long, 4 Dev. & B., 274, where the note was payable to " W. H. H., cashier, or order " ; Rose v. Laffan, 2 Speers, 424, the note being payable to " A. G. Rose, Cashier " ; so where the notes ran, " to W. G., Treasurer of Third Parish in Dedham," Fisher v. Ellis, 3 Pick., 322 ; to " The Treasurer of the Pro- prietors of the new meeting-house in N., or his successor in office," Clap v. Day, 2 Greenl., 305. In Van Ness v. Forrest, 8 Cranch, 30, where a commercial com- pany, consisting of four or five hundred members, sold merchandise, the prop- erty of the company, and took from the purchaser his note for the purchase money, payable to Joseph Forrest, president of the company, it was held that suit should be brought in the name of the promisee against the maker of the note and his dormant partner, notwithstanding such dormant partner was also a partner of the commercial company. And it was said by Marshall, C. J. : " Suit can be brought only in the name of Joseph Forrest. It can no more be brought in the name of the company than if it had been given to a person not a member, for the benefit of the company. The legal title is in Joseph Forrest, who recov- ers the money, in his own name, as a trustee for the company. Upon the record, and technically speaking, he is the sole plaintiff, and the court can perceive no reasonable or legal objection to his sustaining an action on the note." See also Harrow v. Dugan, 6 Dana, 341 ; McConnel v. Thomas, 2 Scam., 313 ; Ramsey V. Anderson, i McMull., 300 ; 2 Parsons N. & B., 451. Vol. II.— 15 226 ACTION OR SUIT UPON BILLS AND NOTES. § II 9O. to make notes, drafts, acceptances, and indorsements pay- able to the cashiers or treasurers of financial institutions by such abbreviations as, " to J. Smith, Cas.," or " J. S., Cash.," or " Cashier," or " Treas." When the corporation sues on such a paper, it is upon the theory and averment that it was made payable to it by the name of the official ; and the production of the instrument in its possession is sufficient prima Jacie evidence to sustain its suit. A distinction has been taken in some cases, to the effect that a bill or note payable to an agent or officer of a com- pany not incorporated may be sued in his name ; but if the company be incorporated its own name must be used.^ The like principle applies when the instrument is payable to the official agent of a State or country ; and the State or country may sue upon it in its own name. It has been so held where the instruments were payable "to Levi Wood- bury, Secretary of the United States, or his successors in office 'V to "T. T. Tucker, Treasurer of the U. S., or order ";^ to "James Irish, Land Agent of Maine."* SECTION III. WHO MAY SUE UPON INSTRUMENTS PAYABLE TO ONE PARTY AND DISCOUNTED BY ANOTHER. § 1 190. A nice question is presented when a note made to raise money is expressed as payable to a certain bank, and is then discounted by another party, the bank named as payee never having any interest in it. Thus suppose the "Cheshire Bank" is named as payee, and A. B. discounts the note, it has been held that in such case the plaintiff may ' Southern Life Ins., etc., Co. v. Gray, 3 Fla., 262 ; McConnel v. Thomas, a Scam., 313; § 1 188. ''United States v. Boice, 2 McLean, 352. ^Dugan V. United States, 3 Wheat., 172. * State of Maine v. Boies, 2 Fairf., 474. See chapter XIV, § 443, vol. I. §1190. INSTRUMENTS PAYABLE AND DISCOUNTED. 22/ declare upon the note as payable to him by the name of the Cheshire Bank.^ It has also been held that suit might be brought in the name of the payee for the benefit of the holder. Should the payee expressly consent, or impliedly by receiving the note for the person advancing the money, his name might be used ;^ but otherwise we can not see how a mere stranger can be unwillingly brought into a contro- versy to which he has no proper legal relation, and it has been held that if the payee refuse the use of his name, it can not be used.^ Some cases utterly deny the right to use the payee's name, even with his consent.^ Where an accommodation note is made payable and ne- gotiable at a particular bank, it has been held that when not discounted by it, but by another person, the latter ac- quires no right of action against the accommodation party, who must be taken to have limited the right of negotiation to the particular bank, and he can not sue even in its name.'* But the better opinion seems to be that this would not be such a diversion of the paper as to discharge the accommo- dation parties.® When a note payable to a third person has not been ne- gotiated by him, but is in the hands of another, who sues in the payee's name, it seems that it v^ p7'i7na facie evidence of an equitable assignment by the payee to the holder, which carries authority to use his name.''' 'Hunt V. Aldrich, 7 Fost., 31 ; Elliott v. Abbott, 12 N. A., 549. Quer>-, if holder might not sue in equity in his own name. See Taylor v. Reese, 44 Miss., 89. - Bank of Chenango v. Hyde, 4 Cow., 567 ; Bank of Newbury v. Rand, 38 N. H., 169; Lime Rock Bank v. Macomber, 29 Me., 564; Granite Bank v. Ellis, 43 Id., 367 ; UticaBank v. Ganson, 10 Wend., 314 ; Farmers' & Mechanics' Bank v Humphrey, 36 Vt., 557 ; see also Bank of Rutland v. Buck, 5 Wend., 66 ; Powell V. Waters, 17 Johns, 176; Marvin v. McCallum, 23 Johns, 288. ^ Bank of Middlebury v. Bingham, 33 Vt., 623. ^ Adams Bank v. Jones, 16 Pick., 574. ^ Dewey v. Cochran, 4 Jones L. (N. C), 184 ; Clinton Bank v. Ayres, 16 Ohio, 282. See Dixon v. Dixon, 31 Vt., 450 ; Quinn v. Hard, 43 Vt., 375. * Utica Bank v. Ganson, 10 Wend., 315; Commercial Bank v. Claiborne, 5 How. (Miss.), 301 ; Briggs v. Boyd, 37 Vt., 534 ; Farmers', etc., Bank v. Hum- phrey, 36 Vt., 557. ■' Harriman v. Hill, 14 Me., 127. 228 ACTION OR SUIT UPON BILLS AND NOTES. ^ II9I. SECTION IV. WHO MAY SUE UPON INSTRUMENTS PAYABLE TO BEARER OR INDORSED IN BLANK. § 1 191. The law is now too well settled to admit of longer controversy that an action on a bill or note payable to bearer, or indorsed in blank, may be maintained in the name of the nominal holder who is not the owner by the owner's consent ; and that possession by such nominal holder \s piHma facie sufficient evidence of his right to sue, and can not be rebutted by proof that he has no beneficial interest, or by anything else but proof of mala fides} And, as has been said in Maryland, by Chambers, J. : " Courts will never inquire whether a plaintiff sues for himself or as trustee for another, nor into the right of possession, unless in an allegation of mala fides, and the blank indorsement may be filled up at the moment of trial." ^ If it were shown that the plaintiff, upon suing upon a note payable to bearer or indorsed in blank, has no interest in it, and in addition that he is suing against the will of the party beneficially interested, he could not recover, as his conduct would be in bad faith.^ § 1 192. Nomiiial holder may sue. — It matters not that such nominal holder will receive the amount as trustee,* agent,^ or pledgee.^ The suit by him holding the paper ' Demuth v. Cutler, 50 Me., 300 ; Patten v. Moses, 49 Me., 255 ; Manufactu- rers' N. B. V. Thompson, 129 Mass., 438; Wheeler v. Johnson, 97 Mass., 39; Craig V. Twomey, 14 Gray, 486 ; Palmer v. Nassau Bank, 78 111., 380 ; Ticonic Nat. Bank v. Bagley, 68 Me., 249 ; Scionneaux v. Wagnerpack, 32 La. An., 288 ; Klein v. Buckner, 30 La. An., 680. ^'Whiteford v. Burckmyer, i Gill, 127. 'Tonne v. Wason, 128 Mass., 517. See Reynolds v. Kent, 38 Mich., 248; Eggan V. Briggs, 23 Kan., 710. * Nicolay v. Fritschle, 40 Mo., 67 ; Lovell v. Evertson, 1 1 Johns, 52 ; Wells v. Schoonover, 9 Heisk., 805. ' King V. Fleece, 7 Heisk., 274; Gregory v. McNealy, 12 Fla., 378 ; Boyd v. Corbitt, 37 Mich., 52 ; Klein v. Buckner, 30 La. An., part i, 680, § 1181. 'Bowman v. Wood, 15 Mass., 534; Bank of Charleston v. Chambers, 1 1 Rich., 657 ; Whitteker v. Charleston Gas Co., 16 W. Va., 717 ; Tarbell v Sturtevant, 26 Vt., 513 ; Logan v. Cassell, 88 Penn. St., 288. § 1192^. INSTRUMENTS PAYABLE TO BEARER. 229 shows his title to recover ; and it can not matter to the de. fendant who discharges the debt that the plaintiff is account- able over to a third party. Thus where the plaintiffs had bought a bill for a correspondent, and had been reimbursed the amount paid, Wightman, J., said : "They have been reimbursed, and the beneficial interest has been transferred, but the legal interest is in them, and they may still sue as trustees." * Evidence, however, that the plaintiff has no in- terest in the instrument will be competent when foundation has been laid for its introduction by offer to prove offset, or other defence, available against a third person who is its true owner.^ And if the indorsement be expressed " for collection," it has been held that the indorsee is not such a holder as may sue.^ § I i()2a. In England it has been held that if the plaintiff has neither an interest in the bill or note, or right of pos- session at the time of suit brought, he can not maintain the suit.^ But an agent being in lawful possession of the bill or note under a blank indorsement, may maintain suit.^ § 1 192^. In a recent New York case, where the holder of a note under a blank indorsement of the payee sued mak- * Poirier v. Morris, 2 Ellis & B., 89. ^ Logan V. Cassell, 88 Penn. St., 290 ; Lenneg v. Blummer, 88 Penn. St., 515. * Rock Co. Nat. Bank v. Hollister, 21 Minn., 385. * Emmett v. Tattenham, 8 Exch., 884 (1853). In this case W. held a bill under a blank indorsement. W.'s executor requested E. to sue in his own name ; but never delivered to him the bill until after suit brought, although a copy had been taken for E.'s use, and it was understood that E. could get the bill when he wanted it. It was held that this did not constitute a constructive deliver}', and Pollock, C. B., said : " The case falls within the simple proposition that a person who has no interest in, or possession of, a bill of exchange can not maintain an action on the instrument." The American cases upholding this doctrine, and those to the contrar)', are cited in i Ames B. & N., 319 et seq., to which excellent work reference is made. It may be that holder may raiify so as to sustain suit by bearer brought without consent. See Hovey v. Sesring, 24 Mich., 232 ; Ticonic Bank v. Bagley, 68 Me., 249. ' Law v. Parnell, 7 C. B. N. S., 282 (1859), Erie, C. J. : "The bill being in- dorsed in blank the bank had a right to hand it over to a third person to sue upon it. without indorsing it ; and therefore the plaintiff, if he was the lawful holder of the bill, and had authority from the bank to do so, had a perfect right to sue upon it In the case of Emmett v. Tattenham (8 Exch., 884), the plaintiff was not indorsee, neither had he possession of the bill. He had no in- terest in the bill." See cases cited in i Ames B. &. N., 323, 324, 230 ACTION OR SUIT UPON BILLS AND NOTES. § 1 193. ers and indorser of the note, and defendants pleaded that the note was not the property of the plaintiff, that the same was never transferred to him, that he was not the real party in interest, and that the note was the prop- erty of the Saratoga County Bank, who was the real party in interest, it was held that under the code of New York, which requires the real party in interest to sue, the defence was admissible ; although production of the note indorsed by the payee made a prima facie case for the plaintiff.-^ § 1 193. An indorsement in blank confers a joint right of action to as many as agree in suing on the bill.^ And, therefore, where three persons separately indorsed a bill for the accommodation of the drawer, which was afterward dis- honored and returned to them, and they paid the amount among them, it was held that they might bring a joint action against a previous indorser.^ But where a bill of exchange 'Hays V. Hathorn, 74 N, Y., 486, reversing Hays v. Southgate, 10 Hun, 511. Hand, J., reviewed the New York decisions, and said : " From this glance at the cases it appears that it is ordinarily no defence to the party sued upon commercial paper, that the transfer under which the plaintiff holds it is without consideration or subject to equities between him and his assignor, or colorable and merely for the purpose of collection, or to secure a debt contracted by an agent without sufficient authority. It is sufficient to make the plaintiff the real party in interest, if he have the legal title either by written transfer or delivery, whatever may be the equities between him and his assignor. But to be entitled to sue he must now have the right of possession, and ordinarily be the legal owner. Such ownership may be as equitable trustee ; it may have been acquired without adequate consideration, but must be sufficient to protect the defendant upon a recovery against him from a subsequent action by the assignee. As we understand the scope of the offer in the present case it went to entirely disprove any ownership or interest whatever, or even right of possession as owner in the plaintiff. It should therefore have been admitted. It may be true that the plaintiff, if this note had been delivered to him with the intent to transfer title, might have lawfully overwritten the blank indorsement with a transfer to hiin- self ; // is also true that the production of the paper by him was prima facie evidctice that it had been delivered by him to the payee and that he had title to it ; but the defendant's offer was precisely to rebut this very presumption, and for aught that we can know the evidence under it would have done so." The court distinguished and explained the cases of Cummings v. Morris, 25 N. Y., 625; City Bank v. Perkins, 29 N. Y., 554; Brown v. Penfield, 36 N. Y., 473; Allen V. Brown, 44 N. Y., 228 ; Eaton v. Alger, 47 N. Y., 345, and Sheridan v. Mayor, 68 N. Y., 30 ; and showed that Gage v. Kendall 1 5 Wend., 640, had been affected and changed by the code. See also Bell v. Tilden, 17 Hun, 346. ^ Ord V. Portal, 3 Camp., 239, Lord Ellenborough. * Low V. Copestake, 3 C. & P., 300 (14 E. C. L. R.) ; Byles [*I44], 262. ^1195- INSTRUMENTS PAYABLE TO BEARER. 2$l was, by the direction of the payee, indorsed in blank, and dehvered to A., B. & Co., who were bankers, on the account of the estate of an insolvent, which was vested in trustees for the benefit of his creditors, Lord Ellenborough held that A. and B., two of the members of this firm, and also trus- tees, could not, conjointly with another trustee who was not a member of the firm, maintain an action against the indorser, without some evidence of the transfer of the bill to them as trustees by the firm, by delivery or otherwise.^ § 1 194. T/ie holder of a note blank as to the payee may fill it up with his own name and sue upon it.^ If payable to a fictitious person, it may be sued on as payable to bearer.'^ The holder of such a paper, in transferring it, should not use the fictitious name, but pass it by delivery only, or by indorsement.^ § 1 195. The holder tuider an indorsement in blank may fill it in his own name before bringing suit, or at the trial ;^ and even after the trial, where judgment has gone for the plaintiff under the impression that the indorsement had been filled up, the correction being made mine pro tunc.^ But the filling up of the blank indorsement is formal merely, and it is not necessary that it should be filled up at all, for the mere act of suing upon it by the holder evi- dences his intention to treat the indorser as a transferrer and indorser to himself.^ This seems to us clearly the cor- rect doctrine, and results from the principle stated by Lord ' Machell v. Kinnear. i Stark., 499 (2 E. C. L. R.) ; Byles [*I44]. 262. "Crutchley v. Clarence, 2 Maule & S., 90; see chapter V, sec. iii, vol. I, §§ 142. 145- , „ ' 2 Parsons N. & B., 448. * Maniort v. Roberts, 4 E. D. Smith, 83. 'Lovell V. Evertson, 1 1 Johns, 52; Hance v. Miller, 21 111., 636; Edwards v. Scull, 8 Eng. (Ark.), 325 ; Olcott v. Rathbone, 5 Wend., 490; Kennon v. McRea, 7 Port. (Ala.), 175 ; Kiersted v. Rogers, 6 Har. & J., 282 ; Fairfield v. Adams, 16 Pick., 381 ; Croskey v. Skinner, 44 HI- 321 ; Lucas v. Marsh, Barnes, 453; Cope V. Daniel, 9 Dana, 415 ; Norris v. Badger, 6 Cowen, 449 ; Pickett v. Stew- art, 12 Ala., 202. * Whittier v. Hayden, 9 Allen, 408. 'Rees V. Conococheague Bank, 5 Rand., 329 ; Poorman v. Mills, 35 Cal., 118 Habersham v. Lehman, 63 Geo., 383. 232 ACTION OR SUIT UPON BILLS AND NOTES. § II 96. Ellenborough, that the exercise of the power to fill up a blank indorsement so as to make it payable to the holder is only expressio eorum quce tacite insunt} But it has been held absolutely necessary that the in- dorsement should be filled up before judgment, and that otherwise judgment would be bad.^ § 1 196, Sti^iking out intervenhig indorsements. — If the plaintiff omit to state in his declaration all the indorse- ments after the first indorsement in blank, he may strike out the intervening indorsements, and aver that the first blank indorser indorsed immediately to himself.^ Abbott, C. J., has said on this subject: "All the indorsements must be proved or struck out, although not stated in the declaration. I remember Bailey, J., so ruling, and striking them out himself on the trial ; and this need not be done before the trial ;* but may be done after the plaintiff has finished his case."^ So where the action is against an in- dorser, and there are several indorsements between the payee's indorsement and the defendant's, the plaintiff may state in his declaration that the payee indorsed to the de- fendant.^ It seems doubtful, however, whether the plain- tiff can avail himself of the title of an indorser whose name he has struck out.''' § 1 197. If the bill or note be not payable to bearer or iu' dorsed in blank, or indorsed specially to himself, the holder can not (unless authorized by statute) sue in his own name, for although he may possess the entire beneficial interest, the legal title is still outstanding in his transferrer, and he must 'Vincent v. Horlock, i Camp., 442. In this case the indorsement was filled up. * Hudson V. Goodwin, 5 Har. & J., 115. 'Byles on Bills [*I49], 268 ; Rand v. Dovey, 83 Penn. St., 281 ; Mayer v. Jadis, I M. & Rob., 247 ; Merz v. Kaiser, 20 La. Ann., 379. * Cocks V. Borradale, MS. ; Chitty on Bills [*462], 719 ; Byles [*I49]. 268. 'Mayer v. Jadis, i M. & Rob., 247. 'Chaters v. Bell, 4 Esp., 210. ' Davies v. Dodd, i Wils. Exch., no; 4 Price, 176 ; Byles [*I49], 269. §1198. INSTRUMENTS PAYABLE TO BEARER. 233 use his name in order to maintain the suit.^ By leaving the instrument unindorsed, the transferrer necessitates and au- thorizes the use of his name to the recovery of the amount ; and he can not object to its use, or release the action when instituted.^ If the transferrer indorses the paper, then his name can not be used save by his own consent ; for then the legal title and right to sue is vested in his indorsee/ But if suit is commenced without his consent, he may sub- sequently assent to it.^ § 1 198. Striking out subsequejit indorsements. — When there appears upon a bill or note an indorsement by the plaintiff, and subsequent' indorsements to his, the question has been raised whether or not he could sustain the suit without showing a re-transfer of the paper to himself. The better opinion is that he can. The Supreme Court of the United States took an opposite view in an early case,^ and there are cases concurring with it.® But the Supreme Court subsequently affirmed the doctrine of the text,'^ and it has also the authority of a number of State decisions.^ And the holder may always strike out a special indorse- ment, and bring suit under any indorsement in blank.^ ' Allen V. Newbury, 8 Iowa, 65 ; Farwell v. Tyler, 5 Iowa, 535 ; Tutile v. Becker, 47 Iowa, 486 ; Robinson v. Wilkinson, 38 Mich., 301 ; Parham v. Mur- phee, 16 Mart. (La.), 355; Allen v. Ayres, 3 Pick., 289 ; Hull v. Conover, 35 Ind., 372. It is held in Alabama, that if the transfer is by a separate instrument, the assig-nee may sue in his own name. Morris v. Poillon, 50 Ala., 403. In New York the transferee without indorsement may sue in his own name by statute. Van Riper v. Baldwin, 19 Hun, 344. "Paese v. Hirst, 10 Barn. & C, 123; Amherst Academy v. Cowles, 6 Pick., 427 ; Royce v. Nye, 52 Vt., 372. ' Bowie V. Duval, i Gill & J., 175 ; Bragg v. Greenleaf, 14 Me., 395 ; Mosher V. Allen, 16 Mass., 451 ; Skowhegan Bank v. Baker, 36 Me., 154; Coleman v. Biedman, 7 C. B., 871. * Colder v. Foss, 43 Me., 364. ' Welch v. Lindo, 7 Cranch, 1 59. • Robson V. Earley, 13 Mart. (La.), 373; Sprigg v. Cuny, 19 Mart. (La.), 253 ; Southern Bank v. Mechanics' Savings Bank, 27 Ga., 253. ' Dugan V. United States, 3 Wheat., 172. * Dollfuss V. Frosch, i Denio, 367; Whittenhall v. Korber, 12 Kansas, 618, Bank of Kansas City v. Mills, 24 Kansas, 610; Wickersham v. Jarvis, 2 Mo. Ap., 280 ; see cases cited in chapter xx, on Presentment for Payment, § 576, vol. i also Caldwell v. Evans, 5 Bush (Ky.), 380 ; Canton, etc., Assn. v. Weber, 34 Md., 669 ; stQ post, § 1229. • Wetherell v. Ela, 42 N. H., 295. 234 ACTION OR SUIT UPON BILLS AND NOTES. § 1 1 99* Where there appears on the paper the plaintiff's own in^ dorsement, it will be presumed either that he had not per- fected his indorsement by delivery, on that the paper has been returned to him as his own property, and in either case he has the right to sue upon it ; ^ and clearly, if his in- dorsement be to another " for collection," he would have the right to sue, for if paid the proceeds would belong to him.^ SECTION V. WHAT CONSTITUTES THE RIGHT TO SUE, AND THE EVIDENCE THEREOF. § 1 1 99. The right to sue in ones own name mtist exist at time of suit brought, if it be in that form ; ^ and if a holder of a note delivered to him without indorsement, sue before obtaining an indorsement, in his own name, an in- dorsement made afterward, but before trial, will not avaiU And so the right to sue must continue during the suit ; and if the plaintiff transfers the instrument pending the ac- tion, it has been held that it operates as a discontinuance ; and that although he may repurchase the paper, he can not restore the right to prosecute an action which he has once abated by his own act.^ But to lay an embargo upon a negotiable instrument merely because it is in suit; would greatly impair its value, and embarrass the holder ; and the better opinion is that the transfer may be made with the agreement that the action should continue for the benefit ^ See ante, § 1181 ; Royce v. Nye, 52 Vt., 375 ; Beeson v. Lippman, 52 Ala., 296; Pitts V. Keyser, I Stew., 154; Evans v. Gordon, 8 Porter, 142; Wicker- sham V. Jarvis, 2 Mo. App., 280 ; Humphreyville v. Culver, 73 111., 435 I Brady V. White, 4 Baxter, 382. ' Locke V. Leonard Silk Co., 37 Mich., 479 ; Best v. Nakomis National Bank, 76 111., 608 ; Reading v. Beardsley, 41 Mich., 123. « Emmett v. Tattenham, 8 Exch., 884; see ante, § 1192. * Dowell v. Brown, 13 Sm. & M., 43. '• Vila v. Weston, 33 Conn., 49 ; Curtis v, Bemis, 26 Conn., i ; Lee v, Jilson, 9 Conn., 94. ^ I200. THE EVIDENCE OF THE RIGHT TO SUE. 235 of the transferee ; and that in the absence of evidence it would be presumed.^ Where principal and surety are sued, and the latter pays the amount pending suit, it may be continued against the principal as commenced for his ben- efit.^ § 1200. Possession is in itself prima facie evidence of the right of the party to sue and receive the money when he holds under a legal title, and also that the title, although not expressly, is actually vested in him. And therefore in order to defeat his suit, it must be shown that he is a mala, fide holder.^ As said in a Maryland case by Chambers, J.: " A bill payable to bearer, or a bill payable to order and indorsed in blank, will pass by delivery, and bare possession is prima facie evidence of title ; and for that reason pos- session of such a bill would entitle the holder to sue."* ' 2 Parsons N. & B., 454. In Alabama it is held that the effect of the trans- fer of a note pending suit " is to make the transferee the beneficiary of the nominal plaintiff," and that such transfer " does not violate the rights of the parties." Penn v. Edwards, 50 Ala., 63. See Ober v. Goodridge, 27 Gratt., 888, where no exception was taken to transfer pending suit, and § 728. ^ Low V. Blodgett, i Fost., 121. Clearly a second action is not barred. Deu- ters V. Townsend, 5 Best & S., 117 ; E. C. L. R., 618 (1864J, Crompton, J.: " Byles on Bills, p. 159, 8th ed., and Chitty on Bills, p. 157, loth ed., are cited to show that if an indorscr takes a bill with notice that an action is pending, it is a defence for the acceptor. If this means that that fact can be pleaded in bar against the maintenance of the second action, it is contrary to principle, and the authorities cited for it do not bear it out. In Marsh v. Newell, i Taunt., 109, the question was whether the court could under those circumstances stay the action ; which was entirely a matter for their equitable jurisdiction. In Colom- bies V. Slim, 2 Chit., 637, the court decided that a plea of this sort was bad for want of an averment of notice of the bill being overdue. But they proceed to say that if there had been notice of indorsement, and the second action w-ere brought to oppress the defendant, it would be otherwise. That very expression shows that that is not the substance of a plea in bar, for you could not introduce an averment that the action was brought with a view to oppress. But it is very good ground for an application to stay the proceedings on the first action. The only other authority is Jones v. Lane, 3 Y. & C, 281. All that amounts to is, that Alderson, B., threw out obiter, there might be a difference in conse- quence of an indorsee having notice of the former action ; but he expressly says that it was not necessary to decide upon it, and that he should like to hear fur- ther argument." ' Wheeler v. Johnson, 97 Mass., 39 ; Pettee v. Prout, 3 Gray, 502 ; and see cases cited in chapter xxiv, sec. vi, § 812, vol. I, and also chapter XX, § 573, vol. I. * Whiteford v. Burckmyer, i Gill, 127 ; Crosthwait v. Misener, 13 Bush (Ky.). 543 ; Wells v. Schoonover, 9 Heisk., 805. 236 ACTION OR SUIT UPON BILLS AND NOTES. § I20I. Therefore, where a note was indorsed to " C. B. Austin, agent of the Union Glass Works," it was held that the suit might be brought in the agent's name, and the court said ; " Here there is no allegation of mala fides, so that the case stands clear of that objection. The suit is brought by Aus- tin, who is a trustee or agent for the Company. Stating that he is the agent of the Union Glass Works, is equiva- lent to saying that the suit is for their use." ^ But if a note were payable " to the Stansbury Oyster Co.," possession by one Stansbury would not be evidence of title.^ § 1 201. When actual possession not necessary to suit. — Possession of the instrument is not always necessary in order to institute a suit. If the holder has indorsed a note in blank and pledged it as collateral security, he may nego- tiate it to a third person, while still pledged, and such per- son may sue as indorsee while it is still in pledge, and maintain an action by discharging the lien and producing the note at the trial.^ The holder of a bill or note as collateral security for an indorsement by him of another bill or note, can not recover if he gratuitously pays the paper indorsed by him, not be- ing duly charged thereon.* SECTION VI. WHO MAY BE SUED. § 1202. As a general rule, the holder may sue all the prior parties on the bill or note, but not any subsequent party. Thus a payee may sue the acceptor or maker. An indorsee may sue the acceptor or maker, and all prior in- dorsers. * Pearce v. Austin, 4 Whart., 489. ' Redmond v. Stansbury, 24 Mich., 406. » Fisher v. Bradford, 7 Greenl., 28 ; see Richardson v. Lincoln, 5 Mete, 20l ; Marsh v. Newell, i Taunt.. 109. * IJachellor v. Priest, 13 Pick., 399. § 1203. WHO MAY BE SUED. 237 § 1202^. When subsequent parties may be sucd--Ox' dinarily an action can not be maintained against a party- subsequent to the plaintiff ; for if it were otherwise, the de- fendant in such action might as indorsee recover back from the plaintiff the very amount recovered of him.^ But if the plaintiff had originally indorsed the instrument to the de- fendant without recourse or without consideration, and the latter had indorsed back to him absolutely and for value, this view would not apply.^ And there may be other spe- cial circumstances, which, w^hen shown, would entitle the holder to recover against a subsequent party — as, for in- stance, w^here such party originally agreed to indorse the paper as security to him.^ Where the payee of a bill in- dorsed it specially to the plaintiff, and then the defendant, and after him the plaintiff indorsed it, it was held that the plaintiff might sue him, as his indorsement was equivalent to a new drawing.* § 1203. At common law, the holder of a bill or note might commence and prosecute several actions against each of the prior parties at the same time ; and an action insti- tuted against one would not preclude any other remedy against the others.^ But satisfaction by any one would dis- charge all to the plaintiff from liability as to the principal sum.* Where a party was liable in the. two characters of joint drawer and of acceptor, he might be sued jointly with the other drawers and separately as acceptor.'^ But by statute in many of the States an action may be maintained and judgment given jointly against all the par- ties to a negotiable instrument, whether drawers, indorsers, ' Bishop V. Hayward, 4 T. R., 470 ; Britton v. Webb, 2 B. & C, 483. ' Bishop V. Hayward, 4 T. R., 470 ; 2 Parsons N. &. B., 459. ' Wilders v. Stevens, 15 M. & W., 208. * Penny v. Innes, i Cro. M. & R., 439 ; see Chitty on Bills, [*242], 276-7 note^. 'Chitty on Bills [*538-9], 610, 611. '' Ex parte Wildman, 2 Ves., Sr., 115 ; Farwell v. Hilliard, 3 N. H., 318. ^ Wise V. Provvse, 9 Price, 393. 238 ACTION OR SUIT UPON BILLS AND NOTES. § I204. or acceptors, or against any one, or any intermediate num- ber of them.^ § 1 204. The indorser of a bill or note can not sue the ac- ceptor or maker until he has paid or satisfied it*^ But as soon as he does this he may sue the acceptor or maker.^ And if one indorser sues a prior party, it is not necessary for him to show that he had received notice, provided it was duly received by such prior party.^ Where there are a number of indorsers, any one may sue, by arrangement be- tween them, all indorsements subsequent to his being stricken out.^ § 1205. The right of draiver to sue acceptor. — "The drawer," says Mr. Chitty, " may maintain an action on the bill against the acceptor, in case of a refusal to pay a bill already accepted, but not on a refusal to accept, in which latter case the action must be special on the contract to ac- cept." ^ Certainly the drawer may sue the acceptor if he has had to pay the bill, '^ or may leave it in the hands of the indorsee to sue for his benefit ; ^ but it has been held that he can not recover without evidence that he has paid the bill.« A receipt on the back of the bill, not stating who made payment, does not create the presumption that it was paid by the drawer, but rather that it was paid by the ac- ceptor.^" § 1 206. Where the accepta^tce is for the drawer s accom- modation, and the acceptor pays the bill, he can not sue the • Code of Virginia (1873), chap. 141, § 11. ^ Hoyt v. Wilkinson, 10 Pick., 31. ° M'Donald v. Magruder, 3 Pet., 470. * Ellsworth v. Brewer, 11 Pick., 316. ^Walwyn v. St. Quintin, i Bos. & Pul., 652. « Chitty on Bills (13 Am. ed.), L*537]. 608. See chapter XIX, vol. r. ' Louviere v. Laubray, 10 Mod., 36; Symonds v. Parminter, i Wils., 185; 4 Bro. P. C, 604; Thurman v. Van Brunt, 19 Barb., 410; Chitty [*537]. « Williams v. James, 15 Ad. & El. N. S., 69; E. C. L. R., 498 (1850). 'Thompson v. Flower, 13 Hart. (La.), 301 ; 2 Parsons N. & B., 453. " Taylor v. Higgins, 3 East., 169 ; Bullock v. Lloyd, 2 Car. & P., 119 ; Chilton V. Whippin, 3 Wils., 13. $ 1207. WHEN RIGHT OF ACTION ACCRUES. 239 drawer upon the bill, for it imports no liability to him, but he may sue for money paid at his request.^ But an accept- or for honor of the drawer or indorser may sue such drawer or indorser upon the bill itself.^ Production of a bill by the acceptor is woX. prima face evidence of his having paid it, unless it is shown that it was in circulation after accept- ance ; ^ and if there be a receipt on the back of the bill, it must be shown to be in the handwriting of a person au- thorized to receive payment.* SECTION VII. WHEN RIGHT OF ACTION ACCRUES. § 1207. Whether or not sint may be instituted against the maker and i^tdorsers of a note upoii the last day of grace is a question upon which the authorities " are like Swiss troops, fighting on both sides," it being contended by some that the maker has the whole of the last day of grace to make payment, and that, as the law knows no frac- tion of a day, suit can not be instituted against him until the last day of grace has entirely elapsed. In respect to the indorser, it has also been held that suit can not be instituted against him until sufficient time has elapsed for him to be in actual receipt of notice. While, on the other hand, it is confi- dently, and, as we think, justly, asserted that after demand and refusal on the last day of grace, action may be commenced against the maker ; and after notice has been put in train to reach the indorser, it may also be commenced against him, whether he has actually received it or not. ' Bell V. Norwood, 7 La., 95 ; Chitty on Bills [*S37], note. Stark v. Alford,. 49 Texas, 260, § 1 181. But see Bacchus v. Richmond, 5 Yerff., 109 ; 2 Parsons N. &B., 460. " ' 2 Parsons N. & B., 455. 'Jewell v. Parr, 13 C. & B., 909. *■ Pfiel V. Vanbatenberg, 2 Camp., 439. 240 ACTION OR SUIT UPON BILLS AND NOTES. § 1 2o8. § 1208. Action lies against maker on day of maturity, after demand and refusal. — In the case of ordinary con- tracts to be performed upon a certain day, they are really solvable within that day ; and as the promisor has the whole of the day for their performance, suit can not be commenced until that day has passed.^ But when the maker of a note, or the drawer or acceptor of a bill, makes it payable on a day certain, his contract is to pay it on de- mand on any part of that day, if made within reasonable hours.^ The protest must be made on that day, which pre- supposes a default already made ; and whether it be the last day of grace, or the day of maturity, when there is no grace, it is clear, upon principle, that as soon as payment is refused, the action may be commenced. § 1209. We are not aware of any decision which deter- mines that the maker may be sued on the day of maturity, if the note is payable without grace, though the affirmative opinion has been expressed ; but if payment has been de- manded and refused, we should say that the action would lie, for the contract to pay on demand within reasonable hours is then broken, and, in the language of Parsons : " He has declared he will not pay, and can want further de- lay only to arrange the means of avoiding payment."^ But 'Webb V. Fairmaner, 3 Mees. & W., 473 ; Coleman v. Ewing, 4 Humph., 241. ''Leftly V. Mills, 4 Term R., 170 (1791), Buller, J., said : " If the party has till the last moment of the day to pay the bill, the protest can not be made on that day. Therefore, the usage on bills of exchange is established : they are payable at any time on the last day of grace, provided that demand be made within rea- sonable hours. A demand at a very early hour of the day, at two or three o'clock in the morning, would be at an unreasonable hour ; but, on the other hand, to say that demand should be postponed until midnight, would be to es- tablish a rule attended with mischievous consequences. If this case were to be governed by any analogy to the demand of rent, payment of a bill of exchange could not be demanded until sunset ; and, if so, the situation of bankers would be extremely hazardous ; for they would then be obliged to send out their clerks at night with bills to a very considerable amount, all of which must be presented within a short space of time, though to houses in different parts of the town." See also Greeley v, Thurston, 4 Greenl., 479 ; i Robinson's Practice (N. ed.), 442 ; Chitty on Bills (13 Am. ed.) [*48i], 544- '2 Parsons N. & B., 461,462. This is said by Shaw, C. J., in Staples v. Franklin Bank, i Mete, 43 ; Veazie Bank v. Winn, 40 Maine, 62, Tenney, J. : " A suit may be properly brought against the maker upon a negotiable promis- b § I2IO. WHEN RIGHT OF ACTION ACCRUES. 24I there is still stronger reason to hold that the action may be commenced after demand and refusal on the last day of grace, for grace was originally matter of indulgence and courtesy, and not of contract, and it would seem unreason- able to extend indulgence after the maker has expressly re- fused to make the payment on the last day allowed him.^ The weight of authority supports the view that suit may be commenced on the last day of grace against the maker ; "^ but there are decisions of most respectable character to the contrary effect — that suit can not be brought on the last day of grace,^ nor on the last day of maturity, when there is no grace.* § 1 2 10. It must be observed that when a demand is neces- sary, it must be made upon the maker prior to institution of the suit on the day of maturity, or last day of grace.^ In Massachusetts it was said by Shaw, C. J. : " The rule in re- sory note on the last day of g^ace after a demand of payment, made at a reason- able hour of that day, and a refusal." See Ames on B. & N., vol. 2, 96. See also Crenshaw v. M'Kieman, Minor, 295. ' Staples V. Franklin Bank, i Mete. (Mass.), 43. ^ Staples V. Frankhn Bank, i Mete. (Mass.), 43 ; Shed v. Brett, i Pick., 401 ; N. E. Bank v. Lewis, 2 Pick., 125 ; Greeley v. Thurston, 4 Greenl., 479 ; Flint V. Rogers, 3 Shepl., 67 ; Estes v. Tower, 102 Mass., 66 ; Veazie Bank v. Winn, 40 Maine, 62 ; Vandesande v. Chapman, 48 Me., 262 ; Dennie v. Walker, 7 N. H., 201 ; Wilson v. Williman, i Nott & McC, 440; McKenzie v. Durant, 9 Rich., 6l ; Ammidown v. Woodman, 31 Me., 580 ; Coleman v. Ewing.4 Humph., 241. 'Osbom V. Moncure, 3 Wend., 170 (1829). Suit commenced at 3 P.M. against the maker held premature. Reaffirmed in Smith v. Aylesworth, 40 Barb., 104, the only difference between the cases being, that, in the first, the note was payable generally, and in the latter, at a bank. The principle of Osbom v. Moncure was affirmed in the following cases, which are distinguishable, however, inasmuch as it does not appear that the notes were presented to the makers for payment before action was brought. Wells v. Giles, 2 Gale, 209 ; Walter v. Kirk, 18 Cal., 381 (semble) ; Cox v. Reinhardt,4i Tex. 591 (semble) ; Randolph v. Cook, 2 Port., 286; Wiggle V. Thomasson, 19 Miss., 452; Hopping v. Quin. 12 Wend., 517; Thomas v. Shoemaker, 6 W. & S., 179; Taylor v. Jacoby, 2 Barr., 495 ; Hinton v. Duff, II C. B. N. S., 724 ; Coleman v. Carpenter, 9 Barr., 198 (semble) ; Ben- son V. Adams, 69 Ind., 353. No demand was made, but suit was brought on last day of grace. Held that maker had all day in which to pay the note ; and that action was not maintainable. See Ames on Bills and Notes, vol. 2, 86 ; 35 Am. Rep., 220. * Davis V. Eppinger, 18 Cal, 381; see Moore v. Holloman, 25 Tex. Supple- ment, 81. 'Greeley v. Thurston, 4 Greenl., 479; Veazie Bank v. Winn, 40 Me., 62. Vol. II.— 16 242 ACTION OR SUIT UPON BILLS AND NOTES. §> I 2 1 1 gard to notes like the one in question is, that the note is payable at any time, on actual demand, on the last day of grace ; and if such actual presentment and demand is so made, and payment is not made, the maker is in default, and notice of dishonor may forthwith be given to the indorser. But if no presentment or demand is made by the holder upon the maker, the latter is not in default to the end of the business day."^ The demand must be made within reasonable hours on the day of maturity (or last day of grace, when there is grace), to authorize suit on that day ; and, accordingly, where suit was brought immediately after a demand made at 8 a.m., it was held premature.^ When the note is payable at a bank, the maker has until the expiration of business hours to pay it in ; and suit should not be commenced until their expiration. But right of action accrues as soon as they have expired, if payment were demanded and refused.^ § 121 1. Due-bills are payable immediately. — A due-bill, which is regarded in many States as a promissory note, is payable immediately, and upon principle there is no doubt, we think, that in such States action may be brought imme- diately on the very day of its date. The due-bill is predi- cated upon, and evidences the fact that the debt is then d le — not to be due on that day (which in ordinary con- tracts means the same as within that day), nor to be due in business hours of that day if demanded, as is the case with respect to negotiable paper which has a period of time to mature. It is true that the due-bill could not be sued upon during that fractional part of the day preceding its making ; b>it it does not follow that during the remainder of the day it is not mature for suit. For its very language and nature purport that it is instantly due ; and as a breach of contract 'Pierce v. Gate, 12 Cush., 190; Estes v. Tower, 102 Mass., 66, Corey, J., ex- plaining Butler V. Kimball, 5 Mete, 94, where the writ was issued after sunset nn the last day of grace, but not delivered to the officer until the next day. ^ Lunt V. Adams, 5 Shepl, 230. ^ See ante, § 1209. ^ 12 1 2. WHEN RIGHT OF ACTION ACCRUES. 243 occurs by failure to pay it instantly, the creditor may sue instantly, indulgence for any time being mere matter of his discretion and pleasure. This view is sustained by well- considered authorities,^ though not without dissent. § 1 2 1 2. Action lies against indorser as soon as notice is put in train of ti'ansmission. — In respect to the indorser, it has been held in a number of cases that suit against him can not be commenced until time has elapsed for notice to be actually received by him, upon the theory that the hold- er's title is not complete until the indorser is actually noti- fied that he is looked to for payment, or at least that time for him to receive such notice has transpired.^ But this is a misconception, as we think, of the law of notice. The holder must exercise due diligence to give the indorser notice. That duty is fulfilled when he puts it in train to reach him, by sending it to his business or dwelling-house, or depositing it in the post-office, as the case may be. And for him to be delayed until time for its actual reception had gone by would subject him to the hazards, vexations, and uncertainties of various circumstances which do not legitimately enter into the consideration of the indorscr's liability.^ ' Cammer v, Harrison, 2 McCord (S. C), 246 ; Dews v. Eastham, 2 Yerg., 403; Hill V. Henry, 17 Ohio, 9; see Fields v. Nickerson, 13 Mass., 130; 3 Par- sons on Contracts, 91 ; Andress' Appeal, S. C. Penn., March, 1882; Central L. J., April 14, 1882, p. 298, Vol. 14, No. 15. ' Smith V. Bank of Washington, 5 Serg. & R., 318 (18 19), where notice to an indorser of a note was put in the post-office on the 13th, and by due course of mail could not reach him before the 19th. Held, that suit commenced on the i6th was premature. Bevan v. Eldridge, 2 Miles, 353 (1S40) ; Wiggle v. Thom- asson, II Sm. & M., 452 ; McFarland v. Pico, 8 Cal.,626; Castrique v. Bernabo. 6Q. B.,498(i844). =' Bayley on Bills, chap. IX, sec. i, 217 ; Shed v. Brett, i Pick.. 401, Shaw, C. J., saying : " It would be mischievous to decide otherwise ; for every plaintifl"'s right of action would commence at different times according to the distance of the party sued ; and the time of suing must be conjectured, as it can not be known when the notice will be actually received. Besides, if the object of wait- ing be to give the party opportunity to take up the note, there must be a sort of double usance ; for the holder must wait until his letter is received, and for a reasonable time afterward ' for the party to come and pay the money.' Who would take a bill or note remitted from New Orleans if this doctrine be correct ? And if the parties liable be beyond the sea, such instruments would be mere waste paper." N. E. Bank v. Lewis, 2 Pick., 125; Greeley v. Thurston, 4 Greenl., 479; City Bank v. Cutter, 3 Pick., 414; Boston Bank v. Hoc(ges, 9 Pick., 420 ; Dennie v. Walker, 7 N. H., 201 ; Manchester Bank v. Fellows. 8 Fost., 302. 244 ACTION OR SUIT UPON BILLS AND NOTES. § I213. But in suits commenced on the last day of grace against an indorser, the plaintiff must prove that before the writ was sued out notice was deposited in the post-office, when he lives in a different place, or sent to his residence or place of business when he lives in the same.^ If the notice precedes the suit ever so short a time, it suffices ; ^ but if it does not, it seems the irregularity can not be cured by the sending and reception of notice afterward.^ § 1 2 13. Actio7t up07i dishonor f 07" no7i-acceptance. — When a bill is dishonored for non-acceptance, right of action ac- crues at once against the drawer,* and also against the indors- ers ® as soon as the protest is made and notice put in train to reach the party, without waiting for the maturity of the bill. And if a note be payable in respect to principal or interest, in instalments, action will lie for each instalment as it falls due.^ SECTION VIII. WHEN RIGHT OF ACTION EXPIRES. § 1 2 14. At common law, when once a right of action accrued, it was immortal. But the disadvantages of per- mitting remedies to be sought at remote periods from the time the transactions occurred, and the desirability of hav- ing settlements while evidence was readily obtainable, led at an early date to the adoption of statutes fixing a limita- tion to actions. As early as a.d. 1270, an act was passed ■ Manchester Bank v. Fellows, 8 Fost., 302. ^ N. E. Bank v. Lewis, 2 Pick., 125. ' Ibid.; New England Bank v. Lewis, 8 Pick., 113, where it is held that if the first action, commenced without first sending notice, be prosecuted to judgment, it is no bar to a second action. In an earlier case it was not thought objectionable that the action was commenced before notice was sent. Stanton v. Blossom, 14 Mass., 116 ; Bayley on Bills, chap, ix, sec. i. * Robinson v. Ames, 20 Johns, 146. ' Lenox v. Cook, 8 Mass., 460 ; Ballingalls v. Gloster, 3 East., 481. ' Tucker y. Randall, 2 Mass., 283 ; Cooley v. Rose, 3 Mass., 221. § I 2 15- WHEN RIGHT OF ACTION EXPIRES. 245 relating to limitation of actions concerning real estate ; but personal property, and especially choses in action, were at that time of so little consequence, that no limitation ol personal actions was prescribed until 1623. In this modern period, choses in action constitute a vast portion of the property of the country ; and the time at which the right to reduce them into possession expires is a matter of prime importance. It is to be observed, in the first place, that statutes of limitation do not destroy the debt, but only bar the remedy. Therefore they must be specially pleaded, and can not be given in evidence under a general issue ' And as they do not enter into the essence of the contract, they must be regulated entirely by the laws of the country where suit is brought.^ § 1 2 1 5. When statutes of limitation begin to ru7i. — The statute of limitations begins to run from the very day the right of action accrues. Thus upon a bill or note payable at so many days from the date, it begins to run from the day of payment, and not from the day of date, but the day of maturity is excluded in the computation of time. If payable at sight, the statute runs from sight. If so many days after sight, or after certain events, then from the time named after sight, or after the events have hap- pened.^ If the instrument be payable on demand, the statute begins to run immediately as payment might be immediately demanded, or suit brought without any pre- vious demand.* But if payable at a certain time after de- mand,^ or after notice,* an actual demand must be made, or notice given, in order to fix the period of maturity when the statute commences. When right of action on the in- ' Chappie V. Durston, i C. & J., i. ' See ante, § 884, vol. i. 'Byles (Sharsvvood's ed.) [*33i], 499; i Robinson's Practice (new ed.), 425. * Wheeler v. Warner, 47 N. Y., 519; Herrick v. Woolverton, 41 N. Y., 581. * Little V. Blunt, 9 Pick., 488; Wenman v. Mohawk Ins. Co., 13 Wend., 267. ' Clayton v. Gosling, 5 B. & C, 360 (i i E. C. L. R.) 246 ACTION OR SUIT UPON BILLS AND NOTES. § 12X6. strument secured expires, all claim to enforce the security, which is a mere incident of the principal obligation, ex- pires with it.* SECTION IX. EVIDENCE. § 1 2 1 6. Under the various titles which have been already discussed, the general principles of evidence touching them respectively have been stated. And within the scope of this volume, which confines itself more particularly to the questions which peculiarly concern negotiable instruments, but little more remains to be said. The rule of the common law that a party interested should not testify in his own be- half has been generally abrogated in the United States by statute ; and the question of competency of witnesses must be solved in the several States where it arises accordiagly as they have continued or modified the common law rule. § 1217. Whether pa^'ty to instrument may be witness to impeach it. — At one time there prevailed in England a pe- culiar rule of evidence respecting written instruments, that no party thereto should be permitted to impeach their validity. And in a leading case, where the indorser of a note was offered to prove it usurious, his testimony was held illegal, Lord Mansfield saying : " It is of consequence to mankind that no person shall hang out false colors to deceive them by first affixing his signature to a paper and afterward giving testimony to invalidate it."* But it was subsequently overruled.^ The United States Supreme Court has, however, adopted it in so far as it applies to negotiable * City of Fort Scott v. Schulenberg, 22 Kansas, 658 ; Schmucker v. Sibert, 18 Kansas, 176. * Walton V. Shelly, i Term R., 296. * Jordaine v. Lasbrooke, 7 T. R.. 601 ; Rich v. Topping, 3 T. R., 27. J 121 7. EVIDENCE. 247 instruments/ and so also have some of the State courts. But the better opinion is, that negotiable instruments enjoy no immunity from the general doctrines of evidence, and that any party to a written contract, negotiable or other- wise, is competent to testify as to its invalidity.^ The rule of exclusion, where applied, is generally limited to negotiable securities indorsed and put in circulation be- fore maturity or dishonor.'' In a recent decision, the United States Supreme Court has given its concurrence in the doc- trine that the rule of exclusion applies " only to a case where a man, by putting his name to a negotiable security, had given currency and credit to it ; and does not apply to a case between the original parties, where the paper has not been put into circulation, and each of the parties was cog- nizant of all the facts." ^ ' Scott V. Lloyd, 12 Pet., 145 ; U. S. v. Leffler, 11 Pet., 86 ; Bank of Metropo- lis V. Jones, 8 Pet., 12 ; Bank U. S. v. Dunn, 6 Pet., 51 ; Saltmarsh v. Tuthill, 13 How., 229 ; Henderson v. Anderson, ^ Id., 73. The United States Supreme Court held, in Bank U. S. v. Dunn, 6 P'et., 57, that " it is a well-settled principle that no man who is a party to a ne^^otiable note shall be permitted, by his own testimony, to invalidate," applying (t to the case of an indorser. In Bank of Me- tropolis V. Jones, 8 Pet., 12, it was held that the drawer of a note is equally in- competent to prove facts which tend to discharge the indorser. In Henderson V. Anderson, 3 How., 73, an effort to overthrow these decisions proved unavail- ing ; and in Saltmarsh v. Tuthill, 13 How., 229, it was held that a party to ne- gotiable paper was as incompetent to prove facts which, taken in connection with others, would invalidate it, as to prove such as would of themselves invali- date it. The rule of exclusion, however, is limited by the Supreme Court to negotiable paper, and is not applied to other securities. U. S. v. Leffler, 11 Pet., 86. * Gaul V.Willis, 26 Penn. St., 259, but now abolished in Pennsylvania by stat- ute ; State Bank v. Rhoads, 89 Penn. St.. 353 ; Lincoln v. Fitch, 42 Me., 456 ; Webster v. Vickers, 2 Scam., 295 ; Drake v. Henly, Walk., 541 ; Rohrer v. Morn- ingstar, 18 Ohio, 579 ; Strang v. Wilson, i Mor. (Iowa), 84; Smith wick v. An- derson, 2 Swan, 573 (overruling Stump v. Napier, 2 Yerg., 35) ; Shamburgh v. Commagere, 10 Mart., 139 ; Dewey v. Warrimer, 71 111., 198. ' Taylor v. Beck, 3 Rand., 316 ; Baring v. Reeder, 4 Hen. & M., 424 ; Orr v. Lacey, 2 Doug. (iNIich.), 230 ; Ringgold v. Tyson, 3 Har. & J., 172 ; Jackson v. Packer, 13 Conn., 342 ; Gorham v. Carroll, 3 Littell, 221 ; Haines v. Dennett, il N. Hamp.. 180; Freeman v. Britton, 2 Har., 191 ; St. John v. McConnell, 19 Mo., 38 ; Stafford v. Rice, 5 Cow., 23 ; Bank of Utica v. Hillard, Id., 153 (over- ruling Winton v. Saidler, 3 Johns' Cas., 185) ; Griffin v. Harris, 9 Port. (Ala.), 225 ; Parsons v. Phipps, 4 Tex., 341 ; Pecker v. Sawyer, 24 Vt., 459 ; Guy v. Hull, 3 Murph., 150 ; Bank of Mo. v. Hull, 7 Mo., 273; Knight v. Packard, 3 McCord, 71. * Parke v. Smith, 4 Watts & S., 287 ; Thayer v. Grossman, i Mete, 46, Shaw C. J. ; Smithwick v. Anderson, 2 Swan, 573. ' Davis V. Brown, 94 U. S. (4 Otto), 427, Field, J. ; see Fox v. Whitney, 16 Mass.. 118. 248 ACTION OR SUIT UPON BILLS AND NOTES. § I2l8. § 1 2 1 8. The identity of each party to the instrument must be proved, and this requisition is satisfied by proof that the party has the same christian and surname.^ The inconvenience of the contrary doctrine, which obtained in some cases, led to its being overruled. " The transactions of the world could not go on if such an objection were to prevail," is the language of Lord Denman, in answer to objection to the sufficiency of such proof.^ Further evi- dence of identity may be required when the name is a very common one in the country ; ^ and so, perhaps, if the party be a marksman.* Where the difference between the name of the payee and indorser consists only in the insertion of a mid- dle initial, it will be presumed that they are the same person.® But the same presumption does not apply as to the identity of the maker and indorser, although the names be identical.^ Where a party signs by initials, it must be shown who they intended to signify.''' § 1 2 19. Proof of signature. — In many of the States proof of the signature of any party sued upon a bond, bill, note, or other evidence of debt is dispensed with by statute, un- less put in issue by denial supported by affidavit, or in some other manner prescribed. Where no such statute applies, evidence of handwriting is the most usual mode of proof. Persons familiar with the party's handwriting may testify as to their opinion of its genuineness. The witness is per- mitted in some jurisdictions to compare the signature with known genuine specimens of the party's handwriting, intro- duced for that purpose in order to form an opinion ; ® in ' Greenshields v. Crawford, 9 M. & W., 314 ; Harrington v. Fry, Ryan & M., 90 ; Sewell v. Evans, 4 Q. B., 626 ; Roden v. Ryde, 4 Q. B., 629 ; Hamber v Roberts, 7 C. B., 861 ; 2 Parsons N. & B., 479. ' Sewell V. Evans, 4 O. B., 626. ' Jones v. Jones, 9 M. & W., 75. * Whitelock v. Musgrove, i Cromp, & M., 511 ; 3 Tyrw., 541 ; 2 Parsons N, & B., 479. ' Hunt V. Stewart, 7 Ala., 525. ' Curry v. Bank of Mobile, 8 Port. (Ala.), 360. ' Jones V. Turnour,' 4 Car. & P., 204. ' Farmers' Bank v. Whitehill, 10 Serg. & R., no; Lyon v. Lyman, 9 Conn. 55 ; Moody v. Rowell, 17 Pick., 490; Hammond's Case, 2 Greenl., 33. § I2 20. EVIDENCE. 24O Others he is not.^ In England, an expert was not by com- mon law permitted to testify from comparison of signatures merely,^ but by statute such evidence is now admissible.^ Where genuine signatures are contained in papers which are in evidence, the jury is permitted to compare the con- tested signature with them.'* § 1220. Admissions. — The admission of the party dis- penses with further proof of his signature.* So a payment, or promise to pay, dispenses with proof of signature® or of agent's authority.''' And as a general rule, the admission of a fact obviates the necessity of other proof thereof, or of any fact which is necessary to the existence of the fact ad- mitted. But an admission may be explained and shown to have been made under a mistake, it hcmg prima facie, but not conclusive evidence. A written admission by an indorser that he received notice of dishonor, has been held not to estop him from showing that he made it under misappre- hension or mistake as to the bill referred to, and that no notice had in fact been received.^ The principle was well stated in an English case by Bayley, J. : "There is no doubt but that the express admissions of a party to the suit, or admissions implied from his conduct, are evidence, and strong evidence against him ; but we think that he is at liberty to prove that such admissions were mistaken or un- true, and that he is not estopped or concluded by them, unless another person has been induced to alter his condi- tion by them."^ , 1 ' Rowt V. Kyle, i Leigh, 216 ; Jackson v. Phillips, 9 Cow., 94 ; Pope v. Askew, I Ired., 16. This is the English rule. Macferson v. Thoytes, Peake, 20 ; Brook- hard V. Woodley, Id., 20 ; overruling Allesbrook v. Roach, i Esp., 351. " Gurney v. Langlands, 5 B. & Aid., 330; Rex v. Cator, 4 Esp., 117. M7 & 18 Vict., 1854. • Doe V, Suckermore, 5 A. & E., 703 ; Doe v. Newton, Id., 514. ' Hall V. Phelps, 2 Johns, 451. " Helmsley v. Loader, 2 Camp., 450 ; Shaver v. Ehle, 16 Johns, 20I. ' Linders v. Bradwell, 5 C. B., 583. • Commercial Bank v. Clark, 28 Vt., 325. • Heane v, Rogers, 9 Barn. & Cres., 577. CHAPTER XXXVIII. THE DISCHARGE OF BILLS AND NOTES BY PAYMENT. SECTION I. NATURE OF PAYMENT. § 1 22 1. 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 is not a contract. It is the discharge 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 extin- guish a bill or note, but continues it in circulation as a valid security against all parties. And it is necessary to consti- tute a transaction a sale that both parties should then ex- pressly or impliedly agree, the one to sell, and the other to purchase the paper.^ Whether the transaction is a pur- > Lancev v. Clark, 64 N. Y., 209 ; affi'g S. C. 8 N. Y, S. C. (3 Hun), 575 ; East- man V. Plumer, 32 N. H., 238. In this case the defendant signed a note as surety for the maker. The note was indorsed in blank, and the indorsee called on the maker for payment. The latter paid and received it. In fact the money used in payment had been placed in the hands of the principal by a third party, who sent it to purchase the note through him as agent, which fact, however, was unknown to the holder. This third party sued the surety ; but it was held that he could not recover, the transaction being regarded as a payment by the maker which extinguished the instrument. Perley, C. J., saying: "The con- tract of the defendant was to pay the note to Roby, the payee or order. By his indorsement in blank, Roby ordered the note to be paid to the indorsee, or to such other person as should become the holder of the note by transfer of the note from Roby. But the holder under Roby's indorsement has made no trans- fer of the note as an existing security. He has received the amount due on the note from the principal debtor, and given up the note to him as paid and dis- charged. Looking at the case, then, as a mere matter of contract, according to his original undertaking on the note, the defendant has hot bound hirrtself to pay it to this plaintiff, because Roby, the payee, has never ordered the contents (250) § 1222. NATJRE OF PAYiMENT. 25 1 chase or a payment, is a question for the jury where the facts are in dispute,^ to be resolved according to the inten- tion of the parties, and looking to the substance of the matter rather than its form.* Credit given by the drawee of a bill, or by a party to a bill or note, who is liable for its payment to the holder at his request, is equivalent to payment.^ But if a bill ac- cepted for the drawer's accommodation be sent to bank for collection, and be credited to the holder at maturity, it has been held that the bank, as its holder, may sue the ac- ceptor.* " Payment of a debt is not necessarily a payment of money ; but that is payment which the parties contract shall be accepted as payment." ° § 1222. Payment can not be converted into purcJiase. — ■ When a party to the instrument produces the money and takes it in, he can not show that he was acting as the secret agent of another, and convert that other into a purchaser.* And when a stranger calls upon the holder of an overdue note, inquires for it, asks if he is willing to receive the money upon it, and pays the amount due, and receives to be paid to him. The holder of the note was not bound to assign it. He might insist that the note should be paid and discharged before he delivered it out of his hand. If he transferred the note by delivery, his assignment would still be a contract involving certain liabilities on his part. He would, for instance, be held to warrant that the note was genuine This defendant was surety, and was interested that the note should be paid by the principal. The holder called on the principal to pay, and he came with the money, paid it over, and the note was given up to him by the holder, with the understanding on his part that it was paid and discharged. So far as the holder of the note and the surety had any information, the note was paid, and the surety was dis- charged, and had a right to rely on the transaction as a payment. But if the plaintiff can maintain this action, the surety might be called on to pay the debt at any time within six years after it fell due, in virtue of a secret arrangement between the plaintiff and the principal debtor, by which the principal would be enabled to deceive his surety with every appearance of having paid the debt, and so relieved the surety from his liability." Approved in Greening v. Patten, 51 Wise, 150. ' Dougherty v. Ueeriey, 45 Iowa, 443. ' Swope v. Leffingwell, 72 Mo., 348. ^ Savage v. Merle, 5 Pick., 83. * Pacific Bank v. Mitchell, 9 Mete, 297. But see chapter XI, vol. I, §§ 325 et seq. ' Hufifmans v. Walker, 26 Gratt., 315, Christian, J. ' Eastman v. Plumer, 32 N. H., 238. 252 DISCHARGE BY PAYMENT. § 1 223. the paper, but declines to have it cancelled, and says noth- ing about a purchase — the transaction amounts to a pay- ment, and can not be regarded as a sale, though the paper be payable to bearer. In such a case it was said in New York, by Welles, J. : " It is true he (the stranger) declined liaving it cancelled ; but that circumstance was not enough to overcome the presumption arising from the facts proved, that it was paid and extinguished. It does not prove a purchase, and unless it was purchased by Riley (the stranger), it was satisfied."^ An action for money had and received lies against a party who fraudulently procures surrender of his note without payment ; and limitation only commences when the fraud is discovered.* In treating the subject of payment, we shall consider : (i) By whom and to whom payment may be made. (2) When payment may be made, and the effect of payment. (3) In what medium payment may be made. (4) Condi- tional and absolute payment ; taking bill or note for or on account of debt. (5) Application of payment. (6) Pay- ment S7ipra protest, or for honor. And shall also consider (7) other discharges. SECTION II. WHO MAY MAKE PAYMENT. § 1223. 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 dis- charged, because, although not compelled to pay it, he ac- quires the right of the holder from whom he took the instrument, or is remitted to his own rights as indorsee.^ But it seems that if the indorser has another note given ' Burr V. Smith, 21 Barb,, 262. ' Penobscot R.R. Co, v. Mayo, 67 Me., 470. • Ellsworth V. Brewer, 11 Pick,, 316. § 1225- WHO MAY MAKE PAYMENT. 253 him to secure and indemnify him for his indorsement, and, not being notified, waives the defence, and voluntarily pays the bill or note, he can not enforce the note given him as indemnity.^ And a stranger has no right to pay or dis- charge the contract of another, and can not pay a bill or note so as to acquire the rights of a holder, except sicp7'a protest, as hereinafter indicated.* But a stranger may always purchase a bill or note with the consent of the holder. And if a stranger takes up a bill payable at a banker's, it is not necessarily a payment by the acceptor, for it may be a purchase of the bill which gives him a right to require payment of the acceptor and others liable.^ A personal representative of an indorser can not purchase — he can only pay the note — as the policy of the law forbids his speculat- ing on the subject of his trust, for his own benefit.'* § 1224. The indorser should assure himself before he ■makes pay77tent that there were no laches in respect to pre- sentment, protest, or notice, which operated a discharge of prior parties, as well as himself ; for if the holder had no right to enforce payment against him or his antecedents, his unnecessary payment could not revive their liability, and, unless made under circumstances of fraud or mistake, which entitled him to recover the amount back from the holder, the loss would fall upon him.^ If he pays under mistake of fact when there were laches he may recover back the amount.^ § 1225. Payor should see that holder traces legal title. — The maker of a note or the acceptor of a bill must satisfy ' Bachellor v. Priest, 12 Pick., 399. "^ Edwards on Bills, 535 ; see §§ 1222, 1254; Burton v. Slaughter, 26 Grat., 919. ' Deacon v, Strodhart, 2 Man. & G., 317 ; Byles on Bills (Sharswood's ed.), r2i6], 354. * Burton v. Slaughter, 26 Grat., 919. ^ Roscoe V. Hardy, 12 East., 434 ; Turner v. Leech, 4 Bam. & Aid., 451. • rosi, § 1226. 254 DISCHARGE BY PAYMENT. § 1226. 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. And payment to a holder under a forged indorse- ment would be invalid as against the true owner, who might require it to be paid again.^ But the maker or acceptor might recover back the money as paid under a mistake of fact.^ When, however, the signature of the drawer is forged, should the drawee accept or pay the bill, he becomes abso- lutely bound, because it is his duty to know the drawer's handwriting ; and if he pays the money he can not recover it back.^ But acceptance does not admit the signature of the drawer as indorser also ; ^ nor the authority of an agent to indorse a bill drawn by him as agent of the drawer.^ If an indorser pays a bill or note upon which there is a prior forged indorsement, he can not recover back the amount, because his indorsement was in itself a warranty that the prior indorsements were genuine.® The payor should also satisfy himself of the identity of the holder ; for he can not defend himself against the real payee by showing that he paid the amount of the bill or note to another per- son of the same name, in good faith and in the usual course of business.' § 1226. Payments under mistake of law or fact. — It is a general principle that money paid with knowledge of facts, but under a mistake of law, can not be recovered back. But a party paying money under a mistake of the real facts may recover it back. Therefore, where a bank paid a post- ^ Smith V. Chester, i Term R., 654 ; Canal Bank v. Bank of Albany, i Hill, 287 ; Goddard v. Merchants' Bank, 2 Sandf., 247. ^ See chapter XLil, on Forgery, section iv. 'Smith V. Mercer, 6 Taunt., 76; Price v. Neal, 3 Burr., 1354; Bank U. S. v. Bank of Georgia, 10 Wheat., 333. * Robinson v. Yarrow, 7 Taunt., 455. See ante, vol. I, § 538 et seq. ^ Story on Bills, § 412 ; ante, vol. i, § 539. ° See chapter xxr, vol. i, § 672. 'Graves v. American Exchange Bank, 17 N. Y., 205. * Adams v. Reeves, 68 N. C, 134. ^ 1227. WHO MAY MAKE PAYMENT. 255 dated check to a holder who knew that the drawer was in- solvent, and that the drawee had no funds, but was in ex- pectation of them that day, and none were received by the bank, it was held that the amount might be recovered back.^ So an indorser, discharged by laches, who pays a bill to the holder under a misrepresentation of facts may recover back the amount,*^ and so if such indorser pays the bill, relying on the notarial certificate of due presentment, when in fact no such presentment was made.^ § 1227. Vouchers of payment. — The party making pay- ment 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 an- other. And if at the time he makes payment it is out- standing, and held by a bona fide holder for value, he will be liable to pay it again, and a receipt taken will be no pro- tection.^ The party making payment of the bill or note should also not fail to insist upon its being surrendered up, as a voucher that the party receiving the money was entitled to do so, and also that he has paid it to him.^ The posses- sion of the note by the maker is presumptive evidence that he has paid it ; ^ and so, likewise, is the possession of the bill ' Martin v. Morgan, 3 Moore, 635 ; see Adams v. Reeves, j«^r- note to E. L. Fant & Co., who had indorsed it to them on August 6th, 1S50, after it had fallen due and been pro- tested for non-payment. Miller & Mayhew sent Davis notice of the transfer to them on the 9th of August, but he did not receive it until afterward ; and 262 DISCHARGE BY PAYMENT. § 1 234. § 1234. Debtor can not compel payment before maturity. — The debtor may, of course, pay the bill or note to any one who is the holder under an indorsement to himself personally, or an indorsement in blank, at any time before maturity, provided the holder consents to receive payment. But if the debtor, from the prospect of some benefit by the rate of exchange, or otherwise, should offer payment before the term arrives, the creditor is not bound to take it, since the term of payment is a condition of the bill or note fixed equally for behoof of both parties.^ § 1235. Time of day for payme7it. — Payment may be demanded at any time after the commencement of bus- iness hours on the day of maturity of the bill or note. And if payment be then refused,^ or if the house at which the instrument is payable be shut up, and no one is there to answer,^ it may be treated as dis- honored, notice given, and resort taken upon the drawer he had already on that day paid the note and taken the receipt of Fant & Co. for the money. This payment was held no defence to the action, Moncure, J., rendering an elaborate and able opinion, in the course of which he cited with approval the obiter dictum of Shaw, C. J., in Baxter v. Little, 6 Mete. R., 7, and advening to the circumstance that no decision had been referred to' holding that it was not a good defence, he added : " On the other hand, however, it may be answered that no case can be found in which it has been decided, or even said that payment to an indorser after an indorsement is a good defence against the indorsee. That no decision can be found the other way is well accounted for by the fact that payment of a negotiable note is very rarely made without taking in the note, or having the payment, if partial, indorsed thereon, and no occasion has therefore occurred for a decision of the question. That no such occasion has occurred is itself an argument in favor of the defendants in error There is, at least, as much reason in holding the maker of a note responsible for want of caution in making a payment as for holding a purchaser responsible for want of caution in making a purchase. Indeed, there is more. For due cau- tion will always protect the former against an improper payment ; while the greatest caution may not protect the latter against an improper purchase. The former is always safe in making payment to the legal holder of the note, which he may thereupon require to be produced and surrendered to him ; while the latter is often deceived by a false possession, and must at his peril look to the title, which may be separate from the possession." See, also, Coppman v. Bank of Kentucky, 41 Miss., 212 ; Elgin v. Hill, 27 Cal., 373. ' Forbes, 108 ; Thomson on Bills, 247. " Ex parte'^oWv^^, i Rose, 303 ; Burbridge v. Manners, i Camp., 193 ; Haynes V. Birks, 3 B. & P., 599; Chitty on Bills (13 Am. ed.) [*397], 448 ; Edwards on Bills, 549; Byles (Sharswood's ed.) [*2i6], 355. ' Hine v. AUely, 4 B. & Ad., 624. ^ 1236. THE EFFECT OF PAYMENT. 263 and indorsers. But the maker or acceptor has the whole day in which he is privileged to make payment, and though he should in the course of the day refuse payment, yet if he subsequently on the same day makes payment, it is good, and the notice of dishonor becomes of no avail.^ A payment after action brought will not prevent the holder from proceeding for his costs, unless they be in- cluded or released.* Payment to a wrong party of a bill or note long dis- honored, or of a check long after it was drawn, or of a check which had been torn into pieces and pasted together, does not discharge the payor,'^ for the circumstances convey reasonable notice that the instrument has been cancelled/ SECTION V. THE EFFECT OF PAYMENT, AND WHO MAY REISSUE A BILL OR NOTE. § 1236. The maker of a note and the acceptor of a bill are the principal parties bound for its payment, the drawer and indorsers being liable as sureties ; and hence a payment by the maker or acceptor discharges the drawer or indorsers and cancels the instrument and the obligation.^ When the bill is accepted for accommodation of the drawer, the latter is bound to refund the amount, should it be paid by the acceptor, and satisfy him for all damages.^ But the ac- ceptor can not sue him on the bill which is his own obliga- > Hartley v. Case, i C. & P., 555 ; 4 B. & C, 339. « Toms V. Powell, 6 Esp., 40 ; Goodwin v. Creamer, 16 E. L. & Eq., 90 ; Kemp V. Balls, 28 Id., 498 ; 10 Exch., 607 ; Tarin v. Morris, 2 Dall., 115 ; Thame v. Boast, 12 Ad. & El. N. S., 808 ; Story on Bills (Bennett's ed.), §423^. ' Scholey v. Ramsbottom, 2 Camp., 485. * Byles on Bills (Sharswood's ed.), [*2i4], 352. ' Suydam v. Westfall, 2 Den., 205 ; Eastman v. Plumer, 32 N. H., 238. • Baker v. Martin, 3 Barb., 634. 264 DISCHARGE BY PAYMENT. § 1 237. tion, cancelled by his payment,^ though it is an item of evi- dence to show the amount on settlement with the drawer.' It has been been held that where a bill was drawn by one person as principal, and another as surety, the undertaking of the latter is with the payee or subsequent holder that the bill shall be accepted and paid, but that he incurs no obli- gation to the drawee who accepts and pays it for accommo- dation.^ But this doctrine has been overruled on the ground that all the parties signing a bill are responsible as for money paid at their request.^ § 1237. Effect of payment by drawer. — If the drawer of a bill pay part of it to the holder, the better opinion is that the holder may nevertheless sue and recover of the acceptor the whole amount, in which case he would receive that portion already paid by the drawer or trustee for him, and would be liable to him, pro tanto, for money had and re- ceived to his use.^ Even if the drawer has paid the whole amount to the holder, yet if he have left the bill in his pos- session, and he should sue the acceptor, it would be no defence as to him.^ For while on the one hand it may be contended that payment by the drawer, \yho is a surety for the acceptor, is an entire extinguishment of the instrument, yet if this w^ere so, the drawer himself could not sue the acceptor upon it, but would have to sue him for money paid at his request."^ It is more correct to regard the pay- * See chapter xxxvil, on Action, §§ 1181, 1206 ; Griffith v. Reed, 21 Wend., 502. * Bank of Vergennes v. Cameron, 7 Barb., 143. ^ Griffith V. Reed, 21 Wend,, 502. * Suydam v. Westfall, 4 Hill, 211 ; 2 Den., 205 ; Edwards on Bills, 534, 535 ; Story on Bills, § 420. ^ Johnson v. Kennion, 2 Wils., 262 ; Walwyn v. St. Quintin, i Bos. & Pul., 652 ; Jones v. Broadhurst, 9 C. B., 173, in which case the whole subject is elab- orately and ably discussed ; Callow v. Lawrence, 3 M. & S., 95 ; Hubbard v. Jackson, i M. & P., 11 (17 E. C. L. R.) ; Byles on Bills (Sharswood's ed.), 354 2 Parsons N. & B., 218; Story on Bills, §422 ; contra. Bacon v. Searles, i H. Bl., 88, now overruled. ^ Jones V. Broadhurst, 9 C. B., 173 ; Thornton v. Maynard, 10 Com. PI. L. R., 69s ; Moak's Eng. R., 522. ' 2 Parsons N. & B., 218, note ^; Byles (Sharswood's ed.), [*2i4], 353, note k § 1238. THE EFFECT OF PAYMENT. 265 ment as a mere extinguishment of the drawer's liability. And it can not matter, nor be good ground of defence to the acceptor who is bound to pay the bill, and may discharge that obligation by payment to any holder who sues. It seems, however, that if the acceptance were for accommo- dation, and the drawer accommodated were to pay the bill, it would operate as an absolute extinguishment, there being no person in existence entitled to receive the money of the acceptor.^ In England, where the drawer paid part of a bill and went into bankruptcy, the acceptor on being sued for the whole amount by the holder was sustained to the extent of the partial payment made in an equitable plea as set-off of an amount due him by the drawer, — the holder being regarded as suing as trustee for the drawer as to the part paid by him.* § 1238. PV/io may reissice a bill or note. — As a bill oi note when paid at maturity by the acceptor or maker is thereby utterly extinguished, it is clear that if he were to reissue it, and it were to pass into the hands of even a bona fide holder, he could not hold the drawer or indorsers liable, for its being overdue would in itself be sufficient no- lice of payment.^ It is equally clear that if the last of several successive indorsers were to pay the bill or note to his indorsee, he could reissue the instrument with or with- out his own indorsement remaining upon it, and that all parties claiming under his second transfer could sue and recover from all prior parties who remain liable to him ; and from him also if his indorsement were upon the instru- ment.* ' Lazarus v. Cowie, 3 Q. B., 459 (43 E. C. L. R.); see Wahv)-n v. St. Quintin, 1 Bos. & P., 652 ; Bacon v. Searles, i H. Bl., 88 ; see Redfield & Bis^elow's Lead. Cas., 350, 351 ; Story on Bills, § 422; Byles on Bills (Sharswood's ed.) [*2I5], 354. "Thornton v. Maynard, 10 Com. PI. L. R., 695 (1875). ' Gordon v. Wansey, 21 Cal., ^^ ; Gardner v. Maynard, 7 Allen, 456. * St. John V. Roberts, 31 N. Y., 441 ; French v. Jarvis, 29 Conn., 348 ; Kirksey V. Bates, I Ala., 303 ; Montgomery R.R. Co. v. Trebles, 44 Ala., 258. See Fenn V. Dugdale, 40 Mo., 63. 266 DISCHARGE BY PAYMENT. § 1 239. § 1238^. Whether drawer may reissue bill. — Differences of opinion have arisen as to the right of a drawer to re- issue a bill. Thus, if A. were to draw a bill upon B., pay- able to the order of C, and C. were to indorse it to D. after its acceptance, and then A. were to pay it to D. — query arises whether or not A. could reissue the bill to E., so as to give him the right to sue the acceptor upon it. Clearly E. could not sue C, for C. was the surety of the drawer, and was discharged by the payment made by him. § 1239. Cases in which drawer can not reissue bill — • Acceptajice for drawer s acco7nmodatio7i. — There are two cases in which the drawer who has taken up a bill at matu- rity can not sue the acceptor, and in which he can not, consequently, so reissue the bill as to enable the holder to sue the acceptor. First: When the acceptance was for the drawer's accom- modation ; for in that case the acceptor was under no lia- bility to the drawer when the latter reissued the bill. And, as after the bill became due, the drawer could only negoti- ate it subject to equitable defences, the acceptor could de- fend himself on this ground.^ An early case may be re- ferred to as authority for this view. Brown drew the bill upon Robley, payable to Hodson or order, and it was ac- cepted by Robley and indorsed by Hodson. Not being paid by the acceptor at maturity, Brown, the drawer, paid it and took it up with Hodson's indorsement remaining thereon. And then Brown gave the bill to Beck as secu- rity for money, not telling him whether or not there w^ere effects in Robley's hands ; and Beck sued Robley as ac- ceptor. It was held that the action could not be main- tained, on the ground, as found by the jury, that " the ac- ceptor was discharged by Brown's taking up the bill, and that there was an end of its negotiabihty," from which it would seem that the bill was made for accommodation of 'Jones V. Broadhurst, 9 Com. B., 173. ^ 1 241. THE EFFECT OF PAYMENT. 267 the drawer.^ So understood, this case is unassailable ; and so it has been construed and approved.^ It has been said to be "no longer law" by an English compiler,^ but with- out assignment of reason or authority for the statement. And in Massachusetts it has been said that " it has never been overruled or denied."* § 1240. Second: When drawer is liable to anindorser. — The drawer could not reissue the bill if the name of any indorser to whom he himself was liable remained upon it. For in that event the holder could not trace title against the acceptor, the indorsements having been discharged. Besides, the indorser, whose name remains upon the bill, would be exposed to liability to a holder, and therefore such a bill is held to be not negotiable.^ The same prin- ciple would apply to forbid the reissue of a bill or note by an intermediate indorser, when the names of subsequent in- dorsers remained upon it, the general doctrine being that a bill or note can not be indorsed or negotiated after it has once been paid, if such indorsement or negotiation would make any of the parties liable apparently who have been already discharged.^ § 1 241. Cases in which drawer or indorser may reissue bill or note. — In all other cases a drawer or indorser may reissue the bill or note.''' Thus, where A. drew a bill upon B,, who accepted it, and it was payable to the draw^er's order, and by him indorsed to C, and by C. to D., and on 'Beck V. Robley, i H. Bl., 89 n. (1774) ; approved in Gardner v, Maynard, 7 Allen, 456 (1863). "Jones V. Broadhurst, 9 Com. B., 173; see opinion of Cressvvell, J. But the fact that it was an accommodation bill is not noticed in Gardner v. Maynard, 7 Allen, 456. See Byles on Bills [*i66], 290. 'Chitty, Jr., on Bills, vol. i, p. 390. * Gardner v. Maynard, 7 Allen, 457, Metcalf, J. 'Gardner v. Maynard, 7 Allen, 456 (1863) ; see also Beck v. Robley, I H.Bl., 89; Jones V. Broadhurst, 9 Com. B., 173. 'Gardner v. Maynard, 7 Allen, 457 ; Chitty on Bills (13 Am. ed.) [*224], 255 | Story on Notes, § 180. ' French v. Jarvis, 29 Conn., 348. 268 DISCHARGE BY PAYMENT. § 1 242. being dishonored by the acceptor was paid by the drawer to D., who struck out his own and C.'s indorsements, it was held that A. might reissue the bill, and the holder could re- cover against the acceptor.^ In the event that the bill were drawn by A. payable to C.'s order, and C.'s indorsement were cancelled, it might be contended that a holder could not trace title against the acceptor. But if the bill were paid by the drawer upon C.'s order, the title would then be in him ; and by virtue of his position, any holder under him, we should say, could recover. The payee and indors- er of a note to whom it is afterward transferred before maturity, in the usual course of business may negotiate it again, and all parties to it at the time it is re-negotiated would be liable to the holder.^ § 1242. Parties negotiating instrument after payment are bound. — It is to be observed that while after payment the parties thereby discharged can not be bound by its re- issue, still bills and notes may remain negotiable after pay- ment, so far as respects the parties who shall knowingly ne- gotiate the same afterward, for in such a case the negoti- ation can not prejudice any other persons, and will only charge themselves.^ But the indorsement of a negotiable bill after its dishonor has been held to be a new and inde- pendent contract, and in its effect between indorser and in- dorsee distinct from the negotiable character of such a bill ; so that if indorsed to a particular person by name, without 'Callow V. Lawrence, 3 Maule & Sel., 95 (1814), Lord Ellenborough saying: «' It does not prejudice anv of the other parties who have indorsed the bill that the holder should be at liberty to sue the acceptor. The case would be different if the circulation of the bill would have the effect of prejudicing any of the in- dorsers. In Beck v. Robley, if the bill had been negotiable it would have had the effect of rendering Hodson liable on his indorsement, which, in point of hw, was discharged by Brown's taking up the bill. That, I think, is the distinction, and disposes of that case." The drawer of a bill who pays it to an indorsee may leave it in his hands to be sued upon by him for the drawer's benefit. Williams v. James, 15 Ad. & El. N. S., 499. =■ West Boston Sav. Inst. v. Thompson, 124 Mass., 506. ' Hubbard v. Jackson, 4 Bing., 390 ; Callow v. Lawrence, 3 M. & S., 95 Guild V. Eager, 17 Mass., 615 ; Mead v. Small, 2 Greenl., 207 ; Story on Bills, §223. 5 I243« THE EFFECT OF PAYMENT. 269 adding the words " or order," or equivalent words of nego- tiability, he can not transfer it by indorsement so as to enable his indorsee to sue upon it in his own name.^ It has been held that if an indorser who pays a bill re- issues it, he is bound by his first or second indorsement ac- cording to intention ; if as one already fixed he need not have notice.* § 1243. Agreeme7it to retire bill. — Sometimes an agree- ment is made to "retire" a bill. It should be construed according to the circumstances of the case. The word "retire" is susceptible of various meanings according as it applies in various circumstances. " If the acceptor retires a bill, he takes it out of circulation — then the bill is paid ; but if an indorser retires it, he only withdraws it from circulation so far as he himself is concerned, and may hold the bill with the same remedies as he would have had, had he been called upon in due course, and paid the amount to his immediate indorsee. This is the ordinary meaning of the word ; and we think it was used in that sense in the letter in question."^ If a note be surrendered by mistake, the whole amount being supposed to have been paid, whereas only a part had been, the balance may be recovered.'' But in the absence of fraud, illegality, or mistake, it could not be.^ 'Leavitt v. Putnam, i Sandf., 199; Story on Bills (Bennett's ecL), 199. » Montgomery R.R. Co. v. Trebles, 44 Ala., 258. See ante, % 997. » Elsom V. Denny, 25 E. L. & Eq., 423, Jervis, C. J. * Banks v. Marshall, 23 Cal., 223. ' Kent V. Reynolds, 15 N. Y. S. C. (8 Hun), 559. 270 DISCHARGE BY PAYMENT. J 1 244, SECTION VI. IN WHAT MEDIUM PAYMENT MAY BE MADE. — THE LEGAL TENDER CASES. § 1 244. The 7noney to be paid is that which is current at the place where payment is to be inade} — But in constru- ing the terms of the bill or note, it is to be interpreted according to the meaning of the words used at the time when, and the place where, the instrument was drawn or made. And accordingly, if the coin which is expressly agreed to be paid be alloyed by the government between the time of contract and the time of payment, the debtor should be required to make good the full value of the coin at the time of the contract. And so, if the name of the coin be changed so as to apply to a lesser value, the amount to be paid should be estimated according to the value at the time of the drawing of the instrument, for payment in that coin then of higher value was contemplated.^ On this sub- ject the authorities exhibit great contrariety of opinion.^ We have simply stated the conclusions which seem to us just and right.* ' Chitty on Bills (13 Am. ed.) [*399], 450; Story on Bills, § 418 ; Williamson V. Smith, I Cold., i. ^ In the case of " The Mixed Monies," Sir John Davies' Reports, a different view was taken. In a subsequent case. Da Costa v. Cole, Holt, 465 ; Skin., 272 (1688), it was held that a bill drawn in England, on Portugal, for 1,000 mille rees, could not be satisfied by tender of mille rees which had been depreciated twenty per cent, by the King of Portugal eight days after the bill was drawn. Holt, C. J., said : " This case differs from the case of Mixed Monies, for there the alteration was by the King of England, who has such a prerogative, and this shall bind his own subjects." ^ See Story's Conflict of Laws, §§ 313, 313a, et seq. ^ Sir William Grant, in the case of Pilkinton v. Commissioners of Claims, 2 Knapp, 17, states the view which we have adopted very clearly. In the course of his opinion, he said : " Vinnius, whose authority was quoted the other day, certainly comes to a conclusion directly at variance with the decision in Sir John Davies' Reports. [The case of the ' Mixed Monies ' above cited.] He takes the distinction that, if, between the time of contracting the debt and the time of its payment, the currency of the country is depreciated by the State, that is to say, lowered in its intrinsic goodness, as if there were a greater proportion of alloy put into a guinea or a shilling, the debtor should not liberate himself by paying § I245« I^ WHAT MEDIUM PAYMENT MADE. 27I § 1245. Party bound rrnist pay in money. — The party bound to make payment has no right to do so in any other medium than that expressed on the face of the instrument- that is, he must make payment in money.* And an agent, holding the instrument for payment, can take nothing else but money.^ Sometimes checks or drafts are offered by the debtor in discharge of the debt, and the effect of giving and receiving them is elsewhere considered.^ But where a bill or note is expressed to be payable " in currency " (in which case, however, it would not be nego- tiable), there is no specification of a particular value which is to be paid ; but only a designation of quantity in nominal value. " One hundred dollars in currency " does not mean the value of one hundred gold dollars to be paid by as much currency as will amount to that value ; but means " one hundred dollars of currency " — that is, one hundred currency dollars. Any currency in circulation at the time of payrnent would then satisfy the terms of the contract — would be the identical thing contracted to be paid — and,- however much depreciated, would be a good tender in discharge of the debt.* the nominal amount of his debt in the debased money ; that is, he may pay in the debased money, being the current coin, but he must pay so much more as would make it equal to the sum he borrowed. But, he says, if the nominal value of the currency, leaving it unadulterated, were to be increased, as if they were to make the guinea pass for thirty shillings, the debtor may liberate himself from a debt of one pound ten shillings by paying a guinea, although he had borrowed the guinea when it was worth but twenty-one shillings." 'Story on Bills, § 419; Edwards on Bills, 550. "^ Ibid. See chapter xi, § 335, ^-01. i ; Herrimon v. Shomon, 24 Kansas, 387 ; Bank of Kansas City v. Mills, 24 Kansas, 610; Chapman v. Cowles, 41 Ala., 103 ; De Mets v. Dagson, 53 N. Y., 635 ; Maddur v. Bevan, 39 iMd., 485 ; Speurs v. Lederbergcr, 56 Mo., 465 ; Davis v. Lee, 20 La. An., 248 ; Moye v. Cogdell, 69 N. C, 93. ' See chapter XLix, on Checks, § 7. ■• Rucker v. Dearing, 18 Gratt., 438, Joynes, J. : "A contract for the payment of so many dollars in Confederate notes was a contract to pay so many dollars of Confederate notes, or so many Confederate dollars. The specification of dollars served only to measure the quantity of the notes, so that, in ever)' such contract, the quantity of notes to be delivered was ascertained, though their value was uncertain. The contract was for quantity only, and not for value." Huston v. Noble, 4 J. J. Marsh, 130; David v. Phillips, 7 Mon., 632; McCord v. Ford, 3 Mon., 166; Chambers v. George, 5 Litt., 335; Diilard v. Evans, 4 Ark., 175, Trebilock v. Wilson, 12 Wall, 694; Taup v. Drew, 10 How., 218. 272 DISCHARGE BY PAYMENT. § 1 246. § 1246. The legal tender cases. — It is provided by the Constitution of the United States (art. I, sec. IX), that " No State shall coin money, emit bills of credit, or shall make anything but gold and silver coin a tender in payment of debts "; and thus any interference of the State governments with the money of the country is forestalled and prevented. It is also provided that Congress shall have power " to coin money and regulate the value thereof," but no power is con- ferred upon it to make anything but coined money "legal tender " in discharge of debts, nor is anything said on that subject. The Constitution, however, declares by art. X of its amendments, that " The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively or to the people." During the war between the Confederate States and the United States, and as a means of raising revenues for its prosecution, Congress, on the 25th day of February, 1863, passed an act providing for the issue of treasury notes, and declaring that they " should be receivable in payment of all taxes, internal duties, excises, debts, and demands of every kind due to the United States, except duties on imports, and of all claims and demands against the United States, of every kind whatsoever, except for interest upon bonds and notes, which shall be paid in coin ; and shall also be lawful money and a legal tender in payment of all debts, public and private, within the United States, except duties on imports and interest as aforesaid." § 1247. Effect of legal tender act and decisions respect- ing it. — The United States Supreme Court has decided that where contracts were made before the passage of this act to pay certain amounts " in gold or silver coin," they were not affected by it ; and according to its opinion and reasoning no contract, whether made before or after the pas- sage of the act, expressed to be payable in coin or specie, can be satisfied by the tender of treasury notes. The result of the legal tender act is that there are now two descriptions of § 1247- IN WHAT MEDIUM PAYMENT MADE. 273 lawful money in use, both of which are legal tender in pay- ment of debts. The statute denomination of both descrip- tions is dollars, but they are essentially unlike in nature. The one is coined out of a precious metal, and possesses an intrinsic value. The other is a promise of the United States to pay a coined dollar, and is without intrinsic value ; and the two dollars differ in their purchasing value. When bills, notes, checks, or other contracts payable in coin are sued upon, judgments should be entered for coined dollars and parts of dollars ; and when payable in dollars generally, without specifying in what description of currency payment is to be made, judgments may be entered generally without such specification.-^ No distinction is made as to the time when such contracts to pay gold may have been entered ' Bronson v. Rhodes, 7 Wall., 245 (1868) ; Butler v. Horwitz, Id., 259 (1868), contract to pay";£i5 current money in Maryland, payable in Enfjlish golden guineas, weighing five pennyweights and six grains, at thirty-five shillings each." Dewing v. Scars, 11 Wall., 379 (1870). Lease bearing yearly rent "of four ounces, two pennyweights, and twelve grains of pure gold in coined money." Strong, J., said : " Judgment should have been entered for coined dollars and parts of dollars, instead of treasury notes equivalent in market value to the value in coined money of the stipulated weight of pure gold." Trebilock v. Wilson, 12 Wall., 687 (1871), Field, J., saying: "The note of the plaintiff is made payable, as already stated, in specie. The use of these terms in specie does not assimilate the note to an instrument in which the amount stated is payable in chattels ; as, for example, to a contract to pay a specified sum in lumber, or in fruit, or grain. Such contracts are generally made because it is more convenient for the maker to furnish the articles desigTiated than to pay the money. He has his option of doing either at the maturity of the contract ; but if he is then unable to furnish the articles, or neglects to do so, the number of dollars specified is the measure of recovery. But here the terms in specie are merely descriptive of the kind of dollars in which the note is payable, there being different kinds in circulation recognized by law. They mean that the designated number of dollars in the note shall be paid in so many gold or silver dollars of the coinage of the United States. They have acquired this meaning by general usage among traders, merchants, and bankers, and are the opposite of the terms in currency, which are used when it is desired to make a note pay- able in paper money. These latter terms, in currency, mean that the designated number of dollars is payable in an equal number of notes which are current in the community as dollars. This being the meaning of the terms in specie, the case is brought directly within the decision of Bronson v. Rhodes, where it was held that express contracts, payable in gold or silver dollars, could only be satisfied by the payment of coined dollars, and could not be discharged by notes of the United States, declared to be a legal tender in payment of debts." To same effect, see Luck v. Faulkner, 25 Cal., 404. ; Higgins v. B. R. & Aw. & M. Co., 27 Cal., 158 ; Smith v. Wood, 37 Tex., 620 ; Phillips v. Dugan, 21 Ohio H. S., 466 ; McGoon v. Shirk, 54 III., 408 (overruling Humphrey v. Clement, 44 III.. 299 ; and Whetstone v. Colley, 36 111., 328) ; but see Wood v. Bullens, 6 Allen, 518 ; Killongh V. Alford, 32 Tex., 457. Vol. II.— 18 274 DISCHARGE BY PAYMENT. § 1 248. into, and the above views apply to contracts made payable in gold, entered into after the legal tender acts were passed, as well as those entered into before.^ If the paper be pay- able " in gold coin or the equivalent thereof in United States legal tender notes," it has been held that a payment in legal tender notes, dollar for dollar, discharges it.^ § 1248. Constitutionality of legal tender act. — In the first case that came before the United States Supreme Court in which the question of the constitutionality of the legal tender act was raised, it was declared that Congress had no power to make anything but coined money a legal tender in payment of debts, and that accordingly the note in suit, dated June 20th, i860, and which was expressed to be payable in "dollars" on February 20th, 1862, could not be discharged by a tender of treasury notes.^ This decision, however, was subsequently overruled, the court in the meantime having been changed by the resignation of one member and the appointment of two new ones.'* But this reversal of what was deemed a just judgment was made under circumstances which divested it of that sanc- tion and acquiescence which have usually attended the de- cisions of that high tribunal. And it may be well said of it (in the language used by Lord Brougham on an occasion which excited his indignation) that it was a " decision which went forth without authority, and will go back without re- spect."^ § 1 249. Creditor s acceptance of depreciated ctirrency is absolute. — If the debtor tenders a depreciated currency in full satisfaction of his debt, or any other currency than gold when it is specifically payable in gold, the creditor ' McGoon V. Shirk, 54 111., 408. ' Killough v. Alford, 32 Tex., 457. ' Hepburn v. Griswold, 8 Wall., 604 (1869), Chase, C. J. * The Legal Tender Cases, noted in 1 1 Wall., 682 (Knox v. Lee and Parker v. Davis), and reported in full in ij Wall, 457 (1870); reaffirmed in Dooley v. Smith, 13 Wall., 605 (1871) ; Bigler v. Waller, 14 Wall., 298 (1871) ; Railroad Co. V. Johnson, 15 Wall., 195 (1872). ^ When judgment was reversed in the case of O'Connell v. McQueen. ^ 1250. APPROPRIATION OF PAYMENT. 2/5 can not by protest accept the medium tendered, and then recover the amount that gold exceeded it in value. He must refuse the tender or accept it ; and if he accepts it without special agreement, he will be considered to have taken it as offered in full satisfaction.^ And the same rule applies in all cases where bank bills are tendered in discharge of debts payable in moncy.^ In like manner, though the instrument be payable in bank notes, legal tender notes, or other medium less valuable than coin, yet, if the creditor tender gold or silver coin, without there being any contract as to the rate at which it is to be taken, and it be received, he can not require it afterward to be applied otherwise than a dollar of coin for each dollar of the amount due, nor make any counter-claim for the value of the coin in excess of the value of the medium of payment expressed in the contract.^ SECTION VII. APPROPRIATION OF PAYMENT. § 1250. When a debtor is indebted to the same creditor in several items of account, and pays him a sum of money in part liquidation of his entire indebtedness, it often be- comes a nice and important question, not only between debtor and creditor, but also as to third parties, to what item the credit shall be applied. With certain limitations and exceptions, the following general principles apply in such cases : ( I ) First : The debtor making payment may appropriate it to zvhatcver ite^n he pleases when the payment is not tinder compulsion of law. '^ — And this right on the part of the cred- ' Gilman v. County of Douglas, 6 Nev., 27. '■' See chapter L, on Bank Notes. ' Bush v. Baldrey, 1 1 Allen, 367. * Chitty (13 Am. ed), [*402], 453 ; Edwards, 554 ; 2 Parsons N. & B., 222 ; Taylor v. Sandford, 7 Wheat., 13 ; U. S. v. January', 7 Cranch, 572 ; Pindall v. Bank of Marietta, 10 Leigh, 484, Cabell, J. ; Miller v. Trevillian, 2 Rob , i • 276 DISCHARGE BY PAYMENT. § 1 25 1. itor continues as between him and his debtor until suit is brought or a dispute arisen ; though in respect of third par- ties who are concerned by the time of application, he must not delay an unreasonable time.* And after he has once made it he is bound by it, and can not change it.^ He may even apply it in prejudice of the rights of a party who is security for one of the debts.^ There can be no election as to application of payment when there was but one debt in existence at the time of payment,* nor can there be any election after the contro- versy as to the application has begun.^ § 1 25 1. (2) Second : If the debtor do not make appli- cation 0/ paymeftt, the creditor may apply it as he pleases!' — In such case the silence of the debtor is construed as leav- ing the matter to the payee, provided it is not an applica- tion peculiarly injurious to him, or against his implied in- tention.''' The creditor could not apply it to debts not due, if there were debts already due.^ The privilege does not apply to compulsory payments ; ^ and if appropriation is Simson v. Ingham, 2 B. & C, 72 ; Hooper v. Keay, i Q. B. Div., 178 (1875) ; Howard v. McCall, 21 Grat., 205 ; Lingle v. Cook, 32 Grat., 272; Harding v. Wormley, 8 Baxter, 578 ; Chapman v. Com., 25 Grat., 721 ; Whittaker v. Pope, 48 Ga., 13 ; Sprinkile v. Martin, 72 N. C, 92 ; Clarke v. Scott, 45 Cal., 86. ' Mayor of Alexandria v. Patten, 4 Cranch, 317; U. S. v. Kirkpatrick, 9 Wheat., 720 ; Pattison v. Hull, 9 Cow., 747 ; Johnson v. Johnson, 30 Ga., 857 • Philpott V. Jones, 2 A. & E., 41 ; Chitty on Bills (13 Am. ed.), [*404j, 456. -Mayor, etc., v. Patten, supra; Hill v. Southerland, i Wash. (Va.), 128. Even though he has applied it to an illegal claim. Hubbell v. Flint, 1 5 Gray, 550. ^ Goddard v. Cox, 2 Stra., 1194 ; Kirby v. Duke of Marlborough, 2 Maule & S., 18 ; Chitty [*402], 454. " Donally v. Wilson, 5 Leigh, 329. ° U. S. V. Kirkpatrick, 9 Wheat., 720. *, Pattison v. Hull, 9 Cow., 747 ; Chapman v. Com., 25 Grat., 721 ; Lingle v. Cook, 32 Grat., 272 ; Harding v. Wormley, 8 Baxter, 578 ; Bennell v. Wilder, 67 111., 327 ; Allen v. Culver, 3 Den., 284 ; Bean v. Brown, 54 N. H., 395 ; Woods V. Sherman, 71 Penn. St., 100. ' Smith V. Screven, i McC, 368. " If he (the debtor) does not make a specific application at the time of payment, then the right of application generally de- volves on the party who receives the money." Hooper v. Keay, i Q. B. Div., 178, Blackburn, J. " Bobe v. Stickney, 36 Ala., 482. ' Blackstone Bank v. Hill, 10 Pick., 129. § 1252. APPROPRIATION OF PAYMENT. 2/7 once made by the creditor, he can not change it.^ If the debtor deny one of the debts, the creditor can not apply payment to it in exclusion of one acknowledged.^ And though the creditor refuse, yet if he receive the money, he must apply it as directed.^ § 1252. (3) Third: Wheji neither party appropriates the payment, the law will apply it according to equitable principles, and with regard to the probable intention of the parties} — It will impute the payment to interest before principal ; ^ and where the interest itself bears interest, it will impute it, first, to interest on interest ; secondly, to interest on principal ; and thirdly, to the principal.^ It will also impute payment to those debts which are prior in date;'^ and to unsecured in preference to secured debts,* unless the latter are secured by a surety, in which case the appropriation will be made for his relief.'' So it will apply payment to the debt most burdensome to the debtor, especially to one bearing interest, or subject- ing him to a penalty or criminal charge, rather than to those which are less burdensome.^" So to a debt which is ^ Tooke V. Bonds, 29, Tex., 419; Hill v. Southerland, i Wash. (Va.), 128; Mayor of Alexandria v. Patten, 4 Cranch, 317 ; White v. Trumbull,. 3 Green (N. T.), 314; Bank of N. A. v. Meredith, 2 Wash. C. C, 47 ; Harding v. Wormley, 8 Baxter, 578. If the debtor were not notified, it is otherwise. Hankey v. Hunter,. Peake Ad. Cas., 107. « Tayloe v. Sandiford, 7 Wheat., 13. ' Reed v, Boardman, 20 Pick., 441 ; Wetherell v. Joy, 40 Me., 325. ^ See Chitty on Bills [^403, 404], 455, 456 ; Lingle v. Cook, 32 Grat., 272. " Lash V. Edgerton, 13 Minn., 210. If payment is made before maturity of a debt drawing interest, it will be appropriated to principal instead of interest Starr v. Richmond, 30 111., 276. ^ Anketel v. Converse, 17 Ohio St., 11. ' Mills V. Fowlkes, 5 Bing. N. C, 461 ; U. S. v. Kirkpatrick, 9 Wheat., 720 ; Bobe V. Stickney, 36 Ala., 482 ; Smith v. Loyd, 11 Leigh, 512 ; Wendt v. Ross, 33 Cal., 650 ; Home v. Planters' Bank, 32 Ga., I. * Lash V. Edgerton, 13 Minn., 210 ; Moss v. Adams, 4 Ired. Eq., 42 ; Baine V. Williams, 10 Sm. & M., 113; Burch v. Tebbutt, 2 Stark., 74 ; Cole v. Withers, 33 Grat., 204 ; Trullinger v. Kofold, 7 Oregon, 228 ; but see Gwinn v, Whitaker. 1 H. & J., 754- ' Marr\-atts v. White, 2 Stark., loi. 10 Wright V. Laing, 3 B. & C, 165 ; Meggot v. Mills, I Lord Ra\TTi., 286 ; Peters v.Anderson, 5 Taunt., 596 ; Spiller v. Creditors, 16 La. Ann., 292 ; con- tra. Mills V. Powlkes, 5 Bing. N. C, 455 ; 7 Scott, 444 ; Stone v. Seymour, 15 Wend., 29. 278 DISCHARGE BY PAYMENT. § 1 253. Still binding in law rather than to one barred by the statute of limitations.^ It has been thought, however, that a cred- itor may apply payment to a debt barred by limitation when the debtor makes no election.^ But this is doubtful at least. The debtor only would be permitted to apply it to an illegal demand.^ If one of two demands becomes barred by limitation before any appropriation of payment is made, then the law will appropriate payment to the barred debt.* If payment is made to a party who holds a debt due to himself, and another due to himself and the plaintiff, he is bound to apply the payment ratably between the two debts.^ § 1253. Payments by partners and joint debtors, — If a partner owes a debtor, of whom his firm is debtor also, and pays the money of the firm, it will be appropriated by law to the debt of the firm ; ^ and if he pays such debtor his own money, it will be appropriated to his own debt.' And no appropriation will be allowed which has the effect of paying one man's debt with another man's money.^ When a person owes the same debtor on joint and on in- dividual account, and simply pays an amount, without ap- propriating it specifically, or it appearing whether it came from his individual or his joint funds, the creditor may apply it to either account.^ " Where one of several part- ners dies, and the partnership is in debt, and the surviving partners continue their dealings with, a particular creditor, ' Nash V. Hodgson, 6 De G. M. & G., 474. ' Armistead v. Brooke, 18 Ark., 521 ; Mills v. Fowlkes, 5 Bing. N. C, 455. ' Kidder v. Norris, 18 N. H., 532 ; Rohan v. Hanson, il Cush., 44; Stone v. Talbot, 4 Wis., 442. * Robinson's Admrs. v. Allison, 36 Ala., 525. ' Colby V. Copp, 35 N. H., 434. * Thompson v. Brown, Moody & M., 40. ' Fairchild v. Holly, 10 Conn., 175. * Thompson v. Brown, Moody & M., 40. * Van Rensselaer's Ex'rs v. Roberts, 5 Den., 570 ; Baker v. Stackpole, ,9 Cow., 420. § 1254- PAYMENT SUPRA PROTEST OR FOR HONOR. '.'79 and the latter joins the transactions of the old and new firms in one entire account, then the payments made from time to time by the surviving partners must be applied tc the old debt." 1 SECTION VIII. PAYMENT SUPRA PROTEST OR FOR HONOR. § 1254. There is a peculiar kind of payment sometimes made after protest, and which is called accordingly pay mcnt supra protest. It is a general principle of the com- mon law, that a stranger can not voluntarily, and without the request of another, pay his debt and acquire a right to reimbursement.^ But an exception is made in respect to bills of exchange, and for the benefit of trade, which is not extended even to negotiable notes.^ When the bill has been protested for non-payment, and not before,'* a stranger may pay it for the honor of the drawer, or acceptor (if it has been accepted), or of any indorser, or he may pay it for the honor of all the parties — for honor generally, as such a payment is termed. And such a payment does not, like a simple payment by the original drawee, operate as a satis- faction of the bill, but itself transfers the holder's rights to the party paying, unless the party paying limits and nar- rows them.^ If the payment is made for the honor of a particular indorser, the party paying may sue such indorser, and all parties prior to him whom he could have re- sorted to, but not subsequent indorsers, for it stands like a payment made at the request of the indorser, for whose honor it is made, and the payor stcpra protest ' Simon v. Ingham, 2 B. & C, 72, ^ayley, J. ; 3 Dowl. & R., 249 ; Hooper v. Keay, 2 O. B. Div., 178. ° Story on Notes, § 453. ' Smith v. Sawyer, 55 Me., 141, * Vandevvall v. Tyrrell, I Mood. & M., 87 ; Bayley (2 Am. ed.), 328 ; Chitty [*5o8, 509], 575 ; Byles [*262], 409. " Chitty on Bills (13 Am. ed.), [*509j, 576. 28o DISCHARGE BY PAYMENT. § 1 255. narrows and limits his rights to recover against them only.^ But if he pays for honor of the bill generally, it is the same as payment for the honor of the last indorsee, and he may recover against all parties to the bill,^ declaring specially upon the bill, according to the custom of mer- chants,^ or generally upon a count for money paid for de- fendant's use.'* But Mr. Chitty says " it is considered safer to declare specially."^ § 1255. Payor supra protest is subrogated to rights of party for whose honor he pays. — As the party paying supra protest becomes substituted, as against parties anterior to the one for whose honor he pays, to the rights and remedies which such party for whose honor he pays would have had against them, had he himself paid, it follows that the right of one who pays for the honor of the drawer to sue the acceptor depends upon whether or not the acceptance was for value.^ In England it was at first held that he could sue the ac- ceptor, whether he had effects of the drawer in his hands oi not ; ''' but this view was subsequently overruled, and the doctrine of the text established.^ § 1256. Whe?i acceptor may pay supra protest. — The ac- ceptor, if he have previously made a simple acceptance, can not pay for honor of an indorser, because, as acceptor, he ' Mertens v. Withing-ton, i Esp., 112; Chitty PS09], 577. Tairley v. Roch, Lutw., 891 ; Chitty P509], 576, 577; Byles (Sharswood's ed.) [*26i], 408 ; Edwards, 441. ^Cox V. Earle, 3 B. & Aid., 430 ; Fairley v. Roch, Lutw., 891. * Vandewall v. Tyrrell, Mood. & M., 87 ; Smith v. Nissen, i T. R., 269 (semble). 'Chitty [*5io], citing Reid v. Smart. 'Byles (Sharswood's ed.) [*26o], 407, 408 ; Chitty [*5o8], 575. "^ Ex parte Wackerbath, 5 Ves., 574 (1800), the Lord Chancellor saying : " I have talked to one or two persons in trade upon this, who answered that the persons accepting for the honor of the drawer have a right to come upon the acceptor. I put the case, that the drawer had no effects in the hands of the acceptor. The answer is, they accept for the honor of the drawer, but they ac- cept an accepted bill. The justice of the case is, that if there were no effects they should go in the first place against the drawer, but they should not be al- together without remedy." ^ Ex parte Lambert, 13 Ves., Jr., 179 (1806). ^ 1258. PAYMENT SUPRA PROTEST OR FOR HONOR. 28 1 is already bound in that character.^ But if he has accepted the bill for the drawer's accommodation, without being in possession of effects, and no provision is made by the drawer for its payment, he may pay it stipra protest, and acquire a remedy against the drawer on the bill.^ But this is unnecessary, except as a precaution in regard to evidence, for without it the acceptor might, in an action for money paid, recover back the amount, though he could not with- out such ceremony recover on the bill. § 1257. The person who desires to pay a bill for the honor of another, must be ready and offer to do so at the time and place of payment, otherwise he will have no right to insist on that privilege.^ No person should make a payment supra protest without ascertaining that the signatures of those for whose honor he pays are genuine ; for should it turn out otherwise, he would have no remedy against them. Nor could he recover back the amount from the party to whom he has paid it, unless he discovers the mistake, and gives notice to him in time to prevent any loss.^ And it has been held that the forgery must be discovered, and the notice thereof given, on the very day of payment, so as to enable the party who holds the bill to give the promptest notice of dishonor, and secure the liability of all prior parties.^ § 1258. The formal mode of makmg payment sicpra pro- test is this : The party proposing to make such payment goes before a notary public after the bill has been noted for protest ® (though it is not necessary that the protest should have been formally extended),''' and makes a declaration for • Chitty on Bills (13 Am. ed.) [*5o8], 575. " Ibid. ' Denston v. Henderson, 13 Johns, 322 ; Bayley on Bills (2 Am. ed.), 329. * See chapter XLII, on Forgery, section iv. ^ Wilkinson v. Johnson, 3 B. & C, 428 ; 5 Dow. & Ry., 403. See chapter XVIII, on Acceptance, § 528, note, vol. i ; Chitty on Bills [*509], 575. *Vande\vall v. Tyrrell, i Mood. & M., 87. See chapter XVlll, sec. vi, § 52^ I'Ol. I. "Geralopulo v. Wieler, 10 C. B., 690 (70 E. C. L. R.) 282 DISCHARGE BY PAYMENT. <§ 1 258 whose honor he makes payment, which declaration should be recorded by the notary, either in the protest or in a separate instrument.^ He must then, in a reasonable time, notify the party for whose honor he pays, otherwise such party will not be bound to refund.^ It is observed by Byles, that "the most obvious and ad- vantageous course to be pursued by a man desiring to pro- tect the credit of any party to a dishonored bill is simply to pay the amount to the holder, and take the bill as an or- dinary transferee. But the holder may possibly object ; for example, the bill may not have been indorsed in blank, and the holder may refuse to indorse even sans recours. In such an event a payment supra protest becomes essential."^ The privilege of payment supra protest is not extended by the law merchant to promissory notes, which are not de- signed for such general circulation as bills of exchange, and the party making such payment acts at his peril.^ * Byles (Sharswood's ed.) [*26o], 407; Chitty [*509], 575, 576; Edwards on Bills, 441. "^ Wood V. Pugh, 7 Ham., 164. * Byles (Sharswood's ed.) [*26i], 408. * Byles on Bills (Sharswood's ed.), [*262] ; Story on Notes, § 453. CHAPTER XXXIX. CONDITIONAL AND ABSOLUTE PAYMENT. TAKING BILL OB. NOTE FOR OR ON ACCOUNT OF A DEBT. SECTION I. WHEN THE PRESUMPTION OF PAYMENT ARISES FROM TAKING A BILL OR NOTE. § 1259. When a bill or note is taken for or on account of a debt, the question arises whether it was taken in absolute discharge of it, and operates as a complete merger, or simply as a collateral security, or in suspension of the debt, during its currency. The intention of the parties is the controlling element. And if there be any distinct agree- ment on the subject all controversy is silenced. But when no particular intention is manifested, and no express or im- plied agreement appears, the question is to be solved by principles of law which make presumptions as to the in- tention of the parties according to the circumstances of each particularcase. Sometimes the debt is antecedent to the giving of the bill or note ; sometimes contemporaneous. And the debtor may give (i) his own bill or note ; or (2) transfer the bill or note of another w^ithout indorsement ; or (3) transfer it with indorsement. § 1 260. Debtor s bill or note for precedent debt. — Firstly, let us consider the case when the debtor gives his own bill or note for or on account of a precedent debt. It is a general principle of law that one simple executory contract does not extinguish another for wdiich it is substituted, and negotiable securities form no exception. And by the general commer- " (2S3) 284 CONDITIONAL AND ABSOLUTE PAYMENT. § I260. cial law, as well of England ^ as of the United States,^ a bill of exchange drawn or promissory note made by the debtor does not discharge the precedent debt for which it is given, unless such be the agreement of the parties. The creditor may return the bill or note when dishonored by non-acceptance or non-payment, and proceed upon the orio-inal debt. The acceptance of the instrument by the creditor is considered as accompanied by the condition of its payment. Thus, it was said in the time of Lord Holt : " A bill shall never go in discharge of a precedent debt, except it be a part of the contract that it shall be so." ^ Such has been the rule in England ever since ; and it pro- ceeds upon the obvious ground that nothing can be justly considered as payment in fact but that which is in truth such, unless something else is agreed to be received in its place ; and that a mere promise to pay ought not to be re- garded as an effective payment is manifest. It is to be regretted that any exception should be found 1 Dowse V. Master, Style, 263 ; Smith v. Chester, i T. R., 655 ; Richardson v. Rickman, 5 T. R., 517 ; Price v. Price, 16 M. & W., 232. 2 The Kimball, 3 Wall, 45 ; Bank U. S. v. Daniel, 12 Pet., 32 ; Peters v. Bev- erley, 10 Pet., 532 ; Downey v. Hicks, 14 How., 240; Clark v. Young, i Cranch, 181 ; Sheehy v. Mandeville, 6 Id., 253 ; Lewis v. Davison, 29 Grat., 226 ; McCluny V. Jackson, 6 Grat., 96 ; McGuire v. Gadsby, 3 Call., 324 ; Armistead v. Ward, 2 Pat. & H., 515 ; Middlesex v. Thomas, 5 C. E. Green, 39 ; Glenn v. Smith, 2 Gill & J., 512 ; Clopper v. Union Bank, 7 Har. & J., 120 ; Walton v. Bemiss, 16 La., 140 ; McLaren v. Hall, 26 Iowa, 298 ; Steamboat Charlotte v. Hammond, 9 Mo., 63 ; Yarneil v. Anderson, 14 Id., 619 ; Doebling v. Loss, 40 Id., 1 50 ; Archibald v. Argall, 53 111., 307 ; Miller v. Lumsden, 16 111., 161 ; Logan v. Attix, 7 Iowa, ^y ; Davis' Estate, 5 Whart., 537 ; Jones v. Strawhan, 4 Watts & S., 261 ; Mclntyre v. Kennedy, 29 Penn. St., 448 ; Dougal v. Cowles, 5 Day, 511 ; Merrick v. Boury, 4 Ohio St., 60 ; SutUff V. Atwood, 15 Ohio St., 186 ; Burdick v. Green, 15 Johns, 249; Cole V. Sackett, i Hill, 516; Winsted Bank v. Webb, 39 N. Y., 325; Hawley v. Foote, 19 Wend., 516; Frisbie v. Lamed, 21 Wend., 450; Syracuse R.R. Co. V. Collins, 3 Lans., 29; Smith v. Miller, 43 N. Y., 171 ; Board of Edu- cation V, Fonda, T] N. Y., 350; Gordon v. Price, 10 Ired., 385; McNeil v. McCamley, 6 Tex., 163 ; Union Bank v. Smiser, i Sneed, 501 ; Marshall v. Mar- shall, 42 Ala., 149; Mvatts v. Bell, 41 Ala., 222 ; Guionv. Doherty, 43 Miss., 538 Stam V. Kerr, 31 Miss., 199 ; Welch v. AUington, 23 Cal., 322 ; Smith v. Owens, 21 Call, II ; Edwards on Bills, 203; Breitung v. Lindauer, 37 Mich., 217 ; Poole V. Rice, 9 W. Va., 73; Feamster v. Withrow, 12 W. Va., 611 ; In re. Hurst, I Flippin C. C. R.,462 ; Walsh v. Lennon, 98 111., 27 ; Wilbur v. Jernegan, 11 R. I.. 113; Nightingale v. Chafee, 11 R. I., 609; Crawford v. Roberts, 50 Cal., 236; Brown v. Olmsted, 50 N. Y. 163; Nightingale v. Chafee, 11 R. I., 619. ° vjlark V. Mundal, i Salk., 124. ^ I 26 1. PRESUMPTION FROM TAKING A BILL OR NOTE. 285 in the adjudicated cases to the adoption of a principle so generally prevalent and so well founded in reason. But the courts of Massachusetts, Maine, Vermont, Indiana, and Louisiana have held that the taking of a bill or note on account of a precedent debt is to be presumed to be a satisfaction of it ; but they admit parol evidence to rebut this presumption, by proof of an express or implied con- tract that the debt should only be suspended, not dis- charged.^ And when the old note is secured by mortgage the presumption of payment does not arise as in other cases. '^ § 1 261. Secondly : Debtor s note for contemporaneous debt. — When a person contracts a debt or purchases goods, and contemporaneously executes his own note for the amount. Story '^ considers it /r/;;2«_/^z^zV conditional payment only; while Parsons says :* " It seems to be substantially selling a note by barter, or exchanging it for goods." ** And we can hardly conceive," he adds, "of a bill being taken at the time of the sale, unless it be the understanding of the parties to regard it as payment. The remedy on the note or bill, which is more convenient to the creditor, is all that should be allowed him, for there is no sufficient reason for allowing resort to be had to the original." There is certainly great force in the reasoning of Parsons. 1 Ely V. James, 123 Mass., 36, and held presumably the same in Maine. Parkham Sewing-Machine Co. v. Brock, 113 Mass., 19-I.; Dodge v. Emerson, Mass. S. C, Oct., 1881 ; Albany L. J., vol. 25, No. 8 (Feb. 25, 1882), p. 155. Appleton V. Parker, 15 Gray, 173; Thatcher v. Dinsmore, 5 Mass., 302; Whit- conib V. Williams, 4 Pick., 231 ; Chapman v. Durant, 10 Mass., 51 ; Goodenow v. Tyler, 7 Mass., 38 ; Wood v. Bodwell, 12 Mass., 289 ; Varner v. Nobleborough, 2 Greenl., 124 ; Gooding v. Morgan, 37 Me., 619 ; Gilmore v. Bussey, 12 Me., 418 ; Ward V. Bourne, 56 Me., 161 ; Hutchins v. Olcutt, 4 Vt., 549 ; Torrey v. Baxter, 13 Vt., 452 ; Dickinson v. King, 28 Vt., 378 ; Farr v, Stevens, 26 Vt., 299 ; Gas- kins V. Wells, 15 Ind., 253; Smith v. Bettger, 68 Ind., 254; Hunt v. Boyd, 2 La., 109 ; Mehlberg v. Fisher, 24 Wise, 607. The learned editors of American Leading Cases attribute the departure of these cases from the general rule to a variation in the course of business, which attaches a different meaning to the same acts and declarations. 2d vol., 250. "^ See § 1266^, and Taft v. Boyd, 13 Allen, 84 ; Parkham Sewing-Machine Co. V. Brock, 113 Mass., 194; Dodge v. Emerson, S. C. Mass., Oct., 1881 ; Albany L. J., Feb. 25, 1882, p. 155. ' Story on Notes, § 104. * 2 Parsons N. & B., 157. ■286 CONDITIONAL AND ABSOLUTE PAYMENT. §1262 But, on the other hand, the debtor has broken his contract to pay when his bill or note is dishonored ; and if the cred- itor, who has parted with value, sues for the original con- sideration, the authorities predominate in favor of allowing him to recover ; ^ though the views of Parsons are sustained by some of the adjudicated cases. And were the question of new impression, we should be inclined to adopt them. § 1262. Thirdly : Strangers bill or note for precedent debt indorsed or unindorsed. — If A. be indebted to B. in the sum of one hundred dollars, and when applied to for the money, he gives him the draft of C. on D., payable to his (A.'s) order, and himself indorses it, he would, of course, be liable as indorser in the event of its dishonor, and of due presentment and notice. But suppose he simply passes to B., by delivery, the draft of C. on D. payable to bearer, and that, when due, it is dishonored, does the precedent indebted- ness revive ? In England, where goldsmiths' and bankers' notes are so passed by delivery for precedent debts, it is con- sidered that, if not paid after due diligence taken in present- ing them, the creditor may sue on the original consideration, provided he gives timely notice of their dishonor;^ and it has been considered that the same rule governs the transfer by delivery of ordinary bills and promissory notes of private persons.^ High American authorities support this view,* and ' In 2 American Lead. Cases, 263, it is said : " There is much less reason for supposing that payment for a contemporaneous sale on the bills or notes of an individual is absolute, than where it is made in bank notes ; and it would seem that this effect can not be ascribed to it, as a matter of law, and apart from the agreement of the parties. The cases fully establish that, in the absence of such an agreement, the vendor may sue for goods sold and delivered, when the in- strument is drawn and indorsed by the vendee, and is dishonored by the party primarily liable for its payment, as maker or acceptor." See Sheehy v. Mande- ville, 6 Cranch, 253. '^Ward V. Evans, 2 Ld. Raym., 928 ; Moore v. Warren, i Stra., 415. ' Camidge v. Allenby, 6 B. & C, 373 ; Swinyard v. Boyes, 5 M. & S., 62 ; Van Wart v. Woolley, 3 B. & C, 439 ; S. C, 5 Dow. & R., 374 ; ex parte Black- bume, 10 Vesey, 204 ; Story on Bills, § 225. *M'Lughan v. Bovard, 4 Watts, 315, Gibson, C. J. ; Leaugue v. Wasing, 85 Penn. St., 244 ; Gordon v. Price, 10 Ired. Law R., 388, Ruffin, C. J. ; Downey V. Hicks, 14 How., 249 (a certificate of deposit), Taney, C. J. ; Gibson v. Tobey, 53 Barb., 195 ; Crane v. McDonald, 45 Barb., 355 ; Noel v. Murray, 3 Kern, 169 ; I Duer, 388 ; Gallagher v. Roberts 2 Wash. C. C, J 93. 5> 1264. PRESUMPTION FROM TAKING A BILL OR NOTE. 287 it is earnestly advocated and may be justly regarded as the wisest and best view, and more consistent with the general principles which are accepted as applicable to conditional and absolute payments ; but it must be contended that there is great force in the reply that, as such instru- ments may be indorsed, and generally are indorsed, when the transferrer assumes any liability for their pay- ment, the more natural presumption, however easily overthrown, would be that when the transferee takes them without indorsement, he takes the risk on himself.^ If the. party indorses the note, it will operate as absolute payment, unless he has due notice of dishonor.^ A refusal of the debtor to indorse the note would be evidence that it was received as payment.^ § 1263. In an English case, where it appeared that in the morning A. sold B. a quantity of corn, and at three o'clock in the afternoon of the same day, B. deli veered to A., in pay- ment, certain promissory notes of the bank of C, which had then stopped payment, but which circumstance was not at the time known to either party, Bayley, J., said : " If the notes had been given to A. at the time when the corn was sold, he could have had no remedy upon them against B. A. might have insisted on payment in money, but if he con- sented to receive the notes as money, they would have been taken by him at his peril." And it was held that B. was bound, as the notes were given after the debt was contracted."* But this distinction has been much criticised.^ § 1264. FourtJily : Stranger s note for contemporaneous debt unindorsed. — When the debtor transfers the bill or ' Dennis v. Williams, 40 Ala., 633. Payee surrendered a note, and took note of stranger from debtor, without indorsement. Held, absolute payment. "• Soffe V. Gallagher, 3E. D. Smith, 507 ; Stam v, Kerr, 31 Miss., 199 ; cor.tra, Cook V. Beech, 10 Humph., 413. ^ Breed v. Cook, 15 Johns, 241. * Camidge v. Allenby, 6 B. & C , 373. See chapter XXII, § 740, vol. I, and also chapter on Bank Notes ; 2 Parsons N. & B., 1 56, note 7n. ' Timmins v. Gibbins, 18 Q. B., 722 ; 14 E. L, & Eq., 64; Corbet v. Bank ot Smyrna, 2 Harring. (Del.), 235. 288 CONDITIONAL AND ABSOLUTE PAYMENT. § 1 265 note of a third party for a contemporaneous debt, without indorsing it, there is certainly strong reason for presuming the transaction to be an exchange of the bill or note for the consideration moving to the debtor. The debtor parts with his property in the instrument, and the party with whom he is dealing parts with his goods, undertakes to do something, or otherwise gives him value. The instrument transferred, in the absence of an express or implied agreement, would seem to constitute in itself the consideration moving from the vendee, and there would be no debt merged in it, or capable of revivor by its dishonor. This view is well sus- tained by authority,^ but not without dissent. § 1265. Fifthly : Stranger'' s note for contemporaneous debt indorsed. — When the debtor transfers and indorses the bill or note of a third party for a contemporaneous debt, the view is generally adopted that there is a presumption of conditional payment only. The indorsement is like the drawing of a new bill by the debtor, and, as his contract is broken by its dishonor, the creditor may sue, as in the first case, for the amount of the consideration. The indorse- ment by the debtor, by which he incurs personal liability, rebuts the presumption of a mere exchange of the paper for the goods or other consideration, which arises when there is mere transfer of a third party's bill or note by de- livery, or indorsement without recourse.^ ' Bank of England v. Newman, i Ld. Rayin., 442 (1699) ; Chitty, Jr., 207, Holt, C. J., saying: "If a man give such a bill (a bill payable to himself or bearer) for money not due before without indorsement, it is a sale of the bill." Ex parte Blackburne, 10 Ves., 204 ; Fydell v. Clark, i Esp., 447. A banker discounting a bill gave his customer bills and notes without indorsing them. Lord Kenjron said (the bills turning out bad) : " Having taken them without in- dorsing them, he hath taken the risk on himself" Whitbeck v. Vanness, 11 Johns, 409 ; Breed v. Cook, 15 Johns, 242 ; Tobey v. Barber, 5 Johns, 68 ; Noel v. Murray, i Duer, 388, Oakley, C. J. ; Camidge v. Allenby, 6 B. & C, 373 ; 2 Parsons N. & B., 156, 183 ; Byles (Sharswood's ed.) [*I54, 372, 373], 275, 552 ; Edwards, 204; Gibson v. Toby, 53 Barb., 195 (1869). But presumption may be rebutted. Porter v. Talcott, i Cow., 381 ; Rew v. Barber, 3 Cow., 279; Torrey v. Hadley, 27 Barb., 196 ; Gordon v. Price, 10 Ired. Law R., 388, Ruffin, "Monroe v. Huff, 5 Den., 369; Boyd v. Hitchcock, 20 Johns, 76; Soffe v. Gallagher, 3 E. D. Smith, 507 ; Shriner v. Keller, 25 Penn. St., 61 ; 2 Am. Lead Gas., 263 ; 2 Parsons N. & B., 159. ^ 1266. PRESUMPTION FROM TAKING A BILL OR NOTE. 289 § 1266. Presumptions as to, and effect of, renewals. — Where a new bill or note is given in renewal of another bill or note, and the original is retained, the new bill or note operates only as a suspension of the debt evidenced by the original, and is not a satisfaction of it until paid. Such at least is the weight of authority.^ And in England it has been held that if the new bill or note, though paid at ma- turity, be not large enough to cover the principal and in- terest of the dishonored bill, the latter revives and may be sued on.^ But there are cases in which it is held that the old note is merged in the new one.'^ Where a note is re- newed, it is said by eminent authority that, according to the general custom and understanding of the mercantile world, the new note cancels the old note for which it is given, and which is taken up, as it is termed ; ^ but no prec- • Kendrick v. Lomax, 2 C. & J., 405 ; Bishop v. Rowe, 3 M. & S., 362 ; Cumber V. Wane, i Stra., 426; Woods v. Woods, 127 Mass., 141. In McGuire v. Gadsby, 3 Call., 234, eleven small notes for fifty dollars each were given to the plaintiff McGuire v. Gadsby, who owed him five hundred and fifty dollars on his orig-inal note for that amount. Three of the small notes were paid, and eight re- maining unpaid, McGuire brought suit on the note for $550, and the defendant pleaded payment and gave these facts in evidence. Roane, J. : " Do the smaller notes extinguish the former } On this subject we take the law to be settled, that, in order to make one instrument an extinguishment of another, the latter must be of a higher dignity than the former, or must put the plaintiff in a better condi- tion, neither of which is the case of these notes, all precisely of the same tenor, and not sealed ; nor do the latter place the plaintiff in a better condition than the former. They benefit the defendant, indeed, by giving him a further day of payment, which he did not avail himself of, and can not now turn that favor to the prejudice of the plaintiff, who did not sue until three months after the most remote payment was to have been made." East River Bank v. Butterworth, 45 Barb., 476 ; Gregory v. Thomas, 20 Wend., 17 ; Waydell v. Luer, 5 Hill, 448 ; Cole V. Sackett, i Hill, 516; Moses v. Price, 21 Grat., 556; Hobson v. David- son, 8 Mart. (La.), 431. In ex parte Barclay, 7 Ves., 597, the new bills were given " in lieu " of the originals, but the latter being left with the plaintiff, it was held he could sue upon them. Byles (Sharswood's ed) [*229], 373 ; Chitty on Bills (13 Am. ed.) [*i8i], 207 ; Benjamin's Chalmers' Digest, 253, 254. ' Lumley v. Musgrave, 4 Bing. N. C, 9 ; 5 Scott, 230. *Nichol V. Bate, 10 Yerg., 429; Hill v. Bostick, 10 Humph., 410; Slaymaker V. Gundacker, 10 S. & R., 75, /^r Tilgham, C. J. In Maine, Massachusetts, and Vermont, where a note is presumed to be payment, the new note is of course presumed to discharge the old. Cornwall v. Gould, 4 Pick., 444 ; Huse v. Alex- ander, 2 Mete, 157. But otherwise if the old note were secured by mortgage. See §§ 1260, i266(T. *2 Parsons N. & B., 203 ; Bank of Commonwealth v. Letcher, 3 J. J. Marsh, 195, obiter. Vol. II.— 19 290 CONDITIONAL AND ABSOLUTE PAYMENT. § 12 66^. edent clearly in point is cited, and the distinction is not recognized in the adjudicated cases.^ In a number of cases it is held to depend upon the in- tention of the parties,*^ and, of course, an express agreement would control the effect of giving the new note. But it should be shown that it was expressly agreed that the old one should be extinguished, in order to have the effect of extinguishment.^ § 1266(3;. Surrender of old security. — The delivery or surrender to the maker of the old note upon its being re- newed, does not in itself raise a presumption of its extin- guishment by the new, it being considered as a conditional surrender, and that its obligation is restored and revived if the new note be not duly paid,* and the same rule ap- plies when the new note has been carried to judgment, but without satisfaction.^ Professor Parsons says, however, as we have already seen in the preceding section, that the general custom and un- ' Moses V. Trice, 21 Grat., 556 ; Olcott v. Rathbone, 5 Wend., 490. See vol. i, §205. ''Weakly v. Bell, 9 Watts, 273 ; Morriss v. Harvey, S. C. of Va., Sept., 1881 ; Va. Law Journal, January, 1882, p. 21. = Crockett v. Trotter, i Stew. & P., 446. * Olcott V. Rathbone, 5 Wend., 490 ; Jag-ger Iron Co. v. Walker, 76 N. Y., 522; Parrott v. Colby, 71 N. Y., 597 (affirming S. C. 6 Hun, 55; overruling Fisher v. Marvin, 47 Barb., 1 59) ; Edwards on Bills, 200 ; 2 Parsons N. & B., 164; 5 Robinson's Practice, 848; Abbott's Trial Evidence, 447 ; contra, Mor- gan V. Creditors, i La., 527 ; Smith v. Harper, 5 Calif., 329 ; Morriss v. Harvey, S. C. of Va., Sept. 3, 1881 (semble) ; Va. Law Jour., Jan'y, 1S82, p. 17 ; 2 Par- sons N. & B., 203 ; see ante^ vol. i, § 205. ^ In First Nat. Bank v. Morgan, 13 N. Y. S. C. (6 Hun), 348, suit was brought on a note dated September 8th, 1869. On November 8th, 1869, a renewal note was given in place of the preceding, which had been delivered up ; and upon the re- newal note judgment was obtained, but execution thereon was returned unsat- isfied. Bockes, J., said : " Now did the acceptance of this note of November 8th, and the subsequent proceedings thereon to enforce its payment, discharge the debt as against Morgan's estate } The giving of the note of November 8th did not satisfy or discharge the debt evidenced by the note of September 8th. Cole v. Sackett, i Hill, 516 ; Elwood v. Deidendorf, 5 Barb., 398 ; Winsted Bank v. Webb, 39 N. Y., 325 ; Pratt v. Foote, 12 Barb., 212, 213 ; Farrington v. Frank- fort Bank, 24 Id., 562 ; Olcott v. Rathbone, 5 Wend., 490 ; Bates v. Rosekrans, 37 N. Y., 409. Nor did its prosecution to judgment without satisfaction. Davis V. Anable, 2 Hill, 339 ; Hawks v. Hinchleff, 17 Barb., 492 ; Corn Exchange Ins, Co. v. Babcock, 57 Id., 231." ^ 1267. PRESUMPTION FROM TAKING A BILL OR NOTE. 29 I derstanding of the commercial world would seem to de- mand a contrary ruling when the old note is surrendered.^ § 1266/5. When debt would be lost, renewal 7iot deemed payment. — Even where a note is considered as paid and discharged by one given for it, as a general rule, the case is excepted where the debt would by such construction be lost, because then the intention to receive the second as a discharge would be prima facie rebutted. This view would apply where the first note is secured by mortgage,^ and when the renewal is forged or altered.^ § i266<;. Renewals of notes in bank. — In a recent New York case, Andrews, J., said : " It may well be, that by common understanding and usage, when a note is dis- counted by a bank to take up a prior note held by the bank against the party procuring the discount and the avails are credited to him, the transaction is to be regarded as an extinguishment of the prior note, although it may not have been actually surrendered."* The constant introduction of such refinements shows an impatience with the general principle that a note is not payment unless paid ; and if that general principle be conceded, as it must be, to be the rule of the common law and the law merchant, consistency with principle would not admit anything to be payment except money, or something else accepted as such. As said in another New York case by Folger, J. : " Until the prom- ise is in fact redeemed there is no payment."^ § 1267. Rebuttal of presumptions. — The presumptions of the law which have been referred to are universally held to ' 2 Parsons N. & B., 203 ; attte, % 1266. 2 Watkins v. Hill, 8 Pick., 522 ; see Pomeroy v. Rice, 16 Pick., 22 ; 2 Parsons N & B., 205, 219 ; see vol. i, § 748 ; Taft v. Bovd. 13 Allen, 84 ; Dodge v. Emer- son, S. C. Mass., Oct., 1881 ; Albany L. J. for Feb. 25, 1882, p. 155. ' Ante, § 205 ; Ritter v. Singmaster, 73 Penn. St., 400 ; Sloman v. Cox, i C. M. & R., 471 ; Goodrich v. Tracey, 43 Vt., 314; Byles on Bills (Sharswood's ed.) [*23o], 373 ; Edwards on Bills, 200. « Phoenix Ins. Co. v. Church, 81 N. Y., 226 (1880). * Jagger Iron Co. v. Walker, 76 N. Y., 526. 292 CONDITIONAL AND ABSOLUTE PAYMENT. § 1 267 be open to rebuttal ; and it is competent for the parties to show that the bill or note was by express agreement received in absolute payment and discharge of the contemporaneous or precedent debt, or the contrary,^ or that there were facts and circumstances attendant upon the transaction from which an understanding and agreement might be inferred.' But the mere fact that a receipt or memorandum passed between the parties at the time speaks of the transaction as " in payment," or " payment in full," or " in satisfaction," it has been considered would not alone warrant the infer- ence that absolute payment was intended, but would be in- terpreted as meaning conditional payment, to be in full when paid.^ But a different view has been taken in some cases.* It is clear that when the receipt is " in full when paid," it contemplates the transaction as conditional pay- ment only.^ And the presumption of payment does not apply where the creditor abandons some security which he held when he takes the paper.^ The transaction, however, is always to be inspected in all its parts, and the intent of the parties, as revealed by its circumstances, is the controlling guide to ' Boyd V. Hitchcock, 20 Johns, 76 ; Booth v. Smith, 3 Wend,, 66 ; Thompson V.Wilson, 27 Ind., 370; Appleton v. Parker, 15 Gray, 173; Butts v. Dean, 2 Met, 76 ; Comstock v. Smith, 22 Me., 262 ; Follett v. Steele, 16 Vt., 30 ; Shum- way V. Reid, 34 Me., 560 ; Iowa Co. v. Foster, 49 Iowa, 676. " Harris v. Lindsay, 4 Wash. C. C, 98, 271 ; White v. Howard, i Sandf., 81. ' Tobey v. Barber, 5 Johns, 68 ; Maillard v. Duke of Argj^Ie, 6 Man. & G., 40 ; Berry v. Griffin, 10 Md., 27 ; Muldon v. Whitlock, i Cow., 290 ; Glenn v. Smith, 2 Gill & J., 494; Putnam v. Lewis, 8 Johns, 389; Steamboat Charlotte v. Ham- mond, 9 Mo., 58; McLughan v. Bovard, 4 Watts, 308 ; Gardner v. Gorham, r Doug. (Mich.), 507 ; In re. Hurst, i Flippin C. C. R., 462 ; Hotchin v. Secor, 8 Mich., 494; Feamster v. Withrow. 12 W. Va., 651 ; Dudgeon v. Haggart, 17 Mich., 273 ; Burchard v. Frazer, 23 Mich., 228 ; Maze v. Miller, i Wash. C. C, 328 ; 2 American Leading Cases, 246, 247. In i Smith's Lead. Cas. (7 Am. ed.), 613, it is said : " Merely receipting the notes as cash, or giving a receipt in full, or receipting the notes as being payment of the debt, will not alone be suf- ficient to prove that the notes were taken, not as conditional payment, but as an immediate and absolute discharge." * The rule in Louisiana is different. Barron v. How, 13 Mart. (La.), 144. * Dayton v. Trull, 23 Wend., 345. * Pomeroy v. Rice, 16 Pick., 22 ; Butts v. Dean, 2 Mete, 76 ; Fowler v. Lud wig, 34 Me., 455. ^ 1269. PRESUMPTION FROM TAKING A BILL OR NOTE. 293 Its construction. And the words " received and accepted in satisfaction," employed in settlement of a claim which was in judgment against the maker of the note, coupled with the fact that he gave an indorser on the note so given, were recently considered in Virginia sufficient to show an abso- lute discharge of the judgment by the debtor's note in- dorsed.^ § 1268. In some cases it has been held that an agree- ment to take a bill or note in absolute payment of a debt must be express in order to render it such ;^ but the better opinion is that such agreement may be implied, as well as expressed, and that all the circumstances may be looked to, to ascertain what was the actual agreement of the par- ties.^ § 1269. Frazidulent representations on transfers in pay- ment render the7n void as such. — If the debtor, at the time when he passes the bill or note of a third party in payment, represents that it is good, or that the parties to it are solv- ent, knowing at the time the contrary, it is a fraud upon the creditor, and. immediately on discovering it he may sue the debtor for the original debt.* Or if such bill or note were given for goods delivered at the time, the vendor may disaffirm the contract, and sue in trover for the goods. In New York, where there was an agreement to sell a * Morriss V. Harvey, S. C. of Va., September, 1881 ; Va. Law Journal, January, 1882, p. 21. ' Dougal V. Cowles, 5 Day, 511 ; Muldon v. Whitlock, i Cow., 290; Hays v. Stone, 7 Hill, 128 ; Glenn v. Smith, 2 Gill & J., 493 ; Conkling v. King, 10 Barb., 372. ^ Merrick v. Boury, 4 Ohio St., 60; Miller v. Lumsden, 16 III, 161 ; Fulford V.Johnson, 15 Ala., 384; Gordon v. Price, 10 Ired., 385; Hart v. Boiler, 15 Serg. & R., 162 ; Berry v. Griffin, 10 Md., 27 ; Johnson v. Cleaves, 15 N. H., 332 ; Slocumb v. Holmes, i How. (Miss.), 139. * Bridge v. Batchelder, 9 Allen, 394 ; Hawse v. Crowe, i R. & M., 414 ; Pierce V. Drake, 15 Johns, 475 ; Bayard v. Shunk, i Watts & S., 94 ; Martin v. Pennock, 2 Barr., 376; Lowrey v. Murrell, 2 Port., 280; Brown v. Montgomery, 20 N. Y., 287 ; Long v. Sprull, 7 Jones (Law), 96 ; Delaware Bank v. Jarvis, 20 N. Y., 226 ; Gurney v. Womersley, 4 E. & B., 133 (82 E, C. L. R.) ; Fenn v. Harrison, 3 T. R-. 759; Popley V. Ashlin, 6 Mod., 147; Holt, 121. See chapter xxii, § 736; vol. I ; also 2 Pars. N. & B., 41, 266; Byles (Sharswood's ed.) [*I57, 15S], 278^ 279, note ; Story on Bills, § 225. 294 CONDITIONAL AND ABSOLUTE PAYMENT. §1270. quantity of flour for the note of one Lyon, and when the flour was demanded and the note tendered, Lyon had failed, it was held that the contract, though valid, was executory ; and that the consideration for the flour had failed, and the vendor was not bound to part with the flour for the note of an insolvent.^ The court assumed the law to be that upon an agreement to accept notes in payment, if the notes turned out bad before the article was delivered, a tender of them would not be good unless the vendor had contracted to run the risk. § 1270. In defence to an action on a debt, it is sufficient to plead that a bill or note payable to order or bearer was delivered for or on account of the amount, and is still cur- rent, or has been transferred to a third party.^ It is neces- sary to state in the plea that the bill or note was payable to order or bearer. If a debtor give a bill or note in payment to an agent whom he knows has no authority to receive anything but cash, he is not discharged from the demand of the principal.^ § 1 27 1. If the debtor, instead of paying the creditor, directs him to take a bill of a third person, and he does so, and the bill is dishonored, the debtor's liability revives ; ■* and it is not necessary that the creditor should notify him of the dishonor.^ If the creditor, not having the option of taking cash, takes of his own accord a bill of the debtor's agent, the debtor is not discharged.^ But if the debtor re- fers his creditor to a third person for payment generally, * Rogett V. Merritt, 2 Cal., 117. ''Kearslake v. Morgan, 5 T. R., 513 ; Griffiths v. Owens, 13 M. & W., 58; Price V. Price, 16 M. & W., 232 ; Crisp v. Griffitlis, 2 C. M. & R., 159. 'Sykes v. Giles, 5 M. & W., 645. * Marsh v. Pedder, 4 Camp., 257 ; Taylor v. Briggs, M. & M., 28 ; Byles on Bills (Sharswood's ed.), [*37o], 550. ^Swinyard v. Bowes, 5 M. & S., 62. ^Robinson v. Read, 9 B. & C, 444 (17 E. C. L. R.) ; Marsh v. Pedder, 4 Camp., 257 , Byles on Bills (Sharswood's ed.), [*37i]. 55o. § 1272. SUSPENSION OF RIGHT OF ACTION. 295 and the creditor, having the option of taking cash, elects to take a bill, which is afterward dishonored, the origina debtor is discharged.^ SECTION II. SUSPENSION OF RIGHT OF ACTION BY TAKING BILL OR NOTE FOR OR ON ACCOUNT OF A DEBT. § 1272. There is no doubt that a negotiable bill or note given for or on account of a contemporaneous or pre-existing debt, and whether or not it be in renewal of a previous bill or note, suspends all right of action on such debt during its currency — that is, until it is dishonored by non-acceptance or non-payment If this were not so, the creditor who took the additional security, in the form of a bill or note, might, in consequence of its negotiable character, transfer it to a bona fide holder, and subject the debtor to payment of both the original and the new debt.^ But as soon as the bill or note is dishonored, the original debt revives, and the creditor may pursue his remedy for it, or sue upon the bill or note.^ The bill or note taken in conditional payment becomes, by its dishonor, a collateral security, which the creditor may retain and endeavor to col- lect, without forfeiting the right to proceed in the principal cause of action, subject to the obligation of surrendering up the bill or note at the trial. ^ * Strong V. Hart, 6 B. & C, 160 (13 E. C. L. R.) * Armistead v. Ward, 2 Pat. & H., 504 ; Black v. Zacharie, 3 How., 483 ; Van Epps V. Dillaye, 5 Barb., 244 ; Putnam v. Lewis, 8 Johns, 389 ; Phoenix Ins. Co. V. Allen, II Mich., 501 ; Stedman v. Gooch, i Esp., 3; Kearslake v. Morgan, 5 T. R., 513 ; Griffith v. Owen, 13 M. & W., 58 ; Price v. Price, 16 Id., 231 ; Maier V. Canovan, 57 How. (N. Y.), Pr., 504; Edwards, 197 ; Byles (Sharswood's ed.) [*229l, 379. 'Stedman v. Gooch, i Esp., 4 ; Owenson v. Morse, 7 T. R., 50; Tobey v. Barber, 5 Johns, 68; Bank of Ohio Valley v. Lockwood, 13 W. Va., 426. * Price V. Price, 16 M. & W., 231. 296 CONDITIONAL AND ABSOLUTE PAYMENT. '^1273. 8 1273. When bill or note does not operate as suspension. — A bill or note given for or on account of a debt will not operate a suspension if the debtor fails to perform the en- tire agreement under which it was given. Thus, where suit has been commenced on a book account, and the de- fendant entered into an agreement to give his note for the amount and pay the costs of suit, but only gave his note, without paying such costs, it was held that the plaintiff might proceed in his action on the account.^ And the like decision has been rendered even where the second bill had been negotiated.^ But this has been justly said to be clearly wrong.^ And clearly if the bill or note given for the antecedent debt were paid, the plaintiff could not then proceed upon it, although the costs were not paid as agreed.* It is better in all cases where a bill or note is given or transferred for a contemporaneous or precedent debt, that the parties should reduce their agreement respecting the transaction to writing, and state either that the instrument is taken in absolute payment, and at the creditor's risk, or else only in conditional payment to be in full when paid, which will at once settle controversy on the subject.^ When this is not done, the question must necessarily be re- solved by the jury, upon the statements of the parties and all the circumstances of the case,^ except where there is no evidence whatever, in which event the presumptions which have been referred to would be followed. § 1 274. The taking of a bill or note from a party bou7id by contract tmder seal, does not extinguish or suspend the remedy on the sealed instrument, until such bill or note is actually paid. Obtaining a judgment upon it does not * Putnam v. Lewis, 8 Johns, 389. * Norris v. AyleUe, 2 Camp., 329. ^Edwards on Bills, 299. * Dillon v. Rimmer, I Bing., 100. ^Herring v. Sanger, 3 Johns' Cas., 71 ; Harris v. Lindsay, 4 Wash. C. C. R., 98, 271 ; 2 Am. Lead. Cas., 246. * Hart V. Boiler, 5 Serg. & R., 162 ; Johnson v. Weed, 9 Johns, 307 ; Lyman V, Bank U. S., 12 How., 244; Gardner v. Gorham, i Doug. (Mich.), 207. §1275- HOLDER OF BILL CONDITIONALLY TAKEN. 297 alter the case.* Nor will the taking of a bill or note for arrears of rent prevent the landlord from pursuing his remedy of distress.^ Taking a forged note does not dis- charge the original, although the original be surrendered i** nor is an indorser of the original discharged if he was fixed by due notice.^ And taking a usurious security would stand upon the same footing as a forged one, the avoidance of the security because of the usury reviving the debt.^ SECTION III. RIGHTS AND DUTIES OF HOLDER OF BILL OR NOTE TAKEN IN CONDITIONAL PAYMENT. § 1275. When suit is brought against a defendant upon a debt, whether evidenced by a note or otherwise, and it appears that he has given a bill or note for the same debt, which has become mature and is unpaid, while it does not operate as a bar to the suit, it is essential to the plaintiff's recovery that it be produced and surrendered up or otherwise satisfactorily accounted for at the trial. This is necessary as a safeguard to the defendant, for if the plaintiff should have passed it off before maturity to a third party, the defendant might be compelled to pay the debt a second time.^ If the 'Drake v. Mitchell, 3 East., 251 ; Curtis v. Rush, 2 Ves. & B., 416 ; Byles (Sharswood's ed.) [*37o|, 549. 2 Brown v. Gilman, 4 Wheat., 256 ; Chipman v. Martin, 13 Johns, 241 ; Harris V. Shipway, Buller N. P., 182; Byles [^^=370], 549; 2 Parsons N. & B., 164; Palfrey v. Baker, 3 Price, 572; Davis v. Gyde, 2 A. & E., 623 ; 4 N. & M., 462. ' Goodrich v. Tracy, 43 Vt., 319 ; § 1266;^. * Ritter v. Singmaster, 73 Penn. St., 400. ^Gerwig v. Sitterly, 56 N. Y., 214; Cook v. Barnes, 36 Id., 520; Hughes v. Wheeler, 8 Cow., 77 ; Goodrich v. Tracy, 43 Vt., 319. ^ Matthews v. Dare, 20 Md., 248 ; Cole v. Sacket, i Hill, 516 ; Lobey v. Barber, 5 Johns, 66 ; Dayton v. Trull, 23 Wend., 345 ; Alcock v. Hopkins, 6 Cush..484; Hays V. McClurg, 4 Watts, 452 ; Milles v. Luinsden, 16 111., 161 ; Harris v. John- ston, 3 Cranch, 311 ; Jones v. Savage, 6 Wend., 658; Raymond v. Merchant. 3 Cow., 150; Smith v. Lockwood, 10 Johns, 367; Bank of Ohio Valley v. Lock- wood, 13 W. Va., 427 ; Lazier v. Nevin, 3 tlagans (W. Va.j, 622 ; Edwards oa Bills, 204. 298 CONDITIONAL AND ABSOLUTE PAYMENT. § 1 2 76, note were lost, and were negotiable, the better opinion is that the debtor should sue in equity where indemnity could be required, against its appearance in the hands of a bona fide holder.^ § 1276. Debt discharged by laches in respect to demand or notice. — When a party contracts a debt, and contempora- neously gives in conditional payment his draft upon a third party, it is the duty of the creditor to present it in a reason- able time for acceptance or payment, and to give notice in the event of its dishonor to the drawer. If he fail to make such presentment, or to give due notice, the drawer is not only discharged from liabiUty on the bill, but also from the debt or consideration for or on account of which it was given.^ And where a bill or note is indorsed by the cred- itor in conditional payment of a debt, the same rule would apply, the indorser standing in the relation of a new drawer ; and if there were any laches respecting presentment or notice, he would be no longer liable on the note, or for the consideration.^ The same rule applies where the debt was * In Dangerfield v. Wilby, 4 Esp., 159, where the plahitiff sued to recover money lent, and it appeared that the debtor had given a note for the amount, which was not produced or accounted for, Lord Ellenborough nonsuited him, saying : " It was incumbent on him to show it to be lost, so that the defendant should not be again subjected to payment of it." ^ Mauney v. Coit, 80 N. C, 300, Smith, C. J., approving the text ; Berry v. Bridges, 3 Taunt., 130 (1810). The defendant being unable to pay a bill when it fell due, which he had accepted, indorsed to the plaintiff a bill drawn by the debtor himself and payable to his own order. It was dishonored by the drawee, who accepted, but did not pay it, and no notice was given the defendant. Held that defendant was discharged both from the bill and the antecedent debt, for the reason that the plaintiff, by not giving him due notice, had put it out of his power to recover what was due thereon. See also Blanchard v. Tittavawassee Boom Co., 40 Mich., 566. In Dayton v. Trull, 23 Wend., 345, the defendant gave his draft payable one year from date, and the plaintiff suing for the prece- dent debt, it was held that he must show that the draft had not been paid, and that due diligence had been exercised to present it, and give notice. Bronson, J. Smith V. Miller, 43 N. Y., 171, where it is said : " Laches, which would dis- charge the drawer or indorser of a bill of exchange, will as effectually extinguish the debt for payment of which a bill or other negotiable instrument is trans- ferred. S. C, 52 N. Y., 546 "; Mehlberg v. Fisher, 24 Wise, 607 ; Allan v. Eldred, 50 Wise, 136; Betterton v. Roope, 3 Lea (Tenn.), 220; Middlesex v. Thomas, 5 C. E. Green, 39; Phoenix Ins. Co. v. Allen, 11 Mich., 501 ; Story on Bills, § 109 ; Edwards on Bills, 445. See §§ 452, 971. ^ Jennison v. Parker, 7 Mich., 355 ; Phoenix Ins. Co. v. Allen, 11 Mich., 50I ; Booth V. Smith, 3 Wend., 66 ; Byles on Bills (Sharswood's ed.), [*372], SS^ ! a 5> 12 77- HOLDER OF BILL CONDITIONALLY TAKEN. 299 precedent.* And in like manner if the creditor takes a bill drawn and accepted, or indorsed by third parties, or a note indorsed by third parties as conditional payment or collat- eral security for a debt, and omits to present it at maturity, or give notice of its dishonor to those entitled thereto, it becomes money in his hands as between him and his debtor, and constitutes absolute payment.^ Where, however, a debtor gives his own note indorsed by other parties, or the bill or note of another party in- dorsed by himself, as collateral security merely for a debt already secured by his own note or otherwise, the creditor may pursue his remedy upon the principal and upon the collateral securities at the same time ; and nothing but sat- isfaction of the one will bar his right of recovery on the other.^ § 1277. Confiicting authorities. — But the authorities are somewhat confused and unsettled, it being contended in some cases that the rule which makes demand and notice essential to a recovery against a drawer or indorser does not apply in actions brought to recover a debt for which a bill or note has been taken in payment ; and that want of demand and notice will not be a defence unless payment has actually been lost through the laches of the creditor.'* But the holder of a bill or note taken for or on account of Parsons N. & B., 181, 154; Edwards on Bills, 198, 201, 445 ; Redfield & Bige- low's Lead. Cas., 637, 642 ; Huston v. Weber, 3 T. & C. (N. Y.J, 147 ; i Hun, 120. ' Ibid. ; Story on Bills, § 109 ; Stoiy on Notes, § 117 ; Edwards on Bills, 445 ; Tobey v. Barber, 5 Johns, 68. - Peacock v. Purcell, 14 C. B. N. S., 728 ; Edwards on Bills, 445. ' Lazier v. Nevin, 3 Hagans (W. Va.), 622. * Gallagher's Ex'rs v. Roberts, 2 Wash. C. C, 191 ; Kephart v. Butcher, 17 Iowa, 240 ; see also Brooks v. Elgin, 6 Gill, 254 ; Cook v. Buck, 10 Humph., 412 ; Hamilton v. Cunningham, 2 Brock., 350. In 2 Am. Lead. Cas., 259, 260, the learned editors, after commenting on the cases, say : " The true view would seem to be that the failure of the creditor to pursue the usual course of business with reference to commercial instruments taken for a debt is 2. prima facie bar to a suit for the debt itself, which may, notwithstanding, be removed by proving that the instrument was unavailable as a means of payment, and that the debtor has not been injured by the omission to present it at maturity and to give notice of its non-payment." 300 CONDITIONAL AND ABSOLUTE PAYMENT. § 12^ "J a, a precedent or contemporaneous debt is a holder for value. If he passes it to a third party, the parties are excluded from equitable defences, and subjected to all the liabilities of parties to negotiable instruments ; and thus exposed to the burdens, it seems but right that they should be entitled to exact all the privileges which attach ordinarily to their positions. § i2j']a. Whether debt is discharged by failure to prC' serve liability of drawer or indorser of collateral bill or note. — When the transferrer indorses the bill or note merely as collateral security for or on account of a precedent debt, without any new consideration therefor, it has been considered that he is not entitled to require strict present- ment and notice as an indorser ; and that the responsibility of the creditor is limited to the loss occasioned by his negligence in respect to presentment and notice.^ But we do not see that this distinction rests on solid foundations. The indorsee of a collateral bill or note ac- quires the rights of a holder, and should correspondingly discharge a holder's duties.^ And the principle has been well stated in an English case, by Erie, C. J., that "The legal effect of taking a bill as a collateral security is, that if, when the bill 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."^ § 1278. Due diligence required of transferee by delivery. — When the debtor transfers by delivery merely the bill or note of another for an antecedent debt, he is undoubtedly not entitled to require strict presentment and notice, as he ' Westphal v. Ludlow, 6 Fed. R., 348 ; 2 Am. Lead. Cas., 260 ; See §§ 452, 828, 971. ^ See ante, § 828. 'Peacock v. Purcell, 14 C. B. N. S., 728 ; see in accord Betterton v, Roope, 3 Lea (Tenn.), 220; Lee v. Baldwin, 10 Ga., 208; Haines v. Pearce, 41 Md., 221 ; Roberts v. Thompson, 14 Ohio, I ; Lawrence v. McCalmont, 2 How., 426 Hamilton v. Cunningham, 2 Brock, 350. ^ 1279. EFFECT UPON A LIEN. 3OI is not a party to the instrument.^ Still, by accepting the instrument in conditional payment, the creditor comes under an obligation to use due diligence in making it sub- serve the purpose for which it was given ; and if by his delay and laches he loses the opportunity to collect and apply the proceeds, he can not then enforce the original right of action against the transferrer.^ But the burden of proof is on the defendant in an action on the original con- sideration to show that there had been laches on the cred- itor's part ; for if the bill or note remains in his hands, it is presumptive evidence that it has been dishonored by non- payment.' SECTION IV. THE EFFECT OF TAKING A BILL OR NOTE UPON A LIEN. § 1279. By the common law a party selling personal property has a right of lien for the purchase money as long as he retains possession of the property. A lien is simply a right to hold, and without possession there can be no lien.* The vendor's lien may be waived expressly. " It may also be waived by implication at the time of the formation of the contract, when the terms show that it was not contem- plated that the vendor should retain possession until pay- ment ; and it may be abandoned during the performance of the contract, by the vendor's actually parting with the goods before payment."^ § 1 2 79^. When lien is regarded as waived. — The circum- stances under which the lien will be regarded as waived are ' Story on Bills, § 109; Story on Notes, § 117. * Tobey V, Barber, 5 Johns, 68; Dayton v. Trull, 23 Wend., 345; 2 Am. Lead. Cas., 256. ^Goodwin v. Coates, i Moody & R., 221 ; Bishop v. Rovve, 3 M. & Sel., 362 ; 2 Parsons N. & B., 183 ; Byles (Sharsvvood's ed.) [*372j, 551. But see Dayton V, Trull, 23 Wend., 345. *Heywood v. Waring, 4 Camp., 291. 'Benjamin on Sales, 598. 302 CONDITIONAL AND ABSOLUTE PAYMENT. §I28o. as follows: (i) In \ht first place, it will be regarded as waived by implication when the goods are sold on credit,^ unless there be an express agreement to the contrary, or an established usage to the same effect in the particular trade of the parties be shown.^ (2) In the seco7td place, the vendor's lien will also be waived by taking a bill, note, or other security payable in future, for the goods bought.^ A promissory note payable on demand, however, would not defeat the vendor's lien.* § 1280. When lien revives. — But if the goods are per- mitted to remain in the vendor's hands until the bill or note given for them by the buyer falls due, and it is then dis- honored, the vendor's lien will be revived.^ In such a case Lord Tenterden said : " We are all of the opinion that, on non-payment of the bill, the defendant ought to retain the goods." ^ Unless, indeed, the bill or note had been nego- tiated and were outstanding in the hands of a transferee, in which case the lien would not be revived by its dis- honor.'^ § 1 28 1. Vendors lien on realty. — When real property is sold, the principle relative to personal property does not apply, and the acceptance of a bill or note, upon which no ' Spartali v. Benecke, lo C. B., 212; 19 L. J. C. P., 293. 2 Field V. Lelean, 6 H. & N., 617 ; 30 L.J. Ex., 168 ; overruling on this point Spartali v. Benecke, supra. * = Chambers v. Davidson, L. R., i P. C. App., 296 ; 4 Moore P. C. C. N. S., 1 58, Lord Westbury saying : " Lien is not the result of an express contract ; it is given by implication of law. If, therefore, a mercantile transaction which might in- volve a lien is created by a written contract, and security given for the result of the dealings in that relation, the express stipulation and agreement of the par- ties for security exclude lien, and limit their rights to the extent of the express contract that they have made. Expressum facit cessare taciturn!' Bunney v. Poyntz, 4 B. & Ad.. 568 (24 E. C. L. R.) ; Barrett v. Goddard, 3 Mason, 107 ; Byles on Bills (Sharswood's ed.) [*385], 566. * Clark V. Draper, 19 N. H., 419; contra, Hutchins v. Olcott, 4 Vt., 549. ^•New V. Swain, i Dans. & L., 193 ; Valpy v. Oakeley, 16 Q. B., 641 ; Dixon V. Yates, 5 B. & Ad., 341 ; Benjamin on Sales, 623. ° New V. Swain, i Dans. & L., 193. ' Bunney v. Poyntz, 4 B. & Ad., 568 (24 E. C. L. R.) ; Byles on Bills [*373]. 553 ; 2 Parsons N. & B., 166. § 1 28 1. EFFECT UPON A LIEN. 303 third person is security, even when it is negotiated to a third party by discount or otherwise, does not amount to a relinquishment of the vendor's hen on the land for the un- paid purchase money.^ The master of the Rolls said in an English case : " The effect of a security of a third person has never been decided ; but I concur with Lord Redesdalc that bills of exchange are not security, but a mode of pay- ment."^ Nor will a check drawn on a bank by the vendee, which is not presented or paid, operate a relinquishment of the vendor's lien, nor any instrument whatever inv^olving merely the vendee's responsibility,^ even if another person be substituted for the original payee.* In Kansas, where a note was given and indorsed, it was said by Brewer, J. : " The lien which the vendor has is something more than a bare right, a personal privilege. It is an interest created by the contract of the parties, and is as fixed, complete, and absolute as the interest of a mortgage. It is more, for the mortgagee has no estate in the land under the decisions of this court, while the vendor, in a bond to convey, holds the legal title. It is a general rule that the incident follows the principal ; the transfer of a debt carries with it the security. The vendor holds the legal title as security. He transfers the debt which is secured. Why may not the indorsee, the holder of the debt, avail himself of the security ? In the case of a mortgage the rule is well settled. What is this but an equitable mortgage ?"° And the ruling accorded with these views. If a negotiable note is drawn by the vendee, and indorsed by a third person, or drawn by a third person, and indorsed by the vendee, it is considered by high authorities that it will repel the lien presumptively.® ' Mag-ruder v. Peter, 11 Gill & J., 217; Tompkins v. Mitchell, 2 Rand., 428; Bayley v. Greenleaf, 7 Wheat., 46 ; ex parte Loring, 2 Rose, 79 ; Hughes v. Kearney, i Sho. & L., 135 ; Hall v. Mobile &: M. R.R., 58 Ala., 10 ; i Lomax Digest [218], 268 ; Byles on Bills [*374], 554. ^ Grant v. Mills, 2 Ves. & B., 306 ; Story Eq. Juris., § 1226. ^ Honore V, Blakewell, B. Mon., 67 ; Mims v. Macon, etc., R.R. Co., Kelly, 333. * Irvin V. Gamer, 50 Tex., 48. ^ Stevens v. Chadwick, 10 Kansas, 406. ' Brown v. Gilman, 4 Wheat., 526 ; i Mason, 192 ; Foster v. Trustees, 3 Ala., 302 ; Burk v. Gray, 6 How. (Miss.), 527 ; Woods v. Bailey, 3 Fla., 41 ; Boon v. 304 CONDITIONAL AND ABSOLUTE PAYMENT. §I28l^. § 1281^. Whether bond for purchase money waives vendors lien. — It has been held that taking a bond for the purchase money of land waives the vendor's lien ; ^ but the better opinion is to the contrary, and that the bond is mere evidence of the debt.^ And when such securities are taken as to raise the presumption of a waiver of the lien, that presumption may be repelled by proof.^ § 1 28 1 (5. Transfer of note for purchase money. — When a note is given for purchase money of land, and is trans- ferred by the vendor, the lien passes also to the transferee,* Murphy, 6 Blackf., 1272; Campbell v. Baldwin, 2 Humph., 248; White v. Dougherty, Mart. & Y., 309; i Lomax Digest [218], 269; cotitra, Magruder v. Peter, 11 Gill & J., 217. In Brown v. Oilman, 4 Wheat., 255, Marshall, C. J., said :' " The notes for which the vendors stipulated are to be indorsed by per- sons approved by themselves. This is a collateral security on which they relied, and which discharges any implied lien on the land itself for the purchase money." And in the same case, when before the lower court (i Mason, 191), Story, J., said : " On a careful examination of all the authorities, I do not find a single case in which it has been held, if the vendor takes a personal collateral security, binding others as well as the vendee — as, for instance, a bond, or note with a security or indorser, or a collateral security by way of pledge or mort- gage — that under such circumstances a lien exists upon the land itself." ' Fawell v. Heelis, 2 Amb., 724 ; Winter v. Anson, 1 Sim. & S., 434- 2 White v. Casanove, i Har. & J., 106 ; Cox v. Fenvvick, 3 Bibb, 183 ; Young V. Wood, II B. Mon., 23 ; Lagow v. Badollet, i Blackf., 416 ; Cole v. Withers, 33 Grat.', 193; Yaney v. Mauck, 15 Grat., 300; Knisely v. Williams, 3 Grat., 233; Story's Eq. Juris., § 1226. Chancellor Kent has said on this subject m his Commentaries, vol. 4, section 58 [*I53], " In several cases it is held that taking a bond from the vendee for the purchase money, or the unpaid part of it, affected the vendor's equity, as being evidence that it was waived, but the weight of authority and better opinion is, that taking a note, bond, or covenants from the vendee for the payment of the money, is not of itself an act of waiver of the lien, for such instruments are the only ordinary evidence of the debt. Tak- ing a note, bill, or bond, with distinct security, or taking distinct security exclu- sively by itself, either in the shape of real or personal property from the ven- dee, or taking the responsibility of a third person, is evidence that the seller did not repose upon the lien, but upon independent security, and it discharges the lien." ^ Story's Eq. Juris., § 1226. ^ Sloan V. Campbell, 71 Mo., 387 ; Hall v. Mobile & M. R.R., 58 Ala., 10; Edwards v. Bohannon, 2 Dana, 98 ; Woods v. Bailey, 3 Fla., 41 ; Stevens v. Chadwick, 10 Kansas, 406 ; 15 American Rep., 352, 353; Buchanan v. Kimes, 58 Tenn., 275 ; 36 Am. Rep., 493 ; see a7ite, §§ 748, 834. In some cases it has been held that if the vendor's lien be not reserved, but is merely equitable in its character, the transfer of the vendee's note by the vendor does not carry with it the lien. Pillow v. Helm, 7 Baxter, 545 ; Green v. De Moss, 10 Humph., 374. But the assignment of the lien is in any event merely equitable, and the distinc- tion as to the assignment of express and implied liens does not seem tenable. See 2 Parsons N. & B., 167-169, and notes. § 1282. EFFECT UPON A LIEN. 305 unless the indorsement were without recourse or the vendoi who transfers guarantees the payment, in either of which cases the lien is defeated.^ § 1282. Mechanics liens. — In many of the States of the United States statutes have been enacted giving mechanics' liens on the buildings or works constructed, for the amount of materials furnished and labor done upon them. And, as a general rule, it may be stated that such liens are not waived by the receipt, on the part of the mechanic, of a bill of exchange or negotiable promissory note for the amount of the debt which such lien secures,'^ but pass as an incident of the debt by the transfer of the security for its payment.^ Taking a bond even for such a debt would not be re- garded as waiving such a lien. Additional securities are in their nature cumulative, and where parties have not ex- pressly or impliedly so stipulated, there is no reason why the one should be regarded as a relinquishment of the other.^ * Woods V. Bailey, 3 Fla., 41 ; Schnebly v. Ragan, 7 Gill & J., 120. 'Sweet V. James, 2 R. I., 270; Gable v. Gale, 7 Blackf., 218; Steamboat Charlotte v. Hammond, 9 Mo., 58 ; Mix v. Ely, 2 Greene (Iowa), 508, 513. * Jones V. Hurst, 67 Mo,, 568. * Kinsley v. Buchanan, 5 Watts, 118; Henchman v. Lybrand, 14 Serg. & R., 32. Vol. II. — 20 CHAPTER XL. DISCHARGES OF BILLS AND NOTES OTHERWISE THAN BV PAYMENT. SECTION I. DISCHARGES BY OPERATION OF LAW. § 1283. Besides the discharge of all liability by payment, there may be other discharges by operation of law and by agreement between^ the parties. By operation of law the obligation of any party to the bill or note may be dis- charged : (i) By a general bankrupt or insolvent act of the State or country where the contract is made or is payable.^ (2) By merger of the bill or note in a judgment thereon against the party or parties liable thereon. (3) By appoint- ment of the maker or acceptor to be the executor of the holder.^ (4) By gift or bequest of the bill or note to the maker or acceptor by last will. (5) By any matter which constitutes such discharge by the local law. § 1284. Judgment merges debt. — As between the parties thereto, a judgment on a bill or note operates as a merger of the indebtedness, and while other parties to the instru- ment may be sued upon it, the one against whom the judg- * But the insolvent laws of a State have no extra territorial force or effect. They are inoperative as to citizens of another State or Territory, although the contract is to be performed within the State granting the discharge. Baldwin V. Hale, I Wall., 223 ; Soule v. Chase, 39 N. Y., 342 ; Pratt v. Chase, 44 N. Y., 597- "^ This is the common law rule. But in equity the executor is accountable for the amount of his debt as assets if necessary for payment of debts of the tes- tator ; otherwise he is discharged. Story on Notes, § 444 ; Marvin v. Stone, 2 Cowen, 781. And the common law rule is generally abolished by statutes in the United States. (306) § 1286. DISCHARGES BY OPERATION OF LAW. 307 mcnt has been obtained is liable only under such judgment. The judgment extinguishes the bill or note as to the judg- ment debtor, but is no satisfaction so as to discharge other parties until paid.^ If the judgment be rendered by a court without jurisdiction it is void and without effect.^ § 1285. There are some other cases in which the debt may be extinguished by merger. Thus, at common law, if the creditor appoint his debtor executor, by the English law it operates at law as a release or extinguishment of the debt, provided there are other assets to pay the creditor's debt.^ But this principle does not obtain in the United States. Where one of three acceptors is the holder of the bill at maturity, the liability to pay, and right to receive the money, concur in one person, and operates as performance and extincruishment of the contract.^ So where an estate descends to the debtor as heir.^ So a gift of the bill or note to maker or acceptor cancels it.^ § 1286. A bill is not satisfied by bequest of a legacy by the drawer to the payee who is its holder.^ But an entry by the testator who is holder of the bill, in his book, that the maker of a note should pay no interest, and should not be called on for the principal, discharges it.^ ■ Russell & Erwin Man. Co. v. Carpenter, 13 N. Y. S. C. (5 Hun), 164 ; Clax- ton V. Swift, 2 Show., 441 ; Tarleton v. Allhusen, 2 Ad. & El, 32 ; Story on Notes, § 409 ; 2 Parsons N. & B., 232 ; Byles pn Bills (Sharswood's ed.), [*228], 372. ^ Linn v. Carson, 32 Grat., 171. 'Williams on Executors, 937; Freakley v. Fox, 9 Bam. & Cres., 130; Story on Bills, § 442 ; Story on Notes, § 407 ; Byles on Bills (Sharswood's ed.) [*54, 233]. 140, 376. * Harmer v. Steele, 4 Welsby H. & G., i. ' Story on Bills, § 445. 'Stewart v. Hidden, 13 Minn., 43. ' Carr v. Eastabroke, 3 Ves., 561. *Edon V. Smyth, 5 Ves., 341, 350, note, citing Ashton v, Pye. 3o8 DISCHARGES OTHERWISE THAN BY PAYMENT. ^ 1 287. SECTION II. DISCHARGES BY AGREEMENT OF THE PARTIES. § 1287. By agreement between the parties a discharge may be effected : (i) By accord and satisfaction by re« ceipt of some collateral thing from the maker or acceptor. (2) By a release from the holder to the maker or acceptor. (3) By a covenant never to sue the maker or acceptor on the instrument. (4) By agreement that another shall be substituted as the debtor. (5) By agreement that another security shall be taken in lieu of the bill or note. (6) By taking a higher security. § 1288. First: An accord and satisfaction, as between the maker or acceptor and the holder, by the giving and ac- ceptance of some collateral thing in discharge of the bill or note, utterly extinguishes it. For whatever amounts to sat- isfaction of a bill or note by the acceptor or maker is satis- faction as to all parties who are collaterally liable. Satisfac- tion made by one partner of a firm, which are either makers or indorsers, discharges all the partners ; and so where a person is partner in two firms, one of which are the rnakers, and the other indorsers of the note, satisfaction by him dis- charges both firms.^ If an executory contract is the con- sideration of another executory contract, both may be mut- ually rescinded, the giving up one being the consideration for giving up the other.^ But a contract upon an executed consideration can not be discharged either before^ or after the breach,^ save by a re- lease, or by satisfaction for a valuable consideration. If the holder of a bill or note renounces his claim and gives up the instrument, the drawer and indorsers are as much ' Atkins V. Owens, 4 Nev. & Man., 123. ' King v. Gillet, 7 M. & W., 55, * Byles on Bills (Sharswood's ed.), [*224], 367, note. *Byles (Sharswood's ed.), P225], 368; 2 Parsons N. & B., 235. 5 1289. DISCHARGES BY AGREEMENT OF THE PARTIES. 3O9 discharged as by payment, and he can not sue the maker or acceptor upon it. And having voluntarily relinquished the evidence of the debt, it may be doubted if he could sue the maker or acceptor at all. § 1289. Pari payment is ordinarily only payment pro ta7ito. — A part payment of a bill or note which has fallen due only extinguishes \X. 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 sufficient consideration for the discharge of the whole.^ But any agreement by way of compromise,* or composition,^ into which any new element entered, would be sustained, and if the claim were disputed, agreement to receive part payment in full would discharge it. § 1289^. Wheii part payment will support agreement to accept it in satisfactio7i. — If the part payment were before maturity,'* or were made by a stranger,^ or was made by a bill or note with a surety,^ or collateral security,' or were in any way more advantageous to the creditor,^ it would suffice to support any agreement based upon it. As said, in Massachusetts, by Dewey, J. : " The same ancient authority which declares that the payment and acceptance of a less sum on the day the debt becomes due, in satisfac- ' Fitch V. Sutton, 5 East., 230 ; Pinnel's Case, 5 Co., 1 17 ; Price v. Cannon, 3 Mo., 453 ; Meyers v. Byin^on, 34 Iowa, 205 ; Missouri Loan Bank v. Garner, r Mo. App., 200 ; Rea v. Owens, 37 Iowa ; Carroway v. Odcneal, 56 Miss., 223 ; Cavaness v. Ross, 33 Ark., 572. "Jenks V. Barr, 56 III., 450; 2 Parsons N. & B., 218; Sibree v. Tripp, 15 M. & W., 23; Cumber v. Wane, i Str., 425. ' Murray v. Snow, 37 Iowa, 410. \ Bowker v. Childs, 3 Allen, 434 ; Brooks v. White, 2 Mete, 283 ; Whittle v. Skinner, 23 Vt., 231 ; Lee v. Oppenheimer, 32 Me., 253. * Welby V. Drake, i Car. & P., 557 ; Thompson v. Percival, 5 B. & Ad., 925. 'Hardman v. Bellhouse, 9 M. & W., 596 ; Mason v. Campbell, 27 Minn., 54. ^ Lewis V. Jones, 4 Bam. «& C, 506. *See Goddard v. O'Brien, English High Court, Q. B. Div., March 27, 18S2, and Mechanics' Bank v. Huston, S. C. of Penn., February 13, 1882, both of which cases are referred to in Central L. J., March 26, 1882, p. 401 (Vol. 14, No. 21), and in both of which it is held that the giving up of a negotiable instrument for a less sum than a debt, in full payment, introduces an element of advantage which discharges the debt. 3 TO DISCHARGES OTHERWISE THAN BY PAYMENT. gISQO. tion of a greater, is no defence beyond the amount paid, also declares that the payment and acceptance of a less sum before the day of payment has arrived, in satisfaction of the whole, would be a good accord and satisfaction , for it is said, peradventure, parcel of the sum before the day it fell due would be more beneficial to him than the whole at the day, and the value of the satisfaction is not material."^ The same rule would apply if a number of notes, some of which were due and some of which were not due, were delivered up for less than face value ; ^ and also if the old note were by agreement surrendered up for a new one, the contract then being executed.^ Where suit had been brought on a note, and a compromise was effect- ed, the holder agreeing to indorse on the note a credit of $50, if defendant would pay balance on a certain day ; and under this agreement suit was dismissed, it was held, that on failure of defendant to pay the balance the payee might erase the credit given.* § 1290. Secondly : A release is technically an instru- ment under seal, the seal importing a consideration. But the release of a party to a bill or note by any agreement, upon a valuable consideration, is as effectual as if made under seal.^ And it discharges a joint party, and all par- ties who are subsequent to the one released, and might have looked to him on making payment for reimburse- ment. It is not necessary that the releasor should be the holder of the instrument at the time of making the re- lease.® But a release of a drawee before he accepts is no bar to a suit on his acceptance, for it can only operate on existing rights.''' ' Brooks V. White, 2 Mete, 283. = Bowker v. Childs, 3 Allen, 436. = Draper v. Hill, 43 Vt., 439 ; Ellsworth v. Fogg-, 35 Vt., 255. * Chamberlin v. White, 79 111., 549. ' Benjamin v. McConnell, 4 Gilm., 536 ; Milliken v. Brown, I Rawle, 391 ; Nicholson v. Revill, 4 Ad. & E., 675 ; 6 Nev. & M., 192. ° Scott V. Lefford, i Camp., 246. ' Hartley v. Manton, 5 O. B., 247 ; Ashton v. Freestun, 2 Man. & G., I ; 2 Scott N. R., 273 ; Brage v.l^etter, i Ld. Raym., 65. §1293- DISCHARGES BY AGREEMENT OF THE PARTIES. 3II If there is not a technical release under seal, which, as has been said, imports a consideration, no agreement can operate as a release, unless it is upon a sufficient considera- tion.^ A verbal agreement of the payee of a note with the maker to release him, and accept a third party in his stead, who signs in pursuance of such agreement, is upon sufficient consideration, and is valid. ^ § 1 29 1. Thirdly : A general covenant 7iot to sue the maker or acceptor will operate as an extinguishment of the debt as to him,'' and will, of course, operate as a discharge of the drawer and indorsers.'* But such a covenant does not discharge another who is jointly liable with the cove- nantee ; ^ nor will such a covenant not to sue, given by one of two creditors, operate as a release.^ And a covenant not to sue for a limited time will not affect a release as be- tween the parties (though it will discharge the sureties), unless it be stipulated that it may be pleaded in bar.^ Nor will an agreement not to sue for a limited time discharge the party with whom it is made.® §1292. Four tJily and fifthly : The substitution of another debtor, or of another security for the bill or note, do not here require extended notice. They depend upon the agreements between the parties, and are governed by the general law of contracts. § 1293. Sixthly: Bo7id or covenant for debt. — A bill or note, or other simple contract debt, is merged in a bond or covenant taken for or to secure the claim, as against the ' Keeler v. Bartine, 12 Wend., no ; Carter v. Zenblin, 68 Ind., 405. * Carpenter v. Murphee, 49 Ala., 84. ' Story on Notes, § 409. * Byles (Sharswood's ed.), 384. *■ Dean v. Newhall, 8 Term R., 168 ; Hutton v. Eyre, 6 Taunt.. 289 ; Lacy v. Kinnaston, Holt, 178 ; I Ld. Raym., 688; Twopenny v. Young, 3 Barn. & C, 208 ; 2 Parsons N. & B., 238 ; Story on Notes, § 409 ; Story on Bills, § 43I• 'Walmsleyv. Cooper, II Ad. & E., 216; 3 Per. & D., 149. ■' Drage v. Netter, i Ld. Raym., 65 ; Hartley v. Manton, 5 Q. B., 247 ; Ashton V. Freestun, 2 Man. & G., i ; Thimbleby v. Barron, 3 M. & W., 210; Byles (Sharswood's ed.) [*24o], 385. * Ford V. Beech, 11 Q. B., 842 (63 E. C. L. R.) ; Byles (Sharswood's ed.) [*23o], 374. 312 DISCHARGES OTHERWISE THAN BY PAYMENT. §1294. party executing such bond or covenant, because in legal contemplation the specialty is an instrument of a higher nature, and affords a higher security and a better remedy than the original demand presented.^ But this does not hold even in favor of a surety by simple contract, if it ap- pear on the face of the subsequent deed that it was intended only as an additional or collateral security, and there is nothing in the deed itself expressly inconsistent with such intention.^ Nor would the principle stated apply where bonds are given for interest on coupons secured by mort- gage, for so long as the debt remains the courts will never presume the principal security to have been surrendered without satisfaction.^ SECTION III. DISCHARGE OF A JOINT PARTY. § 1294. A note may be the joint note of two or more parties, or it may be the joint and several note of two or more parties. A note simply joint is the single note of all the joint parties taken collectively. But the joint and sev- eral note of the same parties is one more than as many notes as the number of the signers, being the several note of each one of them and the joint note of all.'* Now, when the maker of a joint note, or a joint ac- ceptor, or joint indorser, is discharged by a release or other- wise, all others jointly bound with him are discharged ; for no separate suit against each, or joint suit against all, can be maintained in such a case. And besides, the discharge of one by the holder deprives the others of the right of pro- portional relief by contribution, which they would other- wise become entitled to on making payment.^ ' Story on Notes, § 409. ' Bowles v. Elmore, 7 Grat., 390. » Gibcrt V. W. C. V. M., etc., R.R., 33 Grat., 597 ; Cole v. Withers, 33 Grat., 186. * King V. Hoare, 13 M. & W., 505. " Nicholson V. Revill, 6 Nev. & M., 192 ; 4 Ad. & El, 675 ; Brooks v. Stuart, 10 Ad. & EL, 854 ; King v. Morrison, 2 Dev., 341 ; Harrison v. Close, 2 Johns. § 1296. DISCHARGE OF A JOINT PARTY. 3I3 § 1295. An agreement with one partner to look to him only for the whole debt, if not for a valuable consideration, will not discharge him.^ But if the holder accept from him a separate security in discharge of the social debt, that will be sufficient.^ A release of one of two joint debtors will not discharge the others if the holder's rights against them be expressly reserved ; ^ nor will a copartner be discharged by time given another if there be such a reservation.'* Where one of three partners, after a dissolution of partner- ship, undertook to pay a particular partnership debt on two bills of exchange, and that was communicated to the holder, who consented to take the separate notes of the one part- ner for the amount, strictly reserving his right against all three, and retained possession of the original bills, it was held that the separate notes, having proved unproductive, he might still resort to his remedy against the other part- ners ; and that the taking under these circumstances the separate notes, and even afterward renewing them several times successively, did not amount to satisfaction of the joint debt.^ § 1296. Judgment against joint promisor and covenant not to sue. — A judgment against one of two joint promisors is a bar to an action against both jointly,^ and is also a bar 448; Tuckerman v. Newhall, 17 Mass., 581 ; Boardman v. Paige, ii N. H., 431 ; Robertson v. Smith, 18 Johns, 459; Crawford v. Roberts, 8 Oregon, 324; Byles (Sharswood's ed.) [*232], 375 ; Thomson on Bills, 387 ; Story, § 431 ; Story on Notes, §§ 425, 435 ; i Parsons N. & B., 247, 250 • Edwards on Bills, 573. 574 ; Chitty (13 Am, ed.) [*4i6], 470, 472. ' Lodge V. Dicas, 3 Barn. & Aid., 611. " Bedford v. Deakin, 2 Bam. & Aid., 210 ; Evans v. Drummond, 4 Esp., 89 ; Nicholson v. Revill, 4 Ad. & El., 675 ; Stephen v. Thompson, 2 Wms., ^^ \ Story on Bills, § 431 ; Byles (Sharswood's ed.) [*48], 132. ' Kearsley v. Cole, 16 M. & W., 128 ; Price v. Barker, 4 El. & Bl.,760 ; Thom- son on Bills, 387 ; i Parsons N. & B., 249. * Lodge V. Dicas, 3 Barn. & Aid., 611 ; Crawford v. Millspaugh, 13 Johns, 87. ' Bedford v. Deakin, 2 B. & Aid., 210 ; 2 Stark., 173. » Mason v. Eldred, 6 Wall., 238 ; Willings v. Consequa, i Peters, C. C, 305 ; Gibbs V. Bryant, i Pick., 121 ; Smith v. Black, 9 S. & R., 145 ; Lechmere v. Fletcher, i Cr. & M., 635 ; Odell v. Carpenter, 71 Ind., 467 ; Robertson v. Smith, 18 Johns, 459 ; Ward v. Johnson, 13 Mass., 14S ; King v. Hoare, 13 M. «& W., 494; 5 Robinson's Practice, 822; i Parsons N. & B., 249; but see Sheehy V. Mandeville, 6 Cranch, 253 ; Higgins' Case, 6 Co. R., 45 ; 2 Parsons N. & B., 252. 314 DISCHARGES OTHERWISE THAN BY PAYMENT. § I 297. to an action against the other one.* The joint parties can not be sued separately, for they have incurred no separate obhgation ; and they can not be sued jointly, because judg- ment has already been recovered against one who would be subjected to two suits for the same cause.^ But where the liability is joint and several, a judgment against one does not preclude procedure against the other or others, though after judgment against one, all can not be sued jointly.^ A covenant not to sue one of two or more joint makers does not discharge or release the others, being regarded as a mere personal covenant, for breach of which an action will not lie.^ Nor does part payment by one joint debtor dis- charge another,^ nor the mere taking of security from one/ § 1297. Giving time to joint party. — Upon the same principle that a covenant not to sue a joint party will not operate as a discharge of other joint parties, the giving of time to, and taking the note of one;' or proceeding in a suit against one even to judgment,^ but without satisfaction, it has been thought, will be no discharge of the other joint parties ; but the better opinion is that judgment against one joint party bars proceedings against all other parties who are joint, and not also several.* §1298. Death of joint 'party. — At common law it is the settled doctrine that in case of a joint obligation, if one * Ibid. ; Byles on Bills (Sharswood's ed.) [*228], 272 ; Story on Notes, § 409 ; King V. Hoare, 1 3 M. & W., 494 ; Holman v. Langtree, 40 Ind., 349. "" Mason v. Eldred, 6 Wall., 238. ' Story on Bills, § 428 ; see U. S. v. Cushman, 2 Sumner, 310, 426; Byles (Sharswood's ed.) [*228], 372 ; 5 Robinson's Practice, 823. " Twopenny v. Young, 3 Barn. & C, 208 ; Mallet v. Thompson, 5 Esp., 178 ; Story on Notes, §§ 409, 421, 425. ^ Ruggles V. Patten, 8 Mass., 480. « Bedford v. Deakin, 2 B. & Aid., 210 ; Thomson on Bills (Wilson's ed.), 393. ' Draper V. Wild, 13 Gray, 580; Parker v. Cousin, 2 Grat., 372; Story on Notes, §§ 409, 421 ; Story on Bills, § 428. * See Sheehy v. Mandeville, 6 Cranch, 253; and Story on Notes, § 409, note 7 * Ante, § 1296 ; Story on Notes, § 409. § 1299- DISCHARGE OF PARTNERSHIP DEBT. 315 of the obligors die, his representative is at law discharged, and the survivor alone can be sued.^ And it seems to be equally well settled, that if the joint obligor so dying be a surety not liable for the debt irrespective of the joint obli- gation, his estate is absolutely discharged both at law and in equity, the survivor only being liable,^ and this is the case even though in the surety's lifetime there was a joint judgment against him and his coprincipal.^ In many of the States statutes have changed this principle, but in others it is still preserved. In such cases where the surety owes no debt outside and irrespective of the joint obligation, the contract is the measure and limit of his liability. He signs a joint contract, and incurs a joint liability, and no other ; and dying prior to his comaker, the liability attaches to the survivor alone. SECTION IV. DISCHARGE OF PARTNERSHIP DEBT BY BILL OR NOTE OF ONE PARTNER. § 1299. The doctrine is now regarded as sound and well settled as a general rule (though there has been vacillation and difference of opinion on the question), that the giving of the separate bill or note of one of several partners for a copartnership debt, is good consideration for the discharge of the other partners. For it may be advantageous to the creditor in various ways ; it avoids difficulties which might arise from suing the debtor with other defendants ; in the event of his bankruptcy it would have priority over joint debts in England ; and it may be more convenient and ' Getty V. Binsse, 49 N. Y,, 388 ; Towers v. Moore, 2 Vem., 98 ; Simpson v. Vaughan, 2 Atk., 31 ; Harrison v. Field, 2 Wash. (Va.), 136 ; Other v. Iveson 3 Drew. Ch. R., 177. " Getty V. Binsse, 49 N. Y., 388 ; Simpson v. Field, 2 Cases in Ch., 22. ' Risley v. Brown, 67 N. Y., 160. 3l6 DISCHARGES OTHERWISE THAN BY PAYMENT. § I3OO. satisfactory to the creditor in the pursuit of his remedy, whether in equity or at law.^ § 1300. Effect of separate note of one partner for partner- ship debt. — The bill or note of one partner may be undoubt- edly taken as collateral security merely for the firm's debt, in which case the latter is not affected thereby.^ It may also be taken with an express reservation to the creditor of all remedies against the firm, in which case also the original liability of the firm is undoubtedly preserved.' But the question remains, what is the presumption when the separate bill or note of one partner is taken, payable at a future day, for the debt of the firm, and what is its effect ? Partners are joint parties, not joint and several. And the prevailing doctrine is that the sepa- rate note of a partner for a partnership debt is not presum- ably an extinguishment or satisfaction thereof, and that the burden of proof is upon the party alleging it to show that such effect was intended.* In Massachusetts a differ- ent view prevails, but in that State, however, an individual note is presumptively payment.^ The view upon which this doctrine must rest is, that the one partner simply adds his separate security for a joint debt, and that, while it would be a breach of contract to sue him on the joint debt, while the separate security is 1 Thompson v. Percival, 5 B. & Ad., 925 ; Reed v. White, 5 Esp., 122 ; Evans V. Drummond,4Esp., 89 ; Powell v. Charless, 34 Miss., 485 ; Nicholas v. Cheairs, 4Sneed, 231; Arnold v. Camp, 12 Johns, 410; Van Epps v. Dillaye, 6 Barb., 244 ; Waydell v. Luer, 3 Denio, 510 (overruling same case, 5 Hill, 448, and Cole V. Sackett, i Hill, 516) ; see Sheehy v. Mandeville, 6 Cranch, 264; Edwards on Bills, 194, 195 ; 2 American Lead. Cas., 248 ; Byles (Sharswood's ed.) [*37i], 550 ; 2 Parsons N. & B., 199. " 2 Parsons N. & B., 201. »See;5ci-/, § 1322 ; Bedford v. Deakin, 2 B. & Aid., 210, Holroyd, J. ; Story on Notes, § 425. "Ante, §§ 1295, 1297; Parker V. Cousins, 2 Grat., 372; estate of Davis and Desauque, 5 Whart., 530 ; Thompson v. Briggs, 8 Foster, 40 ; Gardner v. Conn, 34 Ohio St., 187 ; Muldon v. Whitlock, i Cow., 290; Montross v. Byrd, 6 La. An., 519 ; Leabo v. Goode, 67 Mo., 126; Powell v. Charless, 34 Mo., 485 ; Ed- wards on Bills, 193, 194; Lindley on Part. (Ewell's ed.), *440, and note. * French v. Price, 24 Pick., 13. See ante, % 1266. ^ 1300^. DISCHARGE OF PARTNERSHIP DEBT. 317 current, his remedy lies by action for such breach (as, in like manner, it lies for breach of covenant not to sue ^) ; and the creditor may at any time sue upon the original joint contract without. regard to the separate security. If, when the separate security is taken, the note or other security of the firm is surrendered up, it would seem prima facie, though not conclusively, demonstrative of an inten- tion to exchange the new security for the old, and to re- gard the latter as discharged.*^ And the question as to the intent of the parties is generally one of fact to be deter- mined by a jury. The surrender of the partnership secu- rity and the acceptance of the separate note of one member, enables the latter to represent to his associates, with appar- ently satisfactory vouchers, that the partnership obligation is at an end, and to settle with them accordingly ; and the case differs from those in which it is considered that no presumption of satisfaction arises from the renewal by an individual of his own paper, and the surrender to him of the instrument renewed.^ § 1300^. Renewals in firms 7tame after dissolution. — If after dissolution of a firm a creditor, who is not affected with notice of dissolution, take from one of the former partners a bill or note in the firm name, it is as binding on the firm as if no dissolution had occurred, upon principles stated in another portion of this work.'* But if the creditor have notice of dissolution, it has been held, that a note given in the firm's name by one of the former partners could not bind any other ex-partners as a party to it, because un- authorized by them ; and further, that it discharged the non-consenting ex-partners, who stood in relation of ' Story on Notes, § 421, "5 Robinson's Practice, 863'; 2 American Lead. Cas., 271 ; Morriss v. Harvey, S. C. of Va., Sept. T., 1881, reported in Va. Law Journal for January, 1^82, p. 21 ; estate of Davis, 5 Whart., 538 ; INLason v. Wickersliam, 4 Watts & S., 100. Compare Wiseman v. Lyman, 7 Mass., 286 ; Sneed v. Wiester, 2 A. K. ^Llrsh, 277 ; Sheehy v. Mandeville, 6 Cranch, 253 ; contra, Powell v. Charless, 34 Mo., 485 ; Leabo v. Goode, 67 Mo., 130. »See ante, § 1266a. ^ Ante, vol. i, §§ 369a, 369<5, 370a, yjob. 3l8 DISCHARGES OTHERWISE THAN BY PAYMENT. §1300^ sureties to the settling partner, he having taken the assets and assumed the debts.^ Upon the peculiar circumstances presented the case was, as it seems to us, rightly decided ; but what is the ordinary presumption and effect of the transaction when one ex-partner of a dissolved firm gives a partnership bill or note for the firm debt ? If unauthor- ized by the other ex-partners, and taken by one affected with notice of the dissolution, it can not bind them. Does it discharge them ? We think not. It can not be pre- sumed to have been intended to discharge them, for it pre- tends to bind them. And if they are discharged it must be upon the ground that, as between themselves, partners are sureties, and that suspension of remedy against one dis- charges the others. But we have already seen that taking the bill or note of one joint contractor does not discharge the others ; and as the unauthorized firm note can only bind the parties making or consenting to it, we can perceive no legal principle upon which the discharge of non-con- senting members of the firm can be grounded.^ The very numerous cases on this and similar questions present quite a diversity and confusion of views. It is difficult to discern in many of them the principles rehed upon ; and impossible to reconcile them. We have stated the conclusions which seem to us the most consistent with general principles ; and are without space to enter into all the refinements and vacillations of the adjudicated cases.^ * Smith V. Sheldon, 35 Mich., 42. Where a retiring- partner surrenders assets to continuing partner under an agreement that he shall pay the debts of the firm, and notifies the creditor of dissolution and of the agreement, the acceptance of the individual note of the continuing partner by the creditor would discharge the retiring partner, he, under these circumstances, being regarded as surety. Maier v, Canavan, 8 Daly, 272 ; see Lindley on Partnership, *44o, and Evvell's note. ^ Parker v. Cousins, 2 Grat., 372. ' ^In Byles on Bills (Sharsvvood's ed.) [="48], 132, it is said: "The taking security from one of several partners, joint makers of a note, or acceptors of a bill, will in general discharge the other copartners." Story says the same thing with even more emphasis. Story on Bills, § 431. More guardedly Parsons says " In general, or, at least, frequently, a holder who takes security from one or more partners liable on negotiable paper discharges the rest." i Parsons N. & B., 135. The doctrine is too strongly stated by Byles and Story — for it is sim- § I30I. DISCHARGE OF PARTNERSHIP DEBT. 319 § 1 30 1. Where no new security is taken, a mere promise to look to one partner only, or that one only should assume the debts, is not binding, because without consideration.* But if third parties were induced to enter into an arrange- ment on the faith of such a promise, it would be otherwise. And it has been urged that when the partner seeking to be discharged is shown to have altered or varied his situation on the faith of such agreement, the rule would be different also.^ When two or more persons, not partners, are jointly indebted, the individual note of one will operate as a dis- charge of both, if so agreed between the parties ;^ but such agreement will not be presumed, and must be distinctly proved.^ ply a question of intent, the presumption being : where the partnership security is retained that it is preserved alive, and the contrary when it is surrendered ; such presumption being controllable by other circumstances appearing. In Thompson v. Percival, 3 Nev. & M., 167 ; 5 B. & Ad., 925, there was evidence tending to show agreement to look only to the separate security, an accepted bill of the continuing partner, and the question whether it was an accord and satisfaction was left to the jury. ' Lodge V. Drias, 3 B. & Aid., 611. '2 Am. Lead. Cas., 249. ' IVIyatts V. Bell, 41 Ala., 222. * Bowers v. Still, 49 Penn. St., 475 ; Schollenberger v. Seldenridge, lb., 83. See ante, § 1297. CHAPTER XLI. WHAT DISCHARGES A SURETY. THE LAW OF PRINCIPAL AND SURETY IN ITS APPLICATION TO BILLS AND NOTES, § 1302. In the chapter on "Payment and other Dis- charo-es " have been considered the matters which operate as a discharge of liability of the maker and acceptor of a negotiable instrument, with incidental reference to the effect of such matters on the Hability of the drawer and in- dorsers. But there are other matters which discharge the drawer and indorsers that deserve especial attention, as theii- relations to the holder of the instrument are very dif- ferent from those of the maker or acceptor. These mat- ters maybe conveniently discussed under the head of "The Law of Principal and Surety in its Application to Bills and Notes." And under that heading will also be appropriately embraced those cases in which the party signs a negotiable instrument describing himself as surety ; or is known to be such, although signing as a joint or several promisor. SECTION I. WHO ARE PRINCIPALS AND WHO SURETIES — AND GENERAL PRINCIPLES OF SURETIES' LIABILITIES. § 1303. In the /r^/ place, as to who are to be regarded as principals, and who as sureties. The acceptor of a bill and the maker of a note, when the acceptance is made or note executed upon a valuable consideration, are undoubt- edly principals as to all the parties thereto. And the drawer (320) ^ 1304. WHO ARE PRINCIPALS AND WHO SURETIES. 32 1 of such a bill, and the indorsers of such a bill or note, are sureties of the acceptor or maker to the holder.^ But though all the parties to such a bill are sureties of the acceptor, they are not as between themselves cosureties, liable for contribution to each other in the event that any one should pay the amount for the acceptor ; but each prior party is a principal as between himself and each subsequent party. Thus, if the bill were payable to the drawer's order, and accepted, and then indorsed by the drawer and two subse- quent indorsers successively, to the holder, the drawer and indorsers would be sureties of the acceptor to the holder. But as between the holder and the drawer, the drawer is ■principal debtor, and the indorsers sureties. As between the holder and second indorser, the second indorser is prin- cipal, and the third indorser is surety.^ If the drawer and indorser of a bill for the acceptor's accommodation agree that each shall pay one-half the bill, if the acceptor fail to pay, they are joint sureties ; and if either one pay the whole amount, he may recover half from the other.^ § 1304. In New York it has been held, that while an in- dorser is in the nature of a surety, he is answerable upon an independent contract, and it is his duty to take up the bill when dishonored ; and that the rule, adopted in that State, that a surety may call upon the creditor to prosecute the principal, did not extend in its privilege to an indorser, though he could show any act impairing his right to resort against the principal in exoneration of himself from his engagement to the creditor.* ' Clark V. Devlin, 3 Bos. & P., 363 ; Wallace v. M'Connell, 13 Pet.. 136 ; Blair V. Bank of Tennessee, 11 Humph., 84; Chitty (13 Am. ed.) [*4ii], 463. ^ Newcomb v. Rapior, 21 Wend., 108 ; Byles on Bills (Sharswood's ed.) [*236], 379 ; Edwards, 565. ' Edelen v. White, 6 Bush (Ky.), 408. * Trimble v. Thorn, 16 Johns, 152 (1819) ; Beardsley v. Warner, 6 Wend., 613 (1831). In the case of a non-negotiable note, the assignee must sue the maker before he can resort to the assignor. Lee v. Love, i Call, 497 ; Bronaugh v Scott, 5 Call, 78 ; Perrin v. Broadwell, 3 Dana, 596 ; Huntington v. Harvey, 4 Vol. II.— 21 322 WHAT DISCHARGES A SURETY. $ I305. § 1305. Fixedindorsei's are sureties. — The fact that the liability of the drawer or indorser is fixed by due demand and notice, does not alter their relation as sureties of the debt ; it simply fixes their liability as sureties for its pay- ment, provided nothing is done by the creditor to exoner- ate them. This view is established by great weight of au- thority, and may be regarded as settled.^ Professor Par- sons regards some New York cases as maintaining a dif- ferent doctrine — that after demand and notice the drawer and indorser become definitely liable as principals.^ This view is a just deduction from these cases, but they did not so expressly decide, but only that the indorser is not a surety entitled to require the holder to sue as sureties might do under the New York law.^ When, however, 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.^ § 1306. Whatever discharges acceptor or maker dis- charges drawer and indorsers. — As a general rule, what- ever discharges the acceptor of a bill or maker of a note discharges the drawer and indorsers who are sureties, for Conn., 125 ; Bishop v. Yeazle, 6 Blackf., 127 ; Ricketson v. Wood, 10 Mo.. 547. These and other cases are quoted by Professor Parsons (2 Parsons N. & B., 244) for the doctrine that the indorsee of a negotiable note loses his recourse against the maker by neglect to sue. But they do not so hold, their application being limited to the resort of an assignee of a non-negotiable note against his as- signor. There are, however, statutory provisions in some of the States which require prompt recourse against the principal before pursuing the indorser. 1 Clark V. Devlin, 3 Bos. & Pul., 365 ; English v. Darley, 2 Id., 61 ; Gould v. Robson, 8 East., 576; Veazie v. Carr, 3 Allen, 14 ; Bank U. S. v. Hatch, 6 Pet., 250; Burrill v. Smith, 7 Pick., 291 ; Lobdell v. Niphler, 4 La. O. S., 295 ; Hef- ford V. Morton, 11 Id., 117; Millaudon v. Arnons, 15 Mart., 596; Wood v. Jefferson Co. Bank, 9 Cow., 194; Hubbly v. Brown, 16 Johns, 70; Priest v. Watson, 7 Mo. Ap., 578 ; Story on Notes, § 413 ; Story on Bills, § 425 ; 2 Par- sons N. & B., 243, 244 ; Edwards, 569. "^ 2 Parsons N. & B., 243. * Trimble v. Thorn, 16 Johns, 152 ; Beardsley v. Warner, 6 Wend., 613 ; War- ner v. Beardsley, 8 Wend., 202, Seward, Senator, gucere. 'Bray v. Manson, 8 Mees. & W., 668, Parke, B. ; Baker v. Flower, 5 Jur., 655. It is otherwise in Texas by statute. Pasch. Dig., art. 4789 ; Parker v. Nations, 33 Tex , 210. 5 1306^. WHO ARE PRINCIPALS AND WHO SURETIES. 323 the contract which they undertook to assure thus passes out of existence by the act of the beneficiary. He can not discharge the party primarily bound for the perform- ance of an engagement, and then insist that another shall stand responsible for its performance. Besides, the drawer or indorscr, on making payment for the maker or acceptor, would be entitled to the holder's remedies against him ; and if the holder has discharged him from his oblicration, the drawer or indorser would be remediless and have no resort for reimbursement.^ Upon this principle, where the holder of a note sued the maker and recovered judgment, and afterward sued the in- dorser for a balance of interest, it was held that the latter suit could not be maintained ; for the maker was discharged by the first suit from all further liability, on the principle nemo debet bis vexari eadem causa, and therefore there could be no remedy against the indorser.^ A mere surety may plead in bar to an action on a note the discharge of the principal on account of its illegality.^ § 1306^. Cases in which surety is bound although prin- cipal is not. — There are some cases, however, in which the principal may be discharged and the surety be still bound. Thus, if a party became surety for a married woman whose note is void because she could not make such a contract, the surety will nevertheless be bound, there being no fraud, duress, or deceit in the procuration of the note;* but it would be otherwise if either of these elements entered into the transaction. '^ How far an indorser is bound, though the maker may not be, has been elsewhere considered.^ ' Sargent v. Appleton, 6 Mass., 85 ; Couch v. W^aring, 9 Conn., 261 ; Byles on Bills (Sharswood's ed.), 378, 386; Broadway S. B. v. Schmucker. 7 Mo. Ap., 171. = Couch V. Waring, 9 Conn., 261. ' Gill v. Morris, 1 1 Heiskell, 614 * Davis V. Staaps, 43 Ind., 103; Hicks v. Randolph, 3 Baxter, 352; Jones v. Crosthwaite, 17 Iowa, 393 ; Allen v. Berryhill, 27 Iowa, 531. See § 1 314. "Osborn v. Robbins, 36 N. Y., 365. * See vol. I, §§ 669-679, especially § 675. 324 WHAT DISCHARGES A SURETY. $ ^SO/- § 1307. Discharge of prior indorser discharges subse- quent indorsers. — We have already seen that whatever dis- charges a prior indorser discharges all subsequent indorsers, for the reason that he stood between them and the holder, and on making payment each one could have had recourse against him, but from which his discharge precludes them.^ It follows from the same reasoning that discharge of a sub- sequent indorser can discharge no prior party ; for such subsequent indorser could, under no circumstances, be liable to such prior party.^ The contracts of the several indorsers are like so many links of a pendant chain : if the holder dissolves the first, every link falls with it. If he dissolves an intermediate link, all after it are likewise dissolved. But the lasf link supports nothing, and its dissolution in- jures no one.^ SECTION 11. WHAT ACTS OF CREDITOR DISCHARGE A SURETY FOR THE DEBT. § 1308. We may enumerate as matters which will dis- charge a surety : (i) Misrepresentation or concealment to induce his becoming surety. (2.) Diversion of the instru- ment from the agreed purpose. (3) Alteration of the in- strument. (4) Payment. (5) Release. (6) Satisfaction. (7) Covenant not to sue a prior party. (8) Parting with security for the debt. (9) Agreement to indulge prior party by extension of time or forbearance of suit. ' Newcomb v. Raynor, 21 Wend., 108. But it is not necessary to notify a prior indorser in order to hold a subsequent one. ^ Claridge v. Dalton, 4 M. & S., 232 ; English v. Darley, 2 Bos. & P., 61 ; Smith V. Knox, 3 Esp., 46; Bank U. S. v. Hatch, 6 Pet., 250 , White v. Hopkins, 3 Watts & S., 99 ; Lynch v. Reynolds, 16 Johns, 41 ; Thomson on Bills, 393 ; Story on Notes, §§ 420, 423, 434 ; Story on Bills, § 429. * See Edwards on Bills, 570. § 1309. § 1309- (I- ^^' *^^^^ in.) ^s to misrepresentation, con- cealment, duress, diversion, and alteration. — The contract of suretyship is a contract tiberrvtioe fidei. Therefore where one is induced to become surety for another, as drawer of a bill, or indorser of a note for accommodation, or otherwise, and there is any misrepresentation or fraud- ulent concealment of a material fact, which, if known, would have induced the drawer or indorser or other surety not to enter into the contract, his contract is void from the beginning as between the surety and all parties privy to such misrepresentation or concealment* Any essential vice in the obligation of the principal which may suffice to annul it is as available to the surety as to him, unless the surety be also the assignor, in which case he is estopped from setting up the antecedent defect.^ If the principal signed under duress, the holder guilty of the duress could not enforce the obligation against a surety.^ If the payee is neither cognizant of, nor participates in the fraud, he is not affected by it.^ Any fraud which deceives the surety after he has become a party releases him.^ And 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 div^ersion in its use operates a dis- charge of the accommodation party as to all other parties who have knowledge of such diversion.^ But this subject is elsewhere more fully considered.''' So alteration is else- where treated.® * Hamilton v. Watson, 12 C. & F., 109; North British Ins. Co. v. Lloyd, 10 Exch., 523; Solser v. Brock, 3 Ohio St., 302; Evans v. Keelancl, 9 Ala., 42; Byles (Sharswood'sed.j, 377 ; Melick v. First N. B., 52 Iowa, 94. where payee as- sured surety that payor was not indebted to him in any farther amount. "" Putnam v. Schuyler, 11 N. Y. S. C. (4 Hun), 168. 'Griffith V. Sitgreaves, 90 Penn. St., 161. * Anderson v. Warne, 71 111., 20. ' Harris v. Brooks, 21 Pick., 122. " Dewey v. Cochran, 4 Jones, 184 ; Southerland v. Whitaker, 5 Jones, 5 ; I Parsons N. & B., 236. ' See chapter xxiv, §§ 790, 796, vol. i. * See chapter XLUI, on Alteration, vol. 2. J 26 WHAT DISCHARGES A SURETY. § I31O. If the holder inform an indorser that the bill has been paid by the acceptor, which statement is untrue, he can not afterward sustain an action against the indorser, though his liability was duly fixed, if in the meantime any party against whom the indorser could have had recourse for payment has become insolvent.^ § 1 3 10. (IV) Payment by the maker or acceptor of course discharges the drawer and indorsers.^ (V) So also does a release of the acceptor or maker discharge drawer and indorsers,^ even though they consent to the release, for that only confirms it.^ But if there were in the release an express reservation of the holder's rights against the drawer and indorsers, they would not be discharged, their rights and remedies against the maker or acceptor being thus reserved by implication.^ (VI) Whatever amounts to satisfaction of the bill or note by the maker or acceptor, operates as an absolute discharge of all parties collaterally liable. There is a distinction between extinguishment and satis- faction. The holder's claim may be extinguished as to an indorser or drawer, and the debt yet unsatisfied. But if there is satisfaction by one, it operates as to all* (VII) A covenant not to sue a prior party discharges the surety, because it disables him from suing should he pay the debt. § 1311. (VIII) As to the creditor s parting with security for the debt. — Upon making payment of the debt, the surety is undoubtedly entitled to all the rights, remedies, and securities which the creditor could have enforced.''^ ^ Petrie V. Feeder, 21 Wend., 171. * See chapter xxxviii, on Payment, ante, p. 250. = Byles on Bills [*24o], 384. '' Broadway S. B. v. Schmucker, 7 Mo. Ap., 171 ; Eggemann v. Henschen, 56 Mo., 123. ° Gloucester Bank v. Worcester, 10 Pick., 528 ; Stewart v. Eden, 2 Cai., 121 ; Tombeckbe Bank v. Stratton, 7 Wend., 429 ; Story on Bills, § 429. ° Story on Notes, § 403 ; 2 Parsons N. & B., 252. ^ Williams v. Price, i Sim. & St., 581 ; ex parte Mure, i Coxe, 93 ; King v Baldwin, 2 Johns Ch., 317 ; Humphrey v. Hitt, 6 Grat., 509 ; Hayes v. Ward, 4 § 131 I. WHAT ACTS OF CREDITOR DISCHARGE A SURETY. 327 And while the creditor may not only cibstain from active measures, but may even reHnquish steps already com- menced,^ he must do nothing which can impair the rights and remedies of the surety. Therefore, if any collateral security which the creditor held be released, or a judgment lien given up, or a levy withdrawn, the surety is discharged.^ But the withdrawal of an execution from the hands of the sheriff before a levy will not discharge the surety.'^ Nor will an omission to revive a judgment, by means of which the lien and the land are lost ; ^ nor discontinuance of steps to foreclose a mortgage.^ But neglect to record a mortgage, whereby its value is lost, would discharge the surety,* and this even though the original mortgage would have been worthless, if recorded, by reason of prior liens. "^ But the surety will not be discharged in any case where it can be clearly proved that the act of the creditor has worked no real injury. And he is discharged only to the Johns Ch., 123 ; Sullivan v. Morrow, 4 Ind., 425 ; Smith v. Jay, 23 Vt., 656 ; Kirkpatrick v. Hawk, 80 111., 122; Kurd v. Spencer, 40 Vt., 581; Dillon v. Russell, 5 Neb., 484 ; Treanor v. Yingling-, 37 Md., 491 ; Muirhead v. Kirk- patrick, 9 Harris, 237 ; Byles (Sharswood's ed.) [*246-7], 392 ; 2 Am. Lead, Cas., 348. 'Bellows V. Lovell, 5 Pick., 307; Lawson v. Sayder i Md., 171; Com- missioners V. Ross, 3 Bin., 250; Montpelier Bank v. Dixon, 4 Vt., 399. » Commonwealth V. Haas, 16 S. & R., 252 ; Farmers' Bank v. Reynolds, 13 Ohio, 84 ; Mayhew v. Boyd, 5 Md., 102 ; Ferguson v. Turner, 7 Mo., 497 ; Sneed v. White, 3 J. J. Marsh, 525; Mayhew v. Crickett, 2 Swans., 193; Winston v. Yeargin, 50 Ala., 340 ; Woodward v. Walton, 7 Heisk., 50; Clopton V. Spratt, 52 Miss., 251 ; Case v. Hawkins, 53 Miss., 702 (an acco-imodation indorser) ; 5 Rob. Prac. (new ed.), 766 ; i Parsons N, & B., 242 ; see cases cited above in note i ; Byles on Bills [*24i], 386. ' Humphrey v. Hitt, 6 Grat., 509 ; Lenox v. Prout, 3 Wheat.. 520 ; Alcock v. Hill, 4 Leigh, 622 ; M'Kenny v. Waller, i Leigh, 434 ; Sawyer v. Bradford, 6 Ala., 572 ; Morrison v. Hartmann, 2 Harris, 416. ♦ U. S. V. Simpson, 3 Penn., 437 ; Farmers' Bank v. Reynolds. 13 Ohio, 84. " Butler V. Gambs, i Mo. App., 466. " Barr v. Boyer, 2 Neb., 265. ' Atlanta Nat'l Bank v. Douglas, 51 Ga., 205 (1874), McCay, J. : " The failure of the principal to record the loss of the lien, in this case, the destruction of the mortgage, is a change in the terms of the security's undertaking. He only guarantee's the notes as security by the mortgage, and when the mortgage was destroyed, his contract was no longer existent ; its terms were broken," distinguishing and explaining Toomer v. Deckerson, 37 Ga.. 428. In Union Nat'l Bank v. Cooley, 27 La. Ann., 202, it wus held, that surrender of a void and valueless collateral did not release surety. 328 WHAT DISCHARGES A SURETY. § 13 1 2. extent that he would be injured if held bound/ Thus withdrawal of a levy on property only entitles the surety to a credit for the value of the property levied on.^ Where the payee, receiving from maker before maturity an order on the indorser, gave up the note, but on dis- honor of the order demanded it back, it was held the indorser could not be injured, and therefore was not discharged.^ § 1 3 1 2. (IX) Extension of time, or forbearance of suit. — The principle that whatever discharges the principal dis- charges the surety is of extended application, and it is operative whenever anything is done which relaxes the terms of the exact legal contract by which the principal is bound, or in anywise lessens, impairs, or delays the remedies which the creditor may resort to for its assurance or en- forcement. For, whenever the creditor relaxes his hold upon the principal debtor, he impairs the hold upon him which the surety would acquire by substitution in his place on making payment ; and good faith and fair dealing require that the surety should not be exposed to the inju- ries which might thus be inflicted upon him/ In the immense majority of cases the act done does not actually damage the surety a shilling, yet the doctrine is so firmly established that only legislative enactment can change it.^ Extension of time for payment is the most frequent form in which the creditor so deals with the principal as to dis- charge the surety ; and whenever such indulgence is granted in pursuance of a binding legal contract, the surety is at once released from his obligations.^ And the same effect follows (the discharge of the surety) if time is given to one of the joint makers of a note of which the surety is in- ' Payne v. Commercial Bank, 6 Smedes & M., 24 ; Loomis v. Fay, 24 Vt., 240 : Neff's Appeal, 9 Watts & S., 36. ' Ward V. Vass, 7 Leigh, 135. ' Smith v. Harper, 5 Cal., 330. * Thomson on Bills, 390. ^ Swire v. Redman, i Q. B. Div., 536 (1876). • See §§ 131 5 to 1 319 inclusive ; also, § 1329 and § 1259, et seq. § 1314- WHAT ACTS OF CREDITOR DISCHARGE A SURETY. 329 dorscr.^ If the debtor takes a time draft, or a renewal note from the principal, the presumption is that right of action is suspended, and time of payment extended to its maturity, and an indorser of the original bill or note is thereby pre- sumptively discharged.^ § 1 3 13. The reason why extension of time of payment discharges the surety is that he would be entitled to the creditor's place by substitution ; and if the creditor, by agreement with the principal debtor, without the surety's assent, disables himself from suing when he would be other- wise entitled to do so, and thus deprive the surety, on pay- ing the debt, from immediate recourse on his princijKil, the contract is varied to his prejudice — hence he is discharged.^ But this principle on which sureties are released " is not a mere shadow without substance. It is founded upon a re- striction of the rights of the sureties by which they are supposed to be injured."* Therefore, when there is a legal impossibility of injury, the principle does not apply. This was decided to be the case where the maker of a note was a discharged bankrupt ; and an agreement between him and the holder for two months' delay, although on a valid consideration, it was held did not discharge the indorser, because the latter could not, by making payment, have recourse against him.^ § 1 3 1 4. Defences available to principal, but not to surety. ' — While, as a general rule, whatever discharges the princi- pal discharges the surety, the principal may sometimes have a defence which is not available to the surety. Where one signs a joint and several note with a married woman as surety, her plea of coverture will be no defence to him.^ ' Story on Notes, § 414. " Pomeroy v. Tanner, 70 N. Y., 547 ; Buck v. Smiley, 64 Ind., 431. S&a post, § 1329, and cases cited. ' King V. Baldwin, 2 Johns' Ch., 559. * 6 How,, 283. ' Tiernan's Exr's v. Woodruff, 5 McLean, 350. • Smyley v. Head, 2 Rich., 590, See ante, § 1306a. 330 WHAT DISCHARGES A SURETY. § ^3^5- So if a corporation made a note which was in excess of its leo-al power, a surety therein would nevertheless be bound.^ And the indorser of a note on which the maker's name is forged, or of which the maker is an infant or married woman, is liable thereon, because he guarantees the instru- ment zn toto^ And one who signs a note as principal, but is in reality a surety, and so known to the holder — signing after others whose names are forged upon the note, and while it is in the hands of the beneficiary — affirms the genuineness of the forged signatures, and can not deny them unless the holder was privy to the fraud.^ § 13 1 5. Elements in indulgence necessary to discharge surety. — The following elements or circumstances must unite in order to constitute an indulgence which will dis- charge the surety. First, a consideration, for without it the promise would not be binding. Second, a promise or agreement to indulge, for without it the hands of the creditor are not tied, although he may have received collat- eral security for the debt. Third, the promise must not be altogether indefinite, for an indefinite promise of for- bearance is void and nugatory, since it might be for an hour, which would be of no advantage to the debtor. Fourth, the indulgence must be without the surety's assent, for if he assents he is a party to it. Fifth, the indulgence must be without reservation of remedy against the surety, for that would reserve the surety's recourse on his princi- pal. Sixth, the agreement must be with the principal, and not with a stranger. § 1316. First, as to the consideration. — There must un- doubtedly be a consideration for the promise to indulge, and if the agreement be merely voluntary, the surety is not discharged. Mere indulgence at the will of the creditor, extended to the debtor, in nowise impairs the obligation of - Conn V. Cobum, 7 N. H., 368. " See ante, % 675, vol. i. * Selser v. Brock, 3 Ohio St., 302. See atite, § 672, vol. I. 5 1317- WHAT ACTS OF CREDITOR DISCHARGE A SURETY. ;^^! the surety ; if it did, it would be a most inconvenient and oppressive rule, as then suits must immediately follow the maturity of the paper. It is well settled that there must be a valid common law agreement, in binding legal form, to give time to the maker or acceptor in order to effect the discharge of the drawer or indorser.^ Therefore where the executrix of an estate verbally promised to pay the holder out of her own estate, if he would forbear to sue, the drawer was held to be still bound, because the contract was not binding under the statute of frauds.^ Mere gratuitous forbearance of whatever duration inside of the limitation bar, will not discharge, for it is not the forbearance, but the contract that operates the discharge;^ and even where the holder insists on interest, that will not suffice to discharge the surety.^ § 131 7. Usuriotis pi^emium for extension of time. — But an agreement to forbear suit, made in consideration of a usurious premium, which has been executed by payment of the premium and by forbearance accordingly, would dis- charge the drawer or indorser ;^ and such, it has been held, would also be its effect if the usurious contract were exec- utory, on the ground that in such a case the creditor places himself under a moral obligation, based upon a considera- * McLemore v. Powell, 12 Wheat., 554 ; Bank of Utica v. Ives, 17 Wend., 501 ; Crawford v. Millspaugh, 13 Johns, 87; Davis v. Graham, 29 Iowa, 514; Gal- braith v. Fullerton, 53 111., 126; Buckalew v. Smith, 44 Ala., 638 ; Payne v. Commercial Bank, 6 Smed. & M., 24; Aud v. Magruder, 10 Cal., 282 ; Hazard V. White, 26 Ark., 155 ; Byles (Sharswood's ed.), 385 ; Story on Notes, § 419; Stor)' on Bills, § 426 ; Parkhurst v. Vail, 73 111., 343 ; ex parte Balch, 2 Low, 440; S&& post, § 1326. ^ Philpot V. Briant, 4 Bing., 717 ; Berry v. Pullen, 69 Me., 10 1. 3 Page V. Webster, 15 Me., 249 ; Berry v. Pullen, 69 Me., loi ; Veazic v. Carr, 3 Allen, 14. * Philpot V. Briant, 4 Bing., 717. See Story on Bills, § 425. But see Rose v. Williams, 5 Kansas, 483. ^ Armistead v. Ward, 2 Pat. & H., 504; Whittemore v. Ellison, 72 111., 301 ; Hamilton v. Prouty, 50 Wise, 592 ; Scott v. Harris, 76 N. C, 205 ; 36 Am. Rep., 871, note ; Austin v. Dorwin, 21 Vt., 38 ; People's Bank v. Pearson, 30 Vt., 711 ; Billington v. Wagoner, 33 N. Y., 31 ; Kenningham v. Bedford, i B. Mon., 325; Kyle v. Bostwick, 10 Ala., 589; Vilas v. Jones, 10 Paige, 76; Miller v. McCan, 7 Paige, 451 ; Harbert v. Dumont, 3 Ind.. 346 ; Redman v. Deputy, 26 Id., 338 ; Cross v. Wood, 30 Id., 378 ; Abel v. Alexander, 45 Ind., 523. c;c'2 WHAT DISCHARGES A SURETY. § 1317^ 00 tion which is beneficial to him, and which he recognizes as bindino- ; and to permit him to take advantage of his own wrong, would enable him to profit doubly by his illegal action.^ But the weight of authority is against this view.' It has been held that where, by statute, a bonus paid for forbearance to sue is necessarily applied as part payment, or by agreement it is so applied, an indorser will not be dis- charged, because no legal obligation not to sue is created ; ^ and that a promise by the maker to pay a greater rate of interest on the note, being without consideration, does not discharge an indorser.* In the absence of such a statute an agreement to pay a greater rate of interest w^ould discharge the indorser.^ The payment of legal interest in advance will uphold an agreement for forbearance, and discharge the surety,^ and a note for the interest will be equal to its payment in advance.'' § 1317^. Whether an agreefnent to pay the same rate of interest will support the stipulation to forbear, is a ques- tion on which authorities differ. Some consider that it will ; ^ others that it will not,^ which latter is, as we think, * Armistead v. Ward, 2 Pat. & H., 504 ; Corielle v. Allen, 13 Iowa, 289; Wheat V. Kendall, 6 N. H., 504; Smith v. Pearson, 52 Cal., 611. See on this subject, Gates V. National Bank, 100 U. S. (10 Otto), 248. 'Vilas V. Jones, I Comst., 274 ; McComb v. Kittridg-e, 14 Ohio, 348 ; Abel v. Alexander, 45 Ind., 523 ; Braman v. Hawk, i Blackf., 392 ; Naylor v. Moody, 3 Blackf., 92; Coman v. The State, 4 Blackf., 241 ; Meiswinkler v. Jung-, 30 Wis., 361 (1872) ; St. Maries v. Polleys, 47 Wise, 78 ; Church v. Maloy, 70 N. Y., 63 ; Tudor V. Goodloe, i B. Mon., 324; Scott v. Hall, 6 B. Mon., 127 ; Patton v. Shanklin, 14 B. Mon., 17; Halstead v. Brown, 17 Ind., 202; Smith v. Hyde, 36 Vt., 306; Burg-ess v. Dewey, 36 Vt., 618 ; Irvine v. Adams, 48 Wise, .-1.68. See also Berry v. PuUen, 69 Me., 10 1. * Nightingale v. Meginnis, 34 N. J. (5 Vroom), 461. See Fernan v. Double- day, 3 Lans., 216. * Schlussel V. Warren, 2 Oregon, 18. ' Kittle v. Wilson, 7 Neb., 84. * 2 Hare & Wallace Lead. Cas., 469. But it is held such agreement is not presumed. First Nat. Bank v Leavitt, 65 Mo., 563 ; St. Joseph F. & M. Ins. Co. V. Hauck, 71 Mo., 466 ; contra, Crosby v. Wyatt, 10 N. H., 322. ^ Gahn v. Niemcewicz, 11 Wend., 312. « Pierce v. Goldberry, 31 Ind., 52 (overruled in Abel v. Alexander, 45 Ind., 523) ; Chute v. Pattee, 37 Me., 102 ; McComb v. Kittridge, 14 Ohio, 348 (over- ruled in Jones v. Brown, il Ohio St., 601) ; Fawcett v. Freshwater, 31 Ohio St., 637 ; Blazer v. Bundy. 15 Ohio St., 57 ; Wood v. Newkirk, 15 Ohio St., 295. » Harter v. Moore, 5 Blackf., 367 ; Stuber v. Schack, 83 111., 192, Schoefield, J. : " The promise to pay interest being merely a promise to do that for which § I3I9- OOs the better opinion, for it is merely a promise to do what the party is already bound to do. § 131 7<5. Part payment is not a sufficient consideration tor an agreement to extend time, and, therefore, if there be no other consideration for an extension, it would not dis- charge a surety.^ But if a note were given for the balance it would itself be a consideration for extension, and a surety would be thereby discharged.^ § 1 3 18. Second: The promise must be absolute. — There must be an absolute agreement for indulgence by extension of time or forbearance to sue ; for an agreement based upon a condition which is uncomplied with is not binding, and therefore does not discharge those who occupy the relation of sureties, but leaves all parties unaffected.^ So an unac- cepted offer is inchoate and ineffectual.* § 1 3 1 9. Third : The i?tdulgence must not be indefinite. — The promise or agreement to indulge the principal must specify some definite time, or, at least, be not indefinite ; for otherwise the time might be so short (as an hour, for instance) as to be of no advantage to the debtor.^ If the time be definite and unconditional a day will suffice.** Agreement to extend time " 20 or 30 days" is definite as to 20 days, and therefore discharges surety.'' " Until after the party was already liable," is not a sufficient consideration ; Wilson v. Pow- ers, 130 Mass., 127. * Andrews v. Hagadon, 54 Texas, 571 ; Herbert v. Servin, 41 N. J. L. R. (13 Vroom). 225 ; Carraway v. Odenhall, 56 Miss., 223 ; Prather v. Gammon. 25 Kan., 379 ; Jenness v. Cutler, 12 Kan., 500 ; Halderman v. Woodward, 22 Kan., 734 ; Royal v. Lindsay, 15 Kan., 291 ; see § 1327. = See Jaffray v. Crane, 50 Wise, 349, where note for part of debt taken in satisfaction was held to discharge a surety. ' Hansberger v. Geiger, 3 Grat., 144 ; Norris v. Cumming, 2 Rand., 323. « Hewet V. Goodrick, 2 Car. & P., 468 ; Badnall v. Samuel, 3 Price, 521 ; Thomson on Bills, 395. » Alcock V. Hill, 4 Leigh, 622 ; Gardner v. Watson, 13 111., 347 ; Miller v. Stem, 2 Penn. St., 286 ; Blackstone Bank v. Hill, 10 Pick., 133 ; Parnell v. Price, 3 Rich., 121 ; Menifee v. Clark, 35 Ind., 304 ; Abel v. Alexander, 45 Ind., 523. • Smith V. Sheldon, 35 Mich., 42 ; Fellows v. Prentiss, 3 Denio, 512. ' Scott V. Harris, 76 N. C, 205. 334 WHAT DISCHARGES A SURETY. § I32O harvest time" has been held too indefinite an agreement of extension to discharge a surety,^ but the opposite view ob- tained as to an agreement to extend the time " until after threshing."^ The indulgence must be for a period longer than that which would be required by law for judgment to be obtained ; otherwise, though upon a valid consideration, the surety will not be discharged.^ Thus, where it was ao-reed that the risfht of action should be suspended, but also that in case of any default the holder should have judgment at as early a period as he could have obtained it had he pursued his legal remedy, the surety was held not to be discharged.^ So, taking a cognovit from the acceptor, payable as early as a judgment could otherwise be obtained, does not exon- erate the drawer or indorsers.^ It would be otherwise if the postponement were beyond the period when judgment could be regularly obtained.^ And the general rule above stated applies only to cases where time has been given after suit brought, and does not apply where time is given by contract before any action has been commenced.'^ § 1320. An agreement for continuance of a case to an- other term of court, based on a valuable consideration, would discharge the drawer or indorser of the bill or note in suit, because it would operate as a suspension of any remedy for the debt for the stipulated period.^ But if merely by consent and without consideration, it would not have this effect.^ ' Findley v. Hill, 8 Oregon. 248. ' Moulton v. Posten, 52 Wise, 169. 3 Sizer v. Heacock, 23 Wend., 81 ; Hallett v. Holmes, 18 Johns, 28 ; Isaac v. Daniel, 8 Ad. & El. N. S., 500 ; Price v. Edmunds, 10 Barn. & C. 578 ; Lee v. Levi, 4 Barn. & C, 390 ; I Carr. & P., 553 ; Byles on Bills (Sharswood's ed.) [*242], 387 ; 2 Parsons N. & B., 242 ; Story on Bills, § 427 ; Chitty on Bills (13 Am. ed.), 468 ; Story on Notes, § 415. ' Kennard v. Knott, 2 Man. & G., 474- ' Fentum v. Pocock, 5 Taunt., 192. ' Story on Notes, § 415 ; Edwards on Bills, 570. ' Raught V. Black, 2 Disney (Ohio), 477. * Bank U. S. v. Hatch, 6 Pet., 250. " Hays v. Myrick, 47 Ala., 335. § 1322. WHAT ACTS OF CREDITOR DISCHARGE A SURETY. 335 § 132 1. Fourth: The surety s assent prevents his dis- charge. — Volenti noii fit injuria is a maxim of law, and it applies where the sureties consent to the indulgence. Then they are parties to it, and are not discharged.^ Where the drawer replied to the holder, who stated the offer of the principal, " You may do as you like," it was held an assent to the indulgence proposed.^ And in Thomson on Bills ^ it is said : " If an obligant be consulted as to the propriety of giving time, his silence may be taken as consent, if the delay be a reasonable one in the circumstances." It would certainly, however, be safer for the holder to require an ex- plicit answer. An ambiguous reply should not be relied on.* If the holder give time to a prior party, and a subse- quent party, knowing the fact, afterward promises to pay, he waives his defence, and is bound absolutely.^ § 1322. Fifth : Reservatiofi of remedies against surety. — The surety will not be discharged by indulgence to the principal when there is an unqualified reservation of the creditor's remedies against the surety. Thus the drawer or indorscr would not be discharged by time granted to the maker or acceptor : First, because it rebuts the implication that the drawer or indorscr was meant to be discharged, which is one of the reasons why the surety is ordinarily exonerated by such a transaction ; and secondly, because it prevents the rights of the drawer or indorser against the acceptor or maker being impaired, the injury to such right of the surety being the other reason. For the debtor (acceptor or maker) can not complain if the instant after- ' Norris v. Crummey, 2 Rand., 334 ; Hunter v. Jett, 4 Rand., 107 ; Gloucester Bank v. Worcester, 10 Pick., 528 ; Prouty v. Wilson, 123 Mass., 297 ; Smith v. Hawkins, 6 Conn., 444; Bruen v. Marquand, 17 Johns, 58; Smith v. Winter, 4 M. & W., 454; Mayhew v. Crickett, 2 Swanst., 185; Gray v. Brown, 22 Ala., 262; Story on Notes, § 419; i Parsons N. & B., 240; Edwards, 571 ; Ludwig V. Iglehart, 43 Md., 39. * Clark V. Devlin, 3 Bos. & P., 363. See Prouty v. Wilson, 123 Mass., 297, for circumstances showing- surety's assent. ' Wilson's ed., 396. * Withall V. Masterman, 2 Camp., 179. ' Stevens v. Lynch, 12 East., 38. ^^e WHAT DISCHARGES A SURETY. § 1 3 23. ward the surety (drawer or indorser) enforces these rights against him, and his consent that the creditor (the holder) shall have recourse against the surety (drawer or indorser) is impliedly a consent that such surety shall have recourse ao-ainst him.^ The contrary doctrine that such reservation of remedies is ineffectual, has been adopted in some cases.^ Parol evidence may be given to show that an agreement which by itself would discharge a surety, was not to have that effect.^ § 1323. The reservation of the rights of the surety should appear on the face of the agreement giving time, and can not, when such agreement is written, be proved by parol. But that is not always necessary where the agreement to preserve the surety's rights is distinct and collateral.* § 1324. Sixth: Agreement mtist be made with princi- pal. — The agreement for indulgence, in order to discharge the drawer or indorser, must be made with the maker or acceptor who is the principal debtor ; and if it be made with a third party, it will not affect the drawer's or in dorser's rights or remedies, although such third party may have his appropriate remedy for breach of the contract with him.'^ ' Muir V. Crawford, 2 Scotch Appeals, L. R., 456 (1875) : 13 Moaks Eng. R., 138; ex parte Carstairs, i Buck, 560; Bouler v. Mayor, 19 C. B. N. S., 70 (1 1 5 E. C.-L. R.) ; Kearsley v. Cole, 16 Mees. & W., 127 (1846), Parke, B. ; ex parte Glendinning, i Buck, 517 ; Boultbee v. Stubbs, 18 Ves., 20 ; ex parte Gifford, 6 Ves., 807, 808 ; Owen v. Homan, 3 Eng. L. & Eq., 125 ; Nichols v. Norris. 3 B. & Ad., 41 ; Stewart v. Eden, 2 Cai., 121 ; Wagman v. Hoag, 14 Barb., 233, 239 ; Clagett V. Salmon, 5 Gill & J., 314 ; Morse v. Huntington, 40 Vt., 488 ; Viele v. Hoag, 24 Vt., 46; Hagey V. Hill, 75 Penn. St., 108 ; Kenworthy v. Sawyer, 125 Mass., 28 ; Story on Bills, § 426 ; Story on Notes, § 416 ; Thomson on Bills, 387 ; I Parsons N. & B., 241 ; Burge on Suretyship, 210. ^ Gustine v. Union Bank, 10 Rob. (La.), 412 (1845) ; Harbert v. Dument, 3 Port. (Ind.), 246 (1852). = Wyke V. Rogers, i DeG. Mac. «& G , 408. ♦ Byles on Bills (Sharswood's ed.) [*245], 390. " Frazer V. Jordan, 8 El. & Bl., 303., Coleridge, J., saying: "We think that the doctrine ought not to be extended to the case of a contract with a stranger. The principal debtor having given no consideration for the promise, has no ground to complain of the breach of it, and can not say that faith has been broken with him. There is no privity of contract with him ; and we see noth- ing on which any right, either at law or in equity (see Lord Abinger s observa- § 132 7' ACTS OF CREDITOR NOT DISCHARGING SURETY. ^37 § 1325. An ordinary surety who has been discharged may certainly waive the discharge, and resume HabiHty for a consideration.^ And perhaps without any new consider- ation.^ Undoubtedly a waiver made with full knowledge of the facts, by an indorser or drawer who has been dis- charged, will bind him, although without a new consider- ation.^ SECTION III. WHAT ACTS OF CREDITOR WILL NOT DISCHARGE A SURETY. § 1326. The surety will not be discharged either by (i) a delay of the creditor to sue the principal ; (2) by receipt of part payment from the principal ; or (3) by receipt from him of collateral security. (i) Mei^e delay and passivity of the creditor does not discharge a drawer or indorser, even when the delay and subsequent insolvency of the principal deprives him of all means of reimbursement ;* and unless authorized so to do by statute, he can not, by request or notice, compel the creditor to sue the principal debtor.^ § 1327. (2) Part payment made to the debtor by the maker or acceptor, either before, or at, or after maturity of tions in Lyon v. Holt, 5 Mees. & W., 250, 253, 254), for him to insist on such a contract can be founded. The stranger may have some private reason of his own to wish for some indulgence to be shown ; and if he has given a good con- sideration, may be entitled to damages, nominal, or large or small, according to any legal interest he may have ; but surely he is the only person to take advan- tage of his contract." Lyon v. Holt, 5 Mees. & W., 543 ; Sterling v. Marietta, etc., Co., II Serg. & R., 179 ; 2 Parsons N. & B., 241 ; Thomson on Bills, 394. ' N. H. Savings Bank v. Colcord, 15 N. H., 119. " Fowler v. Brooks, 13 N. H., 420 ; i Parsons N. & B., 242. ' See ante, § 1222, and chapter xxxv, vol. 2. * Powell V. Waters, 17 Johns, 176 ; Wood v. Jefferson Co. Bank, 9 Cow., 194; Bank of S. C. v. Myers, i Bailey, 412 ; Sterling v. Marietta Co., 11 Serg. & R., 179; Freeman's Bank v. Rollins, 13 Me., 202 ; Worsham v. Goar, 4 Port. (Ala.), 441 ; English v. Darley, 2 B. & P., 61. A different rule applies as to notes not negotiable, see ante, § 13 16. 'See/tfoV, § 1339. Vol. II. — 22 338 WHAT DISCHARGES A SURETY. § 1 328. the note or bill, will not discharge the drawer or indorsers, except to the amount of the sum so paid, unless the part payment is accompanied with some stipulation which may be hurtful to their interests. In itself it is only an extin- guishment of the debt J>ro taiito, which relieves the drawer or indorsers to that extent, and is therefore beneficial.^ It appears to have been once holden that if, on presentment for payment, the holder took less than the whole amount from the acceptor or indorser, in part satisfaction, he thereby discharged the other parties who did not assent.^ But it is now settled that the holder may take part payment from any party, and sue the others for the residue.*^ Even an agreement that part payment shall discharge the debt, will not discharge any party to the instrument, unless some other circumstance entered into the consideration.'* § 1328. (3) The receipt of a mortgage, deed of trust, or other 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, if it be unac- companied with any stipulation for indulgence or delay ; for he is not incapacitated to pursue his remedy against any of the parties at any time, and the security taken oper- ates for the benefit of the drawer or indorsers, who are the better protected against loss.^ And it matters not that he 1 Greenavvalt v. McDowell, 65 Penn. St., 464 ; Hill v. Bostick, 10 Yerg., 410 ; James v. Badger, i Johns' Cas., 131 ; Bank U. S. v. Hatch, 6 Pet., 250 ; Mason V. Peters, 4 Vt., loi ; English v. Darley, 2 B. & P., 61 ; Edwards on Bills, 570; Halliday v. Hart, 30 N. Y., 474 ; Turnbull v. Block, 31 Ohio St., 649. ^ Tassel v. Lewis, 2 Ld. Raym., 744 (1695), where it is said : " If the indorsee of a bill accepts but two pence from the acceptor, he can never after resort to the drawer." Kellock v. Robinson, 2 Stra., 745 (1727). ' Hewitt V. Goodrich, 2 Car. & P., 468 (after dishonor) ; Gould v. Robson, 8 East., 576 ; Walwyn v. St. Quintin, i B. & P., 658 ; English v. Darley, 2 B. & P., 61 ; Chitty on Bills (13 Am. ed.), 472 ; Story on Notes, §§ 385, 422 ; Byles (Sharswood's ed.), [^242], 387 ; Thomson on Bills, 386 ; 2 Rob. Pr. (N. ed.), 239. * See chapter on Payment, and ante, § \'i\']b. In Hightcv/er v. Ivy, 2 Port. (Ala.), 308, it was held that the refusal of an indorsee who had sued the maker, to receive part payment from him, discharged the indorser, it appearing that it could not be afterward recovered. ' Beard v. Root, 11 N. Y. S. C. (4 Hun), 357 ; Bank of Utica v. Ives, 17 Wend., 502 ; Gary v. White. 52 N. Y., 138 ; Brengle v. Bushey, 40 Md., 141 ; § 1329. ACTS OF CREDITOR NOT DISCHARGING SURETY. 339 afterward surrenders up such collateral security, on being informed that the bill would probably be paid by the drawee.^ § 1329. While taking a bill, note, or check as collateral security merely, without any express or implied agreement for delay in consideration thereof, does not discharge the drawer or indorsers; yet if such bill, note, or check so taken by the holder be payable at a future day, there arises an implication of agreement for delay until its maturity, and, as has been said, "such indulgence may be, and is in most cases, the very consideration upon which the collateral security is given and obtained."^ Undoubtedly the holder may show that it was agreed that there should be no delay, or that the remedy against the drawer or indorser was re- served ; but that agreement for delay will be presumed, is the view sustained by weight of authority.^ In England Andrews v. Marrett, 58 Maine, 539 ; Thompson v. Gray, 63 Maine, 230 ; York V. Pierson, 63 Maine, 587; Lincoln v. Bassett, 23 Pick., 154; Sigourney v. Wetherell, 6 Met., 553; Sterling- v. Marietta, etc., Co., 11 Serg. & R., 179; Payne v. Commercial Bank, 6 Sm. & M., 24 ; U. S. v. Hodge, 6 How., U. S., 279; Wade V. Staunton, 5 How. (Miss.), 631 ; Ripley v, Greenleaf, 2 Vt., 129; Oxford Bank v. Lewis, 8 Pick., 458 ; Suckley v. Furse, 15 Johns, 338 ; Miller v. Knight, 6 Baxter, 503 ; Twopenny v. Young, 3 Barn. & C, 208 ; Bring v. Clarkson, 1 Barn. & C, 14; Bedford v. Deakin, 2 B. & Aid., 210; Story on Notes, § 416 ; Story on Bills, § 427 ; Edwards on Bills, 570. ' Hurd V. Little, 12 Mass., 502. ' Okie v. Spencer, 2 Whart., 253 (1836). *See an/e, § 1259 et seq., and § 131 2 et seq. ; Beard v. Root, 11 N. Y. S. C. (4 Hun), 356. In this case defendant was sued as indorser of a note for $226.25. J^he maker received from the holder a bond and mortgage for $600, after maturity of the note, and advanced him $100 thereon. Under the circum- stances of the case the court held the indorser discharged, and E. Darwin Smith, J., said : " It is doubtless true that the mere taking of collateral security for a debt without an agreement to extend the time of payment, does not discharge a surety. But it is not necessary that the agreement to extend the time of pay- ment be in express terms. The contract in this case, unavoidably, and by clear implication, includes such an agreement." Hubbard v. Gurney, 64 N. Y., 460; Pomeroy v. Tanner, 70 N. Y., 547; Armistead v. Ward, 2 Pat. & H., 504; Bangs V. Mosher, 23 Barb., 478. In Okie v. Spencer. 2 Whart., 253, the holder of a note took from the maker, at its maturity, a check dated six days afterward, and the indorser was held to be discharged. Myers v. Willis, 5 Hill, 463 ; Fel- lows V. Prentiss, 3 Den., 512; Couch v. Waring, 9 Conn., 264; Eisner v. Kelly, 3 Daly (N. Y.), 485 ; Frois v. Mayfield, 33 Tex., 801. In Chitty on Bills (13 Am. ed.) [*4o8], 461, it is said: "It is admitted that the mere receiving a lurther security, payable at a future day, would m general imply an agreement to wait till it becomes due." Chitty, Jr., on Bills, 100 w, and 100 x, note ; 2 Parsons N. & B., 247 ; 2 Am. Lead. Cas., 272 ; Thomson on Bills (Wilson's ed.), 392, 393, note a\ contra, Ripley v. Greenleaf, 2 Vt., 129, now overruled; Michigan State Bankv. Leavenworth, 28 Vt., 215. 340 WHAT DISCHARGES A SURETY. § I33O. it was at one time held that where the holder of a bill took a second bill of the acceptor, after notifying the drawer of dishonor, payable at a future day, without any express agreement, and without surrendering the first bill, the second bill should be regarded as collateral security merely, although money had been raised upon it ; and that the drawer was not discharged.^ And there is authority to the same effect in the United States.^ But this decision is now overruled, and the English doctrine conforms to the text.* § 1330. When the bill, note, check, or other security, which is taken by the holder, is payable immediately, or what is the same thing, on demand, there can arise no pre- sumption for delay on the part of the holder, and conse- quently it will not operate in itself as a discharge of the drawer or indorser.'^ Yet the holder, by neglecting to col- lect the amount of the bill, note, or check with due dili- gence, may discharge the maker or acceptor who passed it to him ; and thus by discharging the principal discharge the drawer or indorse r. It is his duty to present a check on the same day if it be on a bank in the place where re- ceived, and to forward it by mail of the next day if in another;^ and he must exercise diligence in presenting a bill or note payable on demand. What due diligence is, is elsewhere considered. ' Pi-ing V. Clarkson, i Barn. & C, 14; 2 Dow. & R., 78 (1882) ; followed in Galen v. Niemcewicz, 16 Johns, 321 (1833). This case may now be regarded as overruled. But see also Austin v. Curtis, 31 Vt., 64; Whitney v. Going, 20 N. H., 354. ^ See preceding note. ' Kendrick v. Lomax, 2 Cromp. & J., 405 (1832) ; see Michigan State Bank v. Leavenworth, 28 Vt., 215 (1856) ; Baker v. Walker, 14 M. & W., 464 (1845). ' Crafts V. Beale, 11 C. B., 172 ; 2 Am. Lead. Cas., 273. See, on this point. Board of Education v. Fonda, 77 N. Y., 362, Folger, J. : " Taking of the draft (which was payable on demand) as a means of getting payment of the debt, and the unavailing use of it for that purpose, without laches, worked no suspension of remedy against Wolcott, the principal, that will discharge defendants if they are his sureties." * Smith V. Miller, 43 N. Y., 171 (1870) ; 52 N. Y., 546 (1873). See vol. 2, § 1590- ^ 1332. JOINT PARTIES AS SURETIES. 34I § 1 33 1. Cojnpositioii with principal. — Any composition with the maker or acceptor, whereby a certain per cent, is agreed to be taken in discharge of the whole amount, upon receiving collateral security from a third person for the composition money, and it were given accordingly, would discharcre the drawer or indorser, whether he were an ac- commodation party or not ; for it would amount to an ex- tinp-uishment and satisfaction of the instrument as to all o the parties thereto.^ This doctrine was first introduced in courts of equity,' but it is now universally applied by courts of law. A dis- charge of the maker in bankruptcy does not release an in- dorser.^ SECTION IV. LATENT SURETIES ; ACCOMMODATION, AND JOINT PARTIES AS SURETIES. § 1332. There is no doubt that if the party add the word "surety" to his name upon the face of the paper, it is a distinct indication of the character in which he signs, and that he will be treated as a surety as against all parties.* And it is equally well settled that if the party signing add the word " principal " to his name, or expressly describe him- self as principal on the face of the paper, all parties may so ' Lewis V. Jones, 4 Barn. & C, 506 ; Steinman v. Magrius, 1 1 East., 390 ; Story on Notes, §§ 426, 427. In Story on Bills, § 430, it is said : " Perhaps it is ques- tionable, even if the holder has the consent of the other parties, that he may ac- cept the composition, and hold them liable, without resorting to the compound- ing creditor, whether he will not still be deprived of his remedy against them, if the composition operates as a release of the debt, inasmuch as it will be a fraud upon the other creditors, if they have supposed that they had contracted with each other on equal terms. On' the other hand, the holder's compounding with, or releasing, the drawer, will not discharge the acceptor of a bill, although he has accepted it for the accommodation of the drawer, unless it is expressly so stipulated." "" Melvill V. Glendinning, 7 Taunt., 126. ' Pratt v. Chase, 122 Mass., 26i>. * Hunt V. Adams, 5 Mass., 358; Robison v. Lyle, 10 Barb., 512 ; Edwards on Bills, 572. See § 1338a. 342 WHAT DISCHARGES A SURETY. § 1332^. regard and treat him.^ But there are other cases in which the parties signing do not expressly describe in what char- acter they are to be bound, which claim especial attention. What we have heretofore said in respect to the discharge of those parties to bills and notes who are regarded as occu- pying the relation of sureties, by indulgence to or discharge of their principals, was said under the assumption that the bill or note, as the caSe might be, was executed upon a valuable consideration, and that all parties were bound in all respects to the holder in like manner as they appeared to be. § 1332(3;. Parties signing as principals for accommodation. — Where the parties ostensibly principal were in reality mere parties for the accommodation of others, it has been held, by authorities of high consideration, that different and peculiar principles apply, and that in such cases, if the holder grant time to or release the party for whose accommoda- tion another became acceptor or maker, the acceptor or maker was thereby discharged. § 1333. English decisions. — Thus it was held at nisi prius, by Lord Ellenborough, that where the in- dorsee of a bill, who received it knowing that it was ac- cepted for accommodation of the drawer, gave time to the drawer when it became due upon his paying a ' Sprigg V. Bank of Mount Pleasant, 10 Pet., 265, Thompson J., saying : " In ordinary cases, when sureties sign an instrument without any designation of the character in which they become bound, it may be reasonable to conclude that they understood that their liability was conditional, and attached only in default of payment by the principal. And hence the reasonableness of the rule of law, which requires of the creditor that his conduct with respect to his debtor should be such as not to enlarge the liability of the surety, and make him responsible beyond what he understood he had bound himself. But when one who is in reality only surety is willing to place himself in the situation of a principal by ex- pressly declaring upon his contract that he binds himself as such, there can not be any hardship in holding him to the character in which he assumes to place himself. As to that particular contract, he undertakes as a partner with the debtor, and has no more right to disclaim the character of principal than the debtor would have to treat him as principal if he had set out in the obligation that he was only surety." See also S. C., 14 Pet., 201. Harris v. Brooks, 21 Pick., 195. 5 1333- JOINT PARTIES AS SURETIES. 343 part, the acceptor was thereby discharged.^ And subse- quently, by the same judge, that giving time to an accom- modation acceptor would not discharge the accommodated drawer, on the ground that the latter had no remedy over against the acceptor which could be materially affected ;* in both cases regarding the acceptor as a surety, and the drawer as the principal debtor. The doctrine of Lord Ellen- borough was soon doubted, and held not to apply where the acceptor promised to pay the bill when demand was made at maturity;^ and Lord Mansfield declared in the ensuing year that " except in the case cited from Campbell (Laxton v. Peat), it never was known that anything pass- ing between other parties could discharge an acceptor."* Lord EUenborough himself, it appears, had applied a differ- ent doctrine from that held by him in the cases above referred to, in an earlier case, where a similar question was presented between the indorsee and the maker of a note for accommodation of the payee.^ Upon the question arising; in the Court of Common Pleas, in a case where it appeared that the indorsee of a bill accepted for the accommodation of the drawer took a cognovit from the » Laxton v. Peat, 2 Camp., 185 (1809), Lord EUenborough saying: " This being an accommodation hill within the knowledge of all the parties, the acceptor can only be considered a surety for the drawer, and in the case of simple contracts the surety is discharged by time being given, without his concurrence, to the principal. The defendant's remedy over is materially affected by the new agree- ment into which the plaintiff entered with the drawer after the bill was due. The case is exactly the same as if the bill had been drawn by the defendant (the acceptor), and accepted by Hunt (the drawer), in consideration oi a debt due." See Edwards on Bills, 573. * Collett V. Haigh, 3 Camp., 281 (1812). ' Kerrison v. Cooke, 3 Camp., 362 (181 3), Gibbs, J. * Raggett V. Axmore, 4 Taunt., 730 (1813). "^ Mallet V. Thompson, 5 Esp., 178 (1804). The indorsee of the payee, for whose accommodation the note was made, knowing that it was an accommoda- tion note, covenanted in a composition deed not to sue or molest the payee on account of the debt for ninety-nine years, and received a dividend of the payee's estate. Lord EUenborough held that the maker was not discharged, in a suit against him by the indorsee, and said : " It is true that the plaintiff, recovering on the defendant (the maker) in this case, he (the maker) may have his action over against Twigg (the payee), but it will be for money paid to his use at the defendant's suit ; the payment creates a new debt, but the old debt is satisfied as between Twigg and the plaintiff." 344 WHAT DISCHARGES A SURETY. § 1 334. drawer payable by instalments, it was unanimously held that the acceptor was not discharged, and the circumstance that the holder did not know it was an accommodation acceptance when he took it, was considered by Lord Mansfield entirely immaterial.^ § 1334. The doctrine of the Court of Common Pleas, enforced by the great name and cogent reasoning of Lord Mansfield, may be regarded as the settled doctrine of the courts of common law in England, in cases where the holder did not know that the note or acceptance was for accommodation at the time when he took the instrument, although he may have afterward acquired information of Its true character.^ And even where the holder knew that the apparent principal party was really signing for the accommodation of another, at the time when he received the instrument, the better opinion is that that circumstance does not alter his rights or duties, as such party has held himself out and obligated himself in a certain character, and has no just ground to demand or expect greater con- sideration than that legally incident to that character which he has assumed,^ If he intended to insist on the privileges of a surety, he should have refused to bind himself save in a recognized form of suretyship. Furthermore, it may be observed, that while the indulgence or release of an ' Fentum v. Pocock, 5 Taunt., 192 ; i Marsh, 14 (1813). « Carstairs v. Rolleston, 5 Taunt., 551 ; i Marsh, 257 (1814). The holder re- leased the payee who had indorsed to him an accommodation note. He did not know when he received it that it was accommodation paper. Held, the maker was not discharged. Nichols v. Norris, 3 Barn. & Ad., 41. Parke, J., said : " I am of opinion that Fentum v. Pocock is sound law." Price v. Edmunds, 10 Bam. & C, 578 (1830), Parke, J.: "I think that the decision in Fentum v. Pocock, where it was held that the acceptor of an accommodation bill was not discharged by giving time to the drawer, was good sense and good law." Rolfe V. Wyatt, 5 Car. & P., 181 (1831). Held, giving time to drawer, on receiving part payment of bill accepted for his accommodation, did not discharge acceptor. The holder did not know it was an accommodation bill. Harrison V. Courtauld, 3 Bam. & Ad., 37 (1832). Held, that holder who knew at the time of the agreement, but not when he took the bill, that it was accepted for accommodation, by releasing drawer did not discharge acceptor. Story on Bills, §§ 253, 268. 2 Fentum v. Pocock, 5 Taunt., 192; i Marsh, 14(1813), Lord Mansfield. § 1334* JOINT PARTIES AS SURETIES. 345 acceptor (or other principal) materially affects the remedies of the drawer (or other surety) who is thereby delayed or entirely deprived of recourse against the acceptor upon the bill itself, to which he would be entitled, and upon which he might sue the acceptor on mal^ng payment, no such injury can possibly be inflicted on the acceptor for accommo- dation by indulgence to or release of the drawer. The ac- ceptor may, at any time at or after maturity of the bill, pay it, and no matter what may be the arrangements between the holder and the drawer, sue the latter, not upon the bill, but for money paid to his use.^ But now in courts of equity in England, and in courts of law where equitable pleas are admissible, the opposite doctrine prevails, and was enforced a few years since in a well-considered casc.^ 'See Mallet V. Thompson supra, §1333, notes; Thomson on Bills, 237; Story on Bills, § 268. « Ewin V. Lancaster, 6 Best & S. Q. B., 572 (118 E. C. L. R.), 1865. Bill ac- cepted for drawer's accommodation, and agreement of compensation entered into between holder and drawer, the holder knowing then that the acceptance was for accommodation. Crompton, J. : " Originally. the cases at law were extremely strong that the position of parties to a bill of exchange or promissory note could not be reversed by making the party who appeared on the face of the instrument to be the principal debtor surety for the other. They proceeded on the principle that parol evidence is not allowed to alter a written contract. Thai principle is a sound one, and has governed many cases in courts of law. But cases in equity establish, that when one or both of two parties to an instrument are primarily liabk, as in the instance of a common bond where several join as obligors, and the creditor may sue any one of them at any time, it is competent for him to show that the relation of principal and surety exists between the parlies. Lord Cottenham, in HoUier v. Eyre, 9 CI. & F., I, 45, referred to in Pooley v. Harra- dine, 7 E. & B., 431, 435 (90 E. C. L. R.), explained that the doctrme on which the courts of equity proceed arose from its being inequital)le that the creditor should prejudice the rights of the surety against the principal. In Strong v. Foster, 17 C. B., 201 (84 E. C. L. R.), which was after ple.re on equitable grounds had been introduced, the evidence failed to support the ecjuitable de- fence, and it was not necessary to pronounce an opinion on the validity of it. In Pooley V. Harradine, 7 E. & B., 431 (90 E. C. L. R.), this court upheld a plea on equitable grounds, which stated that the defendant made the note jointly, with A. as surety only for him, of which the plaintiff had notice at the time, and that the plaintiff gave time to A. without the defendant's knowledge. That de- cision was adopted by the Court of Exchequer in Taylor v. Burgess, 5 H. & N., i, and was held to be law by the Exchequer Chamber, in Greenough v. McClelland, 2 E. & E., 424, 429 (105 E. C. L. R.) But Pooley v. Harradine left one matter in doubt, viz., whether the creditor must have had notice of the suretyship at the time of taking the notes, or whether notice at the time of the dealing, alleged to amount to a discharge of the surety, was sufficient. That case came before this court in Baily v. Edwards, 4 B. & S., 761 (i 16 E. C. L. R.), which is very analogous to the present ; and the law accurately laid down by my brother 346 WHAT DISCHARGES A SURETY. § 1 335. § 1335. A^nerican decisio7is. — In the United States the rule is generally sustained that the parties to a bill or note are bound by the character which they assume upon its face, and that they are liable to, and may be treated by the holder according to tiieir ostensible relations to the instru- ment, especially when he had no knowledge that any of them were accommodation parties at the time when he be- came a holder for value. ^ And the observation of Story may be quoted with approval, that "the strong tendency of the more recent authorities is to hold that, in all cases, the holder has a right to treat all the parties to a bill as liable to him exactly to the same extent, and in the same manner, whether he knows or not the note to be an accommodation note ; for, as to him, all the parties agree to hold themselves primarily or secondarily liable, as they stand on the note ; and that they are not at Hberty, as to him, to treat their liability as at all affected by any accommodation between themselves.^ § 1335^. Knowledge of creditor of party s accofrnjioda- tion character. — There is strong authority for what seems to us the better doctrine, that even if the holder knew at the time he received the bill or note that it was accepted or Blackburn, in that case, applies here. There the plaintiffs, when they executed the deed by which time was given, had notice that the bill was accepted for the accommodation of their debtor ; and that is the time to be looked at, because it is the time when the equity arises. It is clear that a creditor is not bound to sue either the principal or the surety. No delay in suing the surety will prejudice him, but he must not make a binding agreement by which he ties up his hands from suing the principal. If he does so, the surety is discharged, on the prin- ciple explained bv Williams, J., in Strong v. Foster, 17 C. B., 201, 219 (84 E. C. L. R.) Here the plaintiff made a contract with the principal, upon good con- sideration, to give up the bills to be cancelled. Whether that is a waiver of the right of action agamst the surety may be doubtful ; for a waiver can only be to the party himself who relies upon it. But by that contract the plaintiff, for a good consideration, tied up his hands from suing the principal debtor. It may be shown by parol evidence, that in the transaction between the creditor and his debtors, according to truth and for the purposes of equity, one of the debtors was surety for the other ; and then the creditor is within the rule by which, if he gives time to the principal debtor, the surety is discharged." ' Farmers', etc.. Bank v. Rathbone, 26 Vt., 19 ; Gano v. Heath, 36 Mich., 441 ; Summerhiil v. Tapp, 52 Ala., 227. "" Story on Promissory Notes, § 418; see Story on Bills, § 253 ; contra, see Edwards on Bills, 573. 5 1336. JOINT PARTIES AS SURETIES. 347 made for accommodation, his rights and duties are in no respect altered ; and no indulgence to or release of a drawer or indorser will discharge the acceptor or maker.* But there arc weighty American authorities which concur with the English view, that whenever it is known that a party who signs as maker or acceptor, is in fact a party for accom- modation, he is entitled to be regarded and treated as a surety.^ If the holder knew the acceptance was for a particular purpose, which had been accomplished when he took the bill, he could not recover.^ § 1336. Whether or not it may be shown by parol that a joint proinisor was in fact a surety, and kiiown to be such by the holder. — There is no doubt that where the relation of suretyship exists between joint promisors upon a bill or ' Stephens v. Monongahela N. B., 88 Penn. St., 157 ; Bank of Montgomery v. Walker, 9 S. & R., 229 ; s. C, 12 S. &: R., 382. The case of Fentum v. Pocock was approved. White v. Hopkins, 3 W. & S., loi ; Lewis v. Hanchman, 2 Barr, 416; Murray v. Judah, 6 Cow., 484; holder knowing acceptor of check was for accommodation, gave time to drawer ; held acceptor not discharged. Copper's Adm'r v. Union Bank, 7 Har. & J., 92 ; Yates v. Donaldson, 5 Md., 389; Lambert v. Sandford, 2 Blackf., 137 ; Hansborough v. Gray, 3 Grat., 356; Claremont Bank v. Wood, 10 Vt., 182; 2 Robinson's Practice (N. ed.), 241 ; Stiles V. Eastman, i Kelly, 205 ; Cronise v. Kellogg, 20 111., 13 (1858), Caton, J. : " The wider the door is opened to admit defences to bills of exchange, the more is their general value impaired, and the more are commerce and exchange em- barrassed. The acceptor of a bill of exchange has always been considered the party primarily liable to pay it. He expressly agrees to pay it, whether he has funds of the drawer in his hands or not, even though he expects to be in funds from the drawer. An accommodation acceptor occupies precisely the same position as one who accepts with funds, as to all persons who receive the bill for value, whether they know that it was an accommodation acceptance or not. And it is a general maxim, that an acceptor of a bill of exchange can never be dis- charged, except by payment or a release." But see Parks v. Ingram, 2 Fost., 283 ; Adle v. Metroger, i La. Ann., 254. See on this subject, Story on Bills, §§ 425, 432, and 435, where it is said : " There seems a strong inclination in the more recent authorities to the doctrine, that the rights of all the parties to the note are, in respect to the holder and his acts, governed by precisely the same rule, whether the note be one for the accommodation of all the parties or not." Also § 253. In 2 American Lead. Cas., 435, it is well said : " He who makes a note or accepts a bill for the accommodation of another, virtually authorizes those who take the instrument subsequently to make such terms or arrange- ments with the drawer or indorsers, as may be most conducive to their mutual interests, and can not revoke the authority thus given, to the injury of others who have acted upon it." ' See the English cases in § 1334, and notes. Meggett v. Baum, 57 Miss., 22, held that if party knew acceptance was for accommodation, extension of time would discharge acceptor. To same effect Guild v. Butler, 127 Mass., 3S6. • Fletcher v. Heath, 7 B. & C, 517 ; Cartwright v. Williams, 2 Stark., 340. 348 WHAT DISCHARGES A SURETY. ^ 1337- note, their true relation may be shown as between them- selves;^ but upon the question whether or not it may be shown in an action against them by the payee, the English and American cases exhibit great contrariety and vacilla- tion of opinion. In Byles on Bills,^ it is stated as the re- sult of the English authorities that: "When of a joint and several note one maker is in reality principal and the other surety, yet it is no defence at law that one is princi- pal and the other is surety, that this was known to the creditor at the time of the contract, and consequently that the surety is discharged by time given to the principal.^ But such a defence is plainly available in equity,"* and therefore may be the ground of an equitable plea," the equitable plea being allowed in England by the statute of 17 and 18 Victoria, c. 125. § 1337. In the Court of Queen's Bench, one maker of a note, who was known to the payee to be only an accommo- dation maker or surety for the others, was held to be dis- charged by the payee's contracting to give time, and giving it, to the other makers, although on the face of the note he was a joint principal ; the decision being rendered upon an equitable plea allowed by the English statute, and based upon the ground that extraneous evidence to show that the defendant was surety for the other joint promisors did not and could not vary his contract ; but that when it was estab- lished that he was a surety, and that the plaintiff knew it when he took the note, an equity was created which entitled him to insist on such a course of conduct by the plaintiff as would work him no injury.^ More recent decisions have 'M'Gee v. Prouty, 9 Mete, 547 ; Harris v. Brooks, 21 Pick., 195. " Byles (Sliarswood's ed.) [*238], 381. " Price V. Edmunds, 10 B. & C 578 ; Perfect v. Murgrave, 6 Price, in; Man- ley V. Boycot, 2 El. & B., 46; Rees v. Berrington, 2 Ves., Jr., 540. * Hollier v. Eyre, 9 C. & P., 45 ; Davies v. Stainbank, 6 DeG. M. & G., 679 Pooley V. Harradine, 7 El. & B., 431 ; Greenough v. McClelland, 30 L. J. O. B., 15, 'Pooley V. Harradine, 7 El. & BL, 431 ; 40 Eng. L. & Eq., 96. In Manley v. Boycot, 2 El, & Bl., 46 (1853), an action by the payee of a joint and several note § 133^- JOINT PARTIES AS SURETIES. 349 gone a step further, and held that if the creditor knew the relation of suretyship when he granted the indulgence, the surety would be discharged.^ This may be regarded as the law of England on the subject ; but the cases which have held that the holder has a right to treat all the parties to a bill or note as continually bound in the character which they have assumed upon the instrument, and that by assum- ing such character they consent and contract that they may be so treated (unless the holder agreed to regard them as sureties), seem to us to embody the true principles which should be respected and followed.^ § 1338. Authorities i7i U. S. as to admissibility of parol evidence to show that joint party is siirety. — In the United against one of the makers, the defendant pleaded that he was in reality a surety, and the court held the plea bad because it did not allege that the note was de- livered by the defendant to the plaintiffs as surety, and that they agreed so to receive it from him, Lord Campbell, C. J., saying: "No parol evidence can be received of any agreement inconsistent with what appears on the face of the in- strument, as that a bill drawn payable at three months shall not be payable till the expiration of four months ; but evidence may be given by parol of an agree- ment at the time a bill is drawn and indorsed which is consistent with the writ- ten instrument ; as, for example, that a bill is indorsed and handed over for a particular purpose, without giving the bailee the usual rights of indorsee of the bill. But if the payee of a joint and several promissory note, made in the com- mon form by two, may be placed in the situation of treating the one as surety for the other, this can only be done by his express assent to do so when the note was delivered to him." ' Bailey v. Edwards, 4 Best & S. Q. B., 761 (1864) (116 E. C. L. R.);Ewin v. Lancaster, 6 Best & S. Q. B., 572 (1865) (i 18 E. C. L. R.) ; see ante, p. 345, note 2. In Swire v. Redman, i O. B. Uiv., 536 (1876), Cockburn, C. J., speakmg of the doctrine that any act which impairs the rights of the surety discharges him, says: "As it depends on the supposed inequity of interfering with the rights which the suretv has as between him and the principal debtor, it is not material that the knowledge on the part of the creditor that the surety was from the be- ginning, such was not acquired till after the surety had become liable to the creditor." "In Strong v. Foster, 17 Com. B. (8 J. Scott), 204 (84 E. C. L. R.) (1855), Willes, J., said : " You can not show, by parol evidence, that the contract of a partv to the bill or note was intended at the time it was made, to be other than that'which is apparent on the face of the instrument itself. .... A person who signs a note as a principal debtor must, in proceedings upon the note, undergo all the liabilities of a principal debtor, although as between himself and the party at whose instance he signs it, he is in fact a surety only, and that fact was known to the creditor at the time the note was handed over." And after commentmg on the cases, he adds : " The result seems to be that here, if evidence is admissi- ble to show that the defendant signed the note as surety, it must also be shown that the bankers agreed to accept him as such; and consequently that in the present case, where there was no such evidence, the defendant is not entitled to be treated as a surety, and the defence does not arise." 350 WHAT DISCHARGES A SURETY. § 1 338 States, we think, the weight of authority is in favor of allowing evidence to show that one of the joint promisors signed as surety, and that this was known to the payee or indorsee when he took the instrument/ And there are cases which hold that if he knew the fact that one of the promisors was surety at the time when he granted indul- gence to the other, it will be equally as effectual as a dis- charge of the surety promisor.^ But the authorities are by no means harmonious ; and in the midst of conflicting opinions we strongly incline to concur with those which look only to the face of the instrument to ascertain the rights and liabilities of all the parties. If a party intends to insist on a surety's rights, he should sign the instrument in a form which will carry notice of the fact to those deal-, inof with it.^ And if the holder treats him in a manner consistent with his ostensible relation to the paper, it tends to disappoint his reasonable and just expectations to per- mit such party to set up defences based upon extraneous '■ Rose V. Williams, 5 Kans., 489 (1870) ; Perry v. Hadnett, 38 Ga., 104 ; Hub- bard V. Gurney, 64 N. Y., 460 ; Harmon v. Hale, I Wash. Ten, 423 ; Grafton Bank V. Kent, 4 N. H., 221 ; Garrett v. Ferguson, 9 Mo., 125 ; Stillwell v. Aaron, 69 Mo.. 539; Irvine v. Adams, 48 Wis., 468; Barron v. Cady, 40 Mich., 259; i Parsons N. & B., 233, 234, note e. "^ Wheat V. Kendall, 6 N. H., 504, Parker, J., saying : " The injury to the surety is the same as if the creditor had possessed the knowledge at the time the note was taken." Branch Bank v. James, 9 Ala., 949 ; but the party might show that the defendant undertook to deal as principal and not as surety. In i Parsons N. & B., 233, it is said : " On the question whether parol evidence is admis- sible to show that one who signed a note as a joint or joint and several maker was only a surety for his comaker, in an action by the holder against such surety, the authorities are conflicting and uncertain. It seems to be settled that where the fact was not known to the holder previous to the maturity of the note, such evidence is inadmissible ; but where this relation was known to the holder at the time of entering into the contract, the evidence is admissible in equity. But, at law, it is urged, on the one hand, that this is an attempt to vary the con- tract ; that the parties, having called themselves joint or joint and several prom- isors in the contract, can not assume a different relation or character by extra- neous evidence. On the other hand, it is contended that the note does not ex- press the whole contract, since it depends materially upon delivery, and the purposes for which delivery is made ; that the terms of the note only offer a presumption of the relation in which the parties stand to each other ; that this is a mere collateral fact which can be proved, and the presumption rebutted by parol evidence. We consider the weight of authority and principle is in favor of the admission of such evidence." 'Claremont Bank v. Wood, 10 Vt., 582; Dunham v. Donner, 31 Vt., 249 Benedict v. Cox, 52 Vt., 250, as to form of action. § 1339' surety's remedies. 351 circumstances.^ It will be seen that some of the cases, both in England and America, take the view that it may be shown that the payee agreed to regard the copromisor as surety, and that nothing short of such an agreement will justify his claiming a surety's privileges in any respect. This intermediate ground has much to commend it ; and if any departure is made from the face of the instrument, it seems to be far more equitable and just than those which make mere knowledge of the suretyship the criterion.^ § 1338^;. In New York, where a joint and several note was signed by three persons as makers, the last adding the word " surety " to his signature, it was held that the pre- sumption was that he signed as surety for the other two, but that it might be shown that he was surety for only one, and that the other signer was also surety.^ SECTION V. surety's remedies. § 1339- ^^^^ have already seen that mere passivity of a creditor does not discharge the surety. Even when the delay of the creditor and the subsequent insolvency of the principal deprive the surety of all means of reimbursement, he must still submit to it;"* for the duty of performance rests upon those who make contracts. And, in the absence ' Benjamin v. Arnold, 9 N. Y. S. C. (2 Hun), 447 (1874). In this case payee of a joint and several note sued the four signers. Three of the defendants offered to prove that they signed as sureties only for the accommodation of the fourth, which fact was known to the plaintiff at the time she took the note, and that after its maturity, she, without their consent, extended the time of pay- ment. Held, that the evidence was inadmissible. To same effect, see Camp- bell V. Tate, 7 Lans., 370. But these cases in New York are now overruled in Hubbard v. Gurney, 64 N. Y., 460. " See cases supra, ' Sayles v. Sims, 73 N. Y., 552 ; see ante, 1332. ■* Alcock V. Hill, 4 Leigh, 622 ; U. S. v. Simpson, 2 Penn., 427 ; Carr v. How- ard, 8 Blackf, 199; Adams Bank v. Anthony, 18 Pick., 238. 352 WHAT DISCHARGES A SURETY. § 1339' of Statutory provision, the surety can not by notice or re- quest compel the creditor to commence a suit against his principal debtor.^ The surety has his own efficient and ap- propriate remedies : (i) He may pay the debt and institute an action for money paid to his use, against the principal, and recover it back.^ In some States, as in Virginia, he may recover it back by motion. Or (2) he may file a bill in chancery against the principal to compel him to make payment to the creditor.^ Or (3) the surety may file a bill in chancery to compel the creditor to bring his action against the principal, upon being indemnified against the consequences of risk, delay, and expense.* And (4) if he pays the debt, and then be a cosurety, he may file a bill against him for contribution. These are the principles which apply to ordinary sureties. While an accommoda- tion indorser may be regarded as a surety in some cases, and under some circumstances, and has all the rights at- taching to that relationship, yet as between him and a bona fide holder of the paper, where his liability has become fixed, he becomes a principal debtor ; and he can not com- pel the holder to sue the maker, or to enforce a security he possesses. If he desires the benefit of any security held by ' Croughton v. Duvall, 3 Call. 73 : Humphrey v. Hitt, 6 Grat., 509 ; 5 Rob. Prac (N ed.), 781 ; i Parsons N. & B., 237 ; 2 Id., 243, note. In Pain v. Pack- ard 13 Johns, 174, it was held that neglect to sue the solvent principal by the holder, at the request of the surety, and the subsequent insolvency and abscond- ing- of the principal, discharged the surety. This doctrine was denied by Chan- cellor Kent, in King v. Baldwin, 2 Johns Ch., 554 ; but was reaffirmed by the Court of Errors, in the same case, reported in 17 Johns, 384. The courts of New York follow this latter decision, but within strict limits. The opinion of Chan- cellor Kent is now admitted to be the sounder view (see 2 Am. Lead. Cas., 339) ; and in Herrick v. Borst, 4 Hill, 450, Cowen, J., said of the doctrine of Pain v. Packard, that it " came into this court without precedent, was afterward repu- diated even by the Court of Chancery, as it has always been held at law and in equity in England, but was restored on a tie by the casting vote of a layman. But even in New York (as we have already seen in section i, ante), the indorser, while regarded in the nature of a surety, is not a surety in the sense of the cases above quoted, who has a right to require the creditor to sue the maker. Beards- ley V, Warner, 6 Wend., 613 ; Trimble v. Thorn, 16 Johns, 152. ^ Humphrey v. Hitt, 6 Grat., 524 ; Story on Notes, § 419. ' Humphrey v. Hitt, 6 Grat., 524. * Humphrey v. Hitt, 6 Grat., 524 ; King v. Baldwin, 17 Johns, 324. ^ 1 341. surety's remedies. 353 the creditor he must pay the debt and claim the right of subrogation to his position.^ § 1340. As to contribution. — An indorser is a surety to the holder for all parties liable prior to him, and each one of them (except acceptor) is a surety to him. But indors- ers are not cosureties (unless their indorsement is joint), but are severally and successively liable.''^ Where the sure- ties are not as between themselves principal and surety (as are prior and subsequent indorsers), but are merely cosure- ties, as are two or more joint, or joint and several, makers of a note, if one be required to pay the whole debt, the others are bound to contribute in equal proportions, and the cosurety may recover of the others their aliquot shares.^ And this right of contribution arises 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 ev^en though the surety demanding contribution did not at the time of the contract know that he had any cosureties.^ § 1 34 1. The cosurety, in order to sustain his suit for con- tribution, must have made payment under a legal and fixed obligation,^ but not necessarily under compulsion of suit or legal process."^ The right to contribution arises out of an implied promise amongst cosureties to share equally the burdens of cosurctyship,^ and therefore does not exist where there is an express understanding to the contrary. The right of a cosurety to contribution is not prejudiced ' Ross V. Jones, 22 Wallace, 576. In re. Babcock, 3 Story, C. C, 393 ; First National Bank v. Wood, 71 N. Y., 411. ^ See ante, § 703, vol. i ; M'Neilly v. Patchin, 23 Mo. 40. ' Byles on Bills (Sharswood's ed.), P247], 392 ; 2 Parsons N. & B, 253 ; Davis V. Emerson, 17 Me., 64; Fletcher v. Jackson, 23 Vt., 581 ; Pitt v. Purssord, 8 M. & W., 538 ; Frevert v. Henry, 14 Nev., 191. ^ Deering- v. Earl of Winchelsea, 2 Bos. & P., 270 ; Mayhew v. Crickett, 2 Swanst., 184. ' Craythorn v. Swinburne, 14 Ves., 169. ' Pitt V. Purssord, 8 M. & W., 538 ; Davies v. Humphreys, 6 Id., 153. '2 Parsons N. & B., 253. ' Kemp v. Finden, 12 M. & W., 521. Vol. II. — 2-1 354 WHAT DISCHARGES A SURETY. ^ 1.342. by his possessing a security against the principal, which the defendant neither has nor knows anything about. ^ § 1342. Extent of surety s recovery, — A surety who pays a bill or note, or other obligation of his principal, is en- titled to indemnity from him, and may recover back the amount with legal interest thereon.^ But the Hmit of the surety's recovery is simply the amount necessary to indem- nify him, and therefore, even though he take an assign- ment of the creditor's claim, he can not recover the amount that the creditor was entitled to receive, but only the amount which he paid.^ If he compromises the debt, he can only recover back the amount accepted by the creditor in compromise of it;* and if he pays in a depreciated cur- rency, he can not recover a dollar in legal tender for every* dollar of such currency, but only the value of the currency paid.^ It has, however, been held in Massachusetts, that where an accommodation indorser, who is the payee of a note which had been negotiated by the maker for the full amount, took it up, paying only half of the sum, he could sue the maker as payee, and recover the full amount there- of.^ In Virginia the accommodation indorser who makes payment has (and, as we think, justly) been held to stand on no higher footing than any other surety, and there he can only recover the amount paid by him.''' § 1343. Subrogation to principaFs rights. — The surety *Done V. Walley, 2 Exch., 198. *Blow V. Maynard, 2 Leigh, 54; Kendrick v. Forney, 22 Grat., 750; Pace v. Robertson, 65 N. C, 550; Barnett v. Cecil, 21 Grat., 95 ; Burton v. Slaughter, 26 Grat., 920. ^ Blow V. Maynard, 2 Leigh, 54. *Blovv V. Maynard, 2 Leigh, 54; Kendrick v. Forney, 22 Grat., 753 ; ex parte Rushforth, 10 Ves., 409, 420 ; Butcher v. Churchill, 14 Ves., 567 ; Read v. Norris5 14 Cond., E. C. R., 362, 375. ''Kendrick v. Forney, 22 Grat., 748 ; Pace v. Robertson, 65 N. C, 550. 'Fowler v. Strickland, 107 Mass., 552; contra, Vs^cq v. Robertson, 65 N C, 550- 'Burton v. Slaughter, 26 Grat., 920; Barnett v. Cecil, 21 Grat., 95. § 1343- surety's remedies. 355 making payment is subrogated to all the rights of the holder, and to the enjoyment of all the securities which his principal was entitled to for the payment of the debt, being substituted into his place when he pays the debt for him ; ^ and where the maker of a note executes a mortgage to se- cure an indorsee, the payee of the note, on making pay- ment, becomes entitled to the benefit of the mortgage.^ * See ante, § 1312 ; Babcock v. Blanchard, 86 111., 165 (guarantor). * O'Hara v. Haas, 46 Miss., 374. CHAPTER XLII. THE FORGERY OF NEGOTIABLE INSTRUMENTS. . SECTION I. THE DEFINITION AND NATURE OF FORGERY. § 1344. Forgery is the cou7iterfeit iiiaking or altering of any writing with intent to defraud} — The most usual species of forgery is fraudulently writing the name of an existing person ; but where one is in possession of a paper containing a genuine signature, and fraudulently fills it up so as to make it appear to be signed as maker,^ or indorser,^ or other party to bill or note,* it is as much a forgery as if the signature itself had been forged. So where one has au- thority to fill up a bill or note in blank, with a particular sum, and he fraudulently inserts a larger sum, it is as much a forgery as if he had acted without any authority at all.^ § 1345. Illustrations of forgery. — Passing a note signed by one person in his own name, as the note of another per- son of the same name, if done with intent to defraud, is a forgery ; ^ and so appending to one's own name a false ad- dition of description, as by residence or occupation, of another person of the same name ; ' or indorsing a note by 'Byles on Bills (Sharswood's ed.), [*3i7]. 483. ^ Rex V. Hales, 17 St. Trials, 161. ' Ibid. * Powell V. Commonwealth, 1 1 Grat., 822. ' Regina v. Wilson, 17 L. J. M. C, 82 ; Rex v. Hart, 7 C. & P., 652. 'Rex V. Parke, 2 Leach Cr. L., 614. ^ Rex V. Webb, Russ. & R. C. C, 72; Rex v. Parke, -2, Leach, 775 ; Rex V Rogers, 8 Car. & P., 629. (356) ^ 1346. DEFINITION AND NATURE OF FORGERY. 357 another person of the same name with the real payee, or special indorser.^ So, one who, with intent fraudulently to utter a promissory note as a note of a person other than the signer, procures to it the signature of an innocent party who does not thereby with intent to bind himself, is guilty of forgery.^ But where a person falsely represents himself to be the indorser of a bill, but writes nothing falsely him- self, if there be a real person who did indorse the bill in his own proper name, the offence will not be forgery, but ob- taining goods or money upon false pretences,^ And so as to any other genuine signature, though it be passed for another ; yet if there be nothing upon the bill or note to apply it to that person, it is not a forgery.* Where a party habitually uses an assumed name, the signing of it is not a forgery ; but if a party assumes a name for the purpose of fraud, a bill or note under the as- sumed signature will be a forgery. The signature of a fictitious name or firm, if made with intent to defraud, constitutes forgery.^ Thus uttering a forged order for the payment of money, signed " Rt. Venest," there being no such person in existence, is a for- gery.^ So indorsing a bill in the fictitious name of " John Williams."^ § 1346. A mere inforinality in the language of a bill or note, such as the omission of a word, or a misspelling, or other grammatical error, as where "pounds" was omitted;^ or "pound" was used for "pounds";^ or "I promised "for "I promise,"^" does not impair its validity; and, therefore, ^Mead v. Young, 4T. R., 28. ''Commonwealth v. Foster, 114 Mass., 311. ' Hevey's Case, i Leach, 229; Chitty on Bills [*78o]. * Chitty on Bills [*78o]. 'Chitty on Bills [^782] ; Commonwealth v. Chandler, Thatcher Crim. Cas.. 187 ; State v. Givens, 5 Ala., 747. •Lockett's Case, i Leach, 94. ' Taft's Case, i Leach, 172. * Chisholm's Case, Russ. & R., 297. • Rex v. Post, Russ. & R., loi. "Perkins v. Commonwealth, 6 Grat., 651. 358 FORGERY OF NEGOTIABLE INSTRUMENTS. § 1 347 the making or altering of such an instrument is a forgery, But if a paper were made or altered in such a way as to be upon its face void, or fatally defective in law, it would seem to be otherwise.^ Thus a bill drawn payable to " ■ or order," and signed with a forged signature, is not a forgery, because without a payee, and therefore a mere nullity.^ But if payable to bearer it would be different.^ A note without a signature is the same as a mere blank, and can not be deemed a forgery.^ But the total absence of any stamp, or defect in the proper stamp, will not pre- vent the instrument from being a forgery.^ § 1347. Alteration is forgery. — The alteration of a com- pleted instrument, by a material change in its terms, with intent to defraud, is as plain a forgery as the making of it altogether ; for it fraudulently assumes to bind the parties to a contract to which their consent is wanting.® Thus, where a clerk broke the seal of a letter, and altered a check which it contained to a larger amount, it was deemed a forgery ; ''■ and so any fraudulent material change in the terms of the paper, whether in amount,^. place of payment,^ or time of payment.^^ § 1348. What frazid is not forgejy. — The making of the bill or note must be counterfeit and false in order to amount to a forgery, and if real, though fraudulently procured, it will be a fraud, but not a forgery. Thus, where a person * See Clarke v. State, 8 Ohio St., 630; State v. Humphreys, 10 Humph., 442 ; Rex. V. Burke, Russ. & R., 496 ; Wall's Case, 2 East. P. C, 953 (a will) ; Chitty on Bills [*774]. * Rex V. Richards, Russ. «& R. C. C, 193. 3 People V. Brigham, 2 Mich., 550. * Rex V. Pateman, Russ. & R. C. C, 496 ; Regina v. Keith, 29 Eng. L. & Eq., 558. ^ Rex V. Reculist, 2 Leach, 703 ; Rex v. Hall, 3 Stark., 67 ; Chitty on Bills [*779]. *Wheelock v. Freeman, 13 Pick., 165 ; see § 1373 et seq. ' Belknap v. National Bank, 100 Mass., 379. « Rex V. Post, Russ. & Ry., loi. ' Rex v. Treble, 2 Taunt., 328. " Rex V. Atkinson, 7 Car. & P., 669. § 1350. DEFINITION AND NATURE OF FORGERY. 359 writes a note for a certain sum, and procures another to sign it as maker, under the false representation that it is for a smaller sum, it is not a forgery.^ § 1 349. TJie intent to dcfraitd is essetitial to constitute forgery ; and although a bill or note will not be binding upon those whom it purports to bind if their names have been signed to it, or it has been altered without authority, the party who has ignorantly or innocently executed or altered it under a supposed authority, will not be deemed guilty of a forgery.^ Nor will the mere imitation of another's writing, the assumption of a name, or the alteration of a written instrument, where no person can be injured thereby, amount to forgery.^ § 1350. Utterijig instrtime7tt essential to forgery. — The delivery of a bill or note, or other written contract, is neces- sary to its validity ; and so the " uttering," which is the term used to describe the delivery by a forger or counter- feiter to some person of the forged instrument, is necessary in order to complete the crime of forgery. Giving the bill or note to a confederate to utter is an uttering thereof.* But merely displaying forged instruments with fraudulent intent, or handing them ov^er to another without designing to pass them off, is not.^ If the note be payable to the forger's order, his transfer of it without indorsement is an uttering thereof.^ When forgery of a signature is alleged, it will not be competent to prove that the party charged to be guilty has committed a forgery of a similar character, and absconded on that account.''' ' Commonwealth v. Sankejf, 22 Penn. St., 390 ; People v. Getchell, 6 Mich., 496 ; Regina v. Coulsen, i Eng. L. & Eq., 550 ; i Parsons N. & B., 586, note x. " Roscoe's Crim. Evidence, 505. ' Chitty on Bills (13 Am. ed.) P785]. * Rex V. Palmer, Riiss. & R. C. C, 72. ^ Rex v. Shukard, Russ. & R., 200, • Rex V. Beckett, Russ. & R., 86 ; Rex v. Post, Russ. & R., loi. ' Balcetti v. Ser^m" p^n'"- ' ' - 360 FORGERY OF NEGOTIABLE INSTRUMENTS. § 1 35 1. SECTION II. LIABILITY OF PARTY WHO ADOPTS A FORGED SIGNATURE AS HIS OWN. § 135 1. When a person's signature is forged as maker, acceptor, drawer, or indorser, it is, as a general rule, a mere nullity as to him. And ordinarily such person may deny the genuineness of his signature, or show that, although the signature be genuine, the writing attached to it has been materially altered ; in which cases he would not be bound. But if the person whose signature has been forged pro- nounces it genuine, or the instrument valid, the question arises whether or not such declaration renders him liable as if he were a party to a genuine instrument ; and a variety of circumstances affect its just solution. In the fii'st place, when third parties buy the paper on his assurances or representations of the genuineness of his signature, or of the validity of the instrument, or are induced to act upon such assurances or representations, and would suffer loss if he were permitted to set up forgery as a defence, it is quite clear upon principles of estoppel that such defence can not be made.^ If he tells the holder of the paper to " hold on " and that " he will pay him," there- by inducing delay, during which other parties to the paper become insolvent and abscond, these principles would ap- ply ;^ and so if, confiding in the admission of genuineness, the holder loses an opportunity of obtaining security or at- taching property and sustains injury thereby.-'^ ' Workman v. Wright, 33 Ohio St., 405 ; s. C. 31 Am. Rep., 546 ; Woodruft V. Munroe, 33 Md., 158; Casco Bank v. Keene, 53 Me., 104; Greenfield Bank V. Crafts, 4 Allen, 447 ; Dow v. Sperry, 29 Mo., 390 ; Crout v. De Wolf, i R. I., 393; Beeman v. Duck, 11 M. & W.,'251 ; Leach v. Buchanan, 4 Esp., 226; Rudd V. Mathews, S, C. of Ky., Oct, 1881, reported in Central L. J., Nov. 18, 188 1, p. 387 ; 37 Am. Rep., 704 ; see ante, § 859. ^ Hefner v. Dawson, 63 111., 403. ' Casco Bank v. Keene, 53 Me., 103 § 1352- LIABILITY FOR ADOPTING A FORGED SIGNATURE. 36 1 § 1352. Second: Acknowledgment of genuineness or validity by mistake. — When no principle of estoppel applies, and when through mistake a party states that his signature is genuine, and aftenvard discovering his error speedily corrects it — that is to say, before the holder has changed his relations to the paper, or any one has dealt with it upon the faith of his admissions, we know of no prin- ciple of law which prevents the forgery from being pleaded.^ No innocent person can suffer, and simple justice is done the party whose name has been forged by allowing him under such circumstances to prove the truth of the case. But as mere matter of testimony, a prior admission of the genuineness of a signature would weigh heavily ; and a sub- sequent denial, as it seems to us, should be supported by very satisfactory explanations in order to overcom.e it. § 1352^. Third: Deliberate adoption of forged sigjia- ture. — Where the party knowing his signature to be a forgery deliberately adopts it as his own, a more difficult question arises, a question which has divided the courts, and upon which the decisions are in conflict. There are authorities, both English and American, which hold that the party under such circumstances is bound. Where the holder of a bill in an English case went to a father whose son had signed his name and said: "We shall proceed against your son; is this your acceptance?" and the father said, " It is," he was held liable, being regarded as estopped to deny it.'^ In New York, where the name of a person had been forged as joint maker of a note, and after delivery he told the payee of a note it was all right he was bound, and Mullen, P. J., said : " I can not perceive any reason why a person whose name has been forged may not adopt and afhrm the signature as his own act, and thereby subject himself to whatever civil liability may follow from ' Woodruff V. Munroe, 33 Md„ 158. « Ashpitel V. Bryan, 3 B. & S., 492 ; 32 L. J., 91, Q. B. ; 7 L. R. T. (N. S.) 706. o 62 FORGERY OF NEGOTIABLE INSTRUMENTS. § 1352^. it." ^ In Massachusetts the ruling has been to the same effect, the court declaring that such admissions or declara- tions are acts of ratification, that such ratification is binding though there had been no pretence of agency, and that no principle of public policy applies to forbid it unless there be an agreement not to prosecute the forger.^ On the other hand, the view has been forcibly presented that though a voidable act may be ratified, as where an agent has exceeded his powers, or there has been an assumption of agency without proper authority, it is otherwise when the act was originally and in its inception void. A distinction has also been made between civil acts which may be made, it is said, good by subsequent recognition, and a criminal offence which, it is said, is not capable of ratification. And where the status of parties has not been changed by the adoption of the signature, it has been urged that there is no consideration for it, and that it is therefore null and void. And a number of cases resting on these views in whole or in part have held that the mere adoption or ratification of a forged signature, without additional circumstances of estoppel or consideration, is void.'^ Chief Baron Kelly in ^ Howard v. Duncan, 3 Lansing-, 175. "^ Greenfield Bank v. Crafts, 4 Allen, 447, the court saying : " It was clearly competent, if duly authorized, thus to sign the note. It is, as it seems to us, equally competent for the party, he knowing all the circumstances as to the sig- nature and intending to adopt the note, to ratify the same, and thus confirm what was originally an unauthorized and illegal act It is difficult to per- ceive why such adoption should not bind the party whose name is placed on the note as promisor as effectually as if he had adopted the note when executed by one professing to be authorized, and to act as an agent, as indicated by the form of the signature, but who in fact had no authority. It is, however, urged that public policy forbids sanctioning the ratification of a forged note as it may have a tendency to stifle a prosecution for the criminal offence. It would seem, how- ever, that this must stand upon the general principles applicable to other con- tracts, and is only to be defeated where the agreement was upon the under- standing that if the signature was adopted, the guilty party was not to be prosecuted for the criminal offence." See this case cited in 31 Am. Rep., 555. See also 31 Am. Rep., 551, 552; and the dissenting opinion of Martin, B., in Brook v. Hook, there quoted; Wellington v. Jackson, 121 Mass., 157 ; Hefner v. Vandolah, 483 ; Casco Bank v. Keene, 53 Me., 103 ; Forsythe v. Bonta, 5 Bush, 547. ' Shisler v. Van Dyke, 92 Penn. St., 449; 31 Amer. Rep., 553, the court said: " The question, however, remains : could the forged indorsem.ent, conceding it to be such, be ratified and thus made good ? This question must be answered § 1 352'^- LIABILITY FOR ADOPTING A FORGED SIGNATURE. 36 O an English case has clearly analyzed and well presented this question.^ § 1352^. Observations 07i confiicting views. — It is essen- tial in order to charge a party upon a forged signature on the ground of ratification or adoption, as in other cases of ratification, that he should have known all the facts affect- ing his rights in the premises.^ And if the adverse party has acted in bad faith, or there be actual fraud practiced on the party sought to be charged, he is not bound by his rati- fication or adoption of the forgery.^ It is also quite clear that if there be an agreement, express or implied, to suppress in the negative if we accept as authority the case of McHugh v. Schuylkill County, 7 P. F. S., 391 ; S. C, 5 Am. Rep., 447. This case is in point ; there as here the question was whether there could be an after ratification of a forged obliga- tion, and it was held that there could be no such ratification. It is true the dicta of this case, going as it does beyond the point ruled, indicate that no contract, vitiated by fraud of any kind, is the subject of subsequent ratification Where the fraud is of such a character as to involve a crime, the ratification of the act from which it springs is opposed to public policy, and hence can not be permitted ; but where the transaction is contrary only to good faith and fair dealing, where it affects individual interests and nothing else, ratification is allowable." To same effect see Pearsoll v. Chapin, 8 Wright, 9 ; Negley v. Lind- say, 17 P. F. Smith, 217. In Workman v. Wright, 32 Ohio St. (405), 1878; s. C, 31 Am. Rep., 547, it was held that a simple promise to pay a forged note made to the holder after he acquired it was not binding, being without con- sideration. ' Brook V. Hook, 3 Albany L. J., 255 ; 24 Law Times, 34; 31 Am. Rep., 549. In this case defendant denied his signature, and said it must be a forgery of J.'s, upon which plaintiff said he should consult a lawyer, with a view to proceeding criminally against J. The defendant said rather than that he would pay the money, and wrote as follows : " Memorandum, that I hold myself responsible for a bill dated Nov. 7th, 1869, for _£20, bearing my signature and J.'s, of Mr. Brook," and signed his name to it. Held, he was not bound. Chief Baron Kelly (with whom Channelland Piggatt, B.B., concurred) placed his opinion on the grounds: I. That defendant's agreement to treat the note as his own was in consideration that plaintiff would not prosecute the forger; and 2. That there was no ratifica- tion as to the act done, the signature to the note was illegal and void, and that though a voidable act may be ratified by matter subsequent, it is otherwise when an act is originally and in its inception void. Martin, B., dissented. See also McKenzie v. British Linen Co., 44 L. T. R., 431 (1881). In Kernan v. London Discount and M. Bank, 4 Victorian R., 279, the defendant said the signature was his. It was forged. The Supreme Court of Victoria said : "His telling a falsehood is not a ratification Had the defendant previously paid a forged note, and thereby misled an innocent holder, possibly the case might have been different." " Gleason v. Henry, 71 III, 109. ^ Chamberlain v. McClurg, 8 Watts & S., 36 ; McHugh v. County of Schuyl kill, 67 Penn. St., 391, 364 FORGERY OF NEGOTIABLE INSTRUMENTS. § 1352/5. a criminal prosecution of the forger, it would render the ratification or adoption void ; ^ and also clear, as already seen, that such ratification would bind the party making it to any third innocent party who has been induced to act upon the faith of it in such a way as to suffer loss by its repudiation,^ But in the absence of other circumstances the question is difficult. If A., without any authority whatsoever, but with intent to defraud, sign the name of B. to a promissory note, or other obligation, A. is simply a forger, liable to prosecution, and B. is not bound. But suppose that C, the payee and holder of the note, present the note to B. for payment, and B. with knowledge of all the facts answers, " All right, that is my note, and I will pay it to-morrow," and on the morrow discloses that it is forged and refuses to pay, is B. then bound ? It is clear that unless C, the holder, has lost some recourse that he would have had against A., the forger, or his property, to secure the debt, he is in the same status that he would have been if B. had instantly repudiated his signature. It is clear also that B., unless some new consideration has moved to him, is under no additional obligation to pay except that which arises out of a false acknowledgment. Is that alone sufficient to hold him ? If the original act were innocent in itself he would be bound, because ratification under- standingly made is equivalent to a previous authority, and in cases of agency is nothing more than confirmation of previously assumed authority. But when the act without authority constitutes a crime, it is difficult to attribute any motive to the ratifying party but that of concealing it, and suppressing its prosecution ; for why would any man pay money without consideration when he himself had been wronged, unless constrained by desire to shield the guilty party ? For these reasons public policy would seem to in- terdict the ratification of a forged signature, except as to 'See §196. '§1351- J 1354. ESTOPPEL AS TO FORGERY. 365 those who, acting innocently, so charge their relations upon its faith as to estop the party from pleading the truth of the matter. § 1353. Liability upon forged paper by course of con- duct. — So a party may, by his acts and course of conduct, be bound, although his signature be forged. Thus, if it be shown against an acceptor who proves his signature a forgery, that he has customarily paid similar drafts of the party forging, knowing the forgery, he will be held liable upon the bill, as having adopted such acceptances.* If the acceptor, upon presentment of the bill, gives the holder another bill in payment, he can not show in a suit on the second bill that the first was a forgery, for he is bound to know his own signature.^ But a party would not be bound upon a bill, by a forged acceptance in his name, by the mere fact that he had previously paid another bill similarly accepted, if he had not led the holder to believe that the second bill was genuine.^ SECTION III. WHEN ONE PARTY IS ESTOPPED FROM DENYING THE GENUINE- NESS OF another's signature. § 1354. The relation of one party to a bill or note is often such that he can not deny the genuineness of an- other's signature — for having treated it himself as genuine, it would be a fraud to permit him to assert the contrary. ' Barber v. Gingell, 3 Esp., 60 ; Grout v. DeWolf, i R, I., 393. ' Mather v. Lord Maidstono, 18 C. B. N. S., 273 (1856) ; 37 E. L. & Eq., 335. • Morris v. Bethell, Law R. 5 Com. P., 47 (1869), Bovill, C. J., saying : " If it had been made to appear that there had been a regular course of mercantile business, in which bills have been accepted by a clerk or agent whose signature has been acted upon as the signature of the principal, there would be evidence, and almost conclusive evidence, against the latter, that the acceptance was written by his authority. That was the case of Barber v. Gingell. It would have been idle to contend there that the defendant was not responsible for the signature." ^66 FORGERY OF NEGOTIABLE INSTRUMENTS. § 1 355. And first, in respect to the maker of a 7iote,th\s doctrine is not often applicable to him. If he makes and delivers the note to the payee, and there is no signature upon it but his own, it is obvious that should it come into the hands of a do7m fide holder thereafter, bearing at the time the forged indorsement of the payee to whose order it was made pay- able, the maker could not be regarded as responsible for the forgery, or as warranting the genuineness of the signa- ture, and no recovery could be had against him by such holder, as he would be unable to trace his legal title to the instrument.^ Nor, indeed, would the maker be at all justi- fied in making payment to him, as the payee, not having indorsed the note, still holds the legal title, and could re- quire payment to be made again to him, if without his in- dorsement it were paid to another.^ But if the forged name of the payee were indorsed upon the note, or the name of the payee were fictitious and were indorsed upon the note, at the time when it was delivered by the maker, the case would be different. Having issued the note as genuine in all respects, it would be unjust and fraudulent upon others to permit him to deny it ; and proof of his having so issued it would be sufficient to entitle the holder to recover against him.^ § 1355. Under such circumstances — that is, where the foro-ed indorsements were on the note when he issued it — the maker could not, of course, recover back the amount paid to the holder ; for, in addition to the reasons already given, such payment could not be regarded as having been made under a mistake. Under other circumstances, how- ever, the maker may recover back the amount from the party to whom he paid it,^ for the holder, by the very act * Story on Notes, §§ 379, 380, 387. "" 2 Parsons N. & B., 596 ; Story on Notes, §§ 379, 380, 387. ' Meacher v. Fort, 3 Hill (S. C), 227 (1837) ; Hortsman v. Henshaw, II How., 177 (1850) ; see also Beeman v. Duck, 11 M. & W., 251 ; Redfield & Bigelow's Lead. Cas., 62. * See fost, § 1359, as to Acceptor ; Stoiy on Notes, §§ 379, 380, 387. § 1357- ESTOPPEL AS TO FORGERY. ^Sy of assuming ownership and demanding its payment, im- pliedly asserts, even though it be without his indorsement, that he has clear title and is entitled to receive payment.^ § 1356. Secondly, i7i respect to the drawer of a bill, his relation to other parties is ordinarily like that of the maker of a note. If he issues the bill, as is generally the case, without any other name upon it but his own, he can not be made responsible for the subsequent forgery of an indorse- ment or acceptance ; and if the name of the payee to whose order the bill is payable, or of a special indorsee, be forged, no recovery can be had against him.^ But if the drawer puts the bill in circulation with the name of the payee indorsed upon it, he will be understood, by so doing, as affirming that the indorsement is in the handwriting of the payee, or written by his authority ; and if it be forged, the amount paid under such indorsement may be credited against him by the acceptor, or recovered against him by the holder of the bill.'' § 1357- Thirdly, in respect to the t7idorser of a negotiable instrument, upon which the name of the drawer, maker, ac- ceptor, or of a prior indorser is forged, he, by indorsing it, warrants that he has clear legal title thereto, and that the instrument is the genuine article it purports to be, and he is, therefore, bound by his indorsement to all parties subsequent to him,* even though the paper has been discounted for a prior party.^ He is like the drawer of a bill who issues it with such names upon it. But if all the names of parties antecedent to his own are genuine, he is then like the drawer ' See § 1361, infra. ' See § 735, vol. I ; znApost, § 1361. ' Hortsman v. Henshaw, 11 How., 177 ; Meacher v. Fort, 3 Hill (S. C), 227 ; Coggill V. American Exchange Bank, i Comst., 113; ante, § 1354. * MacGregor v. Rhodes, 6 EI. & B., 266 (indorser can not deny indorsement to himself). See chapter xxi, on Transfer by Indorsement, §§672, bjietseq., vol. I ; Bigelow on Estoppel, 429 ; Story on Notes, § 380. * State Bank v. Fearing, 16 Pick., 533. Note was offered for discount by maker. The name of the payee who was first indorser was forged. /AvV/thit the bank could recover of the second rndorser, whose indorsement was genuine. o 68 FORGERY OF NEGOTIABLE INSTRUMENTS. § 1 358. of a bill who issues it without any names upon it ; and if he pays it to any one holding under a forged indorsement subsequent to his own, he may recover back the amount* § 1358. 1)1 the fourth place, as to the transferrer by de- livery, the act of transfer by delivery of a negotiable in- strument falls under the general rule of law, that in every sale of personal property the vendor impliedly warrants that the article is in fact what it is described and purports to be, and that the vendor has a good title or right to transfer it.^ Therefore, if the signature of the indorser be forged, the bank discounting the bill or note offered for discount with such indorsement upon it may recover back the amount from the party from whom it received it.^ And on the same principle, the maker of a note, or the acceptor of a bill, making payment to a holder under a forged indorse- ment, would be entitled to recover back the money. And this principle would apply even if the holder who transfers the paper is an agent, unless he discloses his principal.^ As to the holder of a bill who presents it to the drawee for payment, " He," says Allen, J,, "is held to a knowledge of his own title, and the genuineness of the indorsements, and of every part of the bill other than the signature of the drawers, within the general principle which makes every party to a promissory note or bill of exchange a guarantor of the genuineness of every preceding indorsement, and of the genuineness of the instrument." ^ How far he may warrant the drawer's signature we shall presently consider.^ § 1359. When drazveeor acceptor boundy though drawer's name be forged. — Fifthly : In respect to the drawee or ac- ^ Ante, §§ 1225, 1355. "^ See ante, § 731, Smith v. McNair, 19 Kansas, 330. ^ Burgess v. Northern Bank of Kentucky, 4 Bush (Ky.), 600 (1868) ; Cabol Bank v. Morton, 4 Gray, 157; see chapter xxil, on Transfer by Assignment vol. I, §§ 731, 732 et seq. ^ Lyons v. Miller, 6 Grat., 439. ' White V. Continental Nat. Bk., 64 N. Y., 320. * § 1361. } 1360. ESTOPPEL AS TO FORGERY. 369 ceptor of a bill, it is obvious that his relation to the instru- ment is very different from that of the parties who issued it. He should know his own correspondent's handwriting ; and therefore the doctrine is laid down by numerous authorities that if he accepts the bill, or pays it, he can not afterward, on discovering that the signature of the drawer was a forgery, revoke the acceptance, or recover back the amount paid under mistake from the holder to whom he paid it.^ § 1360. A leading case on this subject, which is often quoted as authority, is Price v. Neal,^ which was an action by Price to recover from Neal the amount paid him on two bills of exchange, of which Price was the drawee. One of the bills had been paid by Price without acceptance, and the other was duly accepted and paid at maturity. Both bills had been forged. It was held the action could not be maintained, chiefly upon the ground that the acceptor is presumed to know the drawer's handwriting, although there were intimations that there had been laches in notifying the holder of the forgery. There are other English cases which maintain this doc- trine,^ and in the United States Mr. Justice Story has de- clared, in an opinion of the Supreme Court, that " after some research we have not been able to find a single case in which the general doctrine, thus asserted, has been shaken or even doubted ; and the diligence of the counsel for the defendants on the present occasion has not been more suc- cessful than our own." ^ And in commenting on the case ' Byles on Bills (Sharswood's ed.) [''■324], 491 ; 2 Parsons N. & B., 590, 591 ; Story on Bills, § 411 ; Howard v. Mississippi Valley Bank, 28 La., 728-9, the drawee bank having other genuine drafts of the drawer in his hands, and the means of comparing signatures. ^ 3 Burr, 1355 (1763). See Allen v. Fourth Nat. Bank, 59 N. Y., 12, for ex- planation and limitation of this case. ^ Smith V. Mercer, 6 Taunt., 76 ; i Marsh, 453 (181 5). There had been de- lay of a week in returning the bill, but this was not the ground of decision. See Smith V. Chester, i Term. R., 654 (1787). ' Bank of U. S. v. Bank of Georgia, 10 Wheat., 333 (1825). Vol. II. — 24 370 FORGERY OF NEGOTIABLE INSTRUMENTS. § 1 36 1. of Price v Neal, he observed : " In regard to the first bill, there was no new credit given by any acceptance, and the holder was in possession before the time it was paid or ac- knowledged. So that there is no pretence to allege that there is any legal distinction between the case of a holder before or after the acceptance. Both were treated on this judgment as being in the same predicament and entitled to the same equities." § 1 36 1. Notwithstanding these high authorities, and numerous other cases which decide that the drawee paying a forged draft can not recover back the amount from the party to whom he paid it, whether such party received it before acceptance,^ or afterward,^ a distinction has been taken between the two cases which is clearly philosophical, and, as it seems to us, much better calculated to effectuate justice than the doctrine of Mansfield and Story.^ When the holder has received the bill after its accept- ance, the acceptor stands toward him as the warrantor of its genuineness, and receiving the bill upon faith in the acceptor's representation, there is obvious propriety in maintaining his right to hold the acceptor absolutely bound. Indeed the acceptor, being the primary debtor, stands just as the maker of a genuine promissory note. But when the holder of an unaccepted bill presents it to the drawee for acceptance or payment, the very reverse of this rule would seem to apply ; for the holder then represents, in effect, to the drawee, that he holds the bill of the drawer, and de- mands its acceptance or payment, as such. If he indorses ■ National Park Bank v. Ninth National Bank, 46 N. Y., 81 ; Gloucester Bank V. Salem Bank, 17 Mass., 43, Parker, C. J. ; Bank of Commerce v. Union Bank, 3 Corns., 235, Ruggles, J. ; Goddard v. Merchants' Bank, 4 Coms., 149, Bronson, C. J. ; Canal Bank v. Bank of Albany, i Hill (N. Y.), 239, Cowen, J. ; Bern- heimer v. Marshall, 2 Minn., 81 ; Stout v. Benoist, 39 Mo., 280; see also Na- tional Bank of Commerce v. National M. B. Assoc'n, 55 N. Y., 213 ; White v. Cent. N. B., 64 N. Y., 322. ' Ellis V. Ohio Life Ins., etc., Co., 4 Ohio St., 632, Ranney, J. ' See an able article on this subject in American Law Review for April, 1875, p. 411. § 1362. ESTOPPEL AS TO FORGERY. 37I it, he warrants its genuineness ;* and his very assertion of ownership is a warranty of genuineness in itself.^ There- fore, should the drawee pay it or accept it upon such pre- sentment, and afterward discover that it was forged, he should be permitted to recover the amount from the holder to whom he pays it, or as against him to dispute the bind- ing force of his acceptance, provided he acts with due dili- gence. § 1362. Qicestions of negligence in mistaken payments — Amounts paid by mistake recoverable tmless situation of parties changed. — In all the cases which hold the drawee absolutely estopped by acceptance or payment from deny- ing genuineness of the drawer's name, the loss is thrown upon him on the ground of negligence on his part in ac- cepting or paying, until he has ascertained the bill to be genuine.^ But the holder has preceded him in negli- gence, by himself not ascertaining the true character of the paper before he received it, or presented it for ac- ceptance or payment. And although, as a general rule, the drawee is more likely to know the drawer's handwrit- ing than a stranger is, if he is in fact deceived as to its genuineness, we do not perceive that he should suffer more deeply by a mistake than a stranger, who, without knowing the handwriting, has taken the paper without previously as- certaining its genuineness. And the mistake of the drawee should always be allowed to be corrected, unless the holder, acting upon faith and confidence induced by his honoring the draft, would be placed in a worse position by according such privilege to him. This view has been applied^ in a ' National Bank v. Bangs, 106 Mass., 445. ^ See §§ 731, 732, vol. i. ' Ellis V. Ohio Life Ins., etc., Co., 4 Ohio St., 662. * McKleroy v. Southern Bank of Ky., 14 La. Ann., 458. In this case the drawees, McK. & B., accepted the draft about the ist of December, and paid it on the 1 8th. It turned out that the drawer's signature was forged. The South- em Bank of Kentucky had purchased the draft before acceptance, and had re- ceived payment of it ; and McK. & B. sued the bank to recover back the amount. The court said : " The defendant became the holder of the draft before it was accepted by the plaintiffs, and before thev had any knowledge of its e.xistence, 372 FORGERY OF NEGOTIABLE INSTRUMENTS. § 1 362 well-considered case, and is intimated in another;^ and is forcibly presented by Mr. Chitty, who says it is going a great way to charge the acceptor with knowledge of his correspondent's handwriting, "unless some dona ^de holder has purchased the paper on the faith of such an act."^ Negligence in making paper under a mistake of fact is not now deemed a bar to recovery of it,^ and we do not see why any exception should be made to the principle, which would apply as well to release an obligation not consum- mated by payment. and consequently before the defendant had any right of action against them for its recovery. The plaintiffs therefoie had done no act which induced the defend- ant to believe the signature of the drawer to be genuine at the time the bill was purchased. How, then, can it be said that the defendant purchased the bill on the faith of the plaintiff's acceptance, or on their guarantee of the genuineness of the drawer's signature ? Or how can it be said that the plaintiffs misled the defendant at the time of the purchase of the bill, or were then guilty of the omission of any duty toward the defendant as the purchaser of the bill ? If the defendant had purchased the bill on the faith of the acceptance of plaintiffs, or had sustained any loss in consequence of their negligence, or would have no difificulty in affirming the judgment of the lower court ; but such are not the >facts made known to us by the record. The defendant purchased the bill on •the faith of the indorsement of Shotwell & Son, which was a warranty of the genuineness of the drawer's signature to the bank ; and there was no gooa reason why the accidental payment made by the plaintiffs should inure to the benefit of the defendant." ' Canal Bank v. Bank of Albany, i Hill, 287, Cowen, J. "Chitty on Bills (13 Am. ed.) [*43i], 485, where it is said: "It has been contended that if the party paid was a bona fide holder, ignorant of the forgery, then he ought not to be obliged to refund under any circumstances, although he could not have enforced payment, and although he had immediate notice of the forger}', because the drawee was bound to know the handwriting of the drawer, and the genuineness of the bill, and because the holder being ignorant of the forgery, ought to have the benefit of the accident of such payment by mistake, and not to be compelled to refund. But on the other hand, it may be observed, that the holder who obtained payment can not be considered as having alto- gether shown sufficient circumspection ; he might before he discounted or re- ceived the instrument in payment, have made more inquiries as to the signatures and genuineness of the instrument even of the drawer or indorsers themselves ; and if he thought fit to rely on the bare representation of the party from whom he took it, there is no reason why he should profit by the accidental payment, when the loss had already attached upon himself, and why he should be allowed to retain the money, when by an immediate notice of the forgery he is enabled to proceed against all other parties precisely the same as if the payment had not been made, and, consequently, the payment to him has not in the least altered ■his situation, or occasioned any delay or prejudice. It seems, that of late, upon questions of this nature, these latter considerations have influenced the court in determining whether or not the money shall be recoverable back ; and it will be found, in examining the older cases, that there were facts affording a distinction, and that upon attempting to reconcile them, they are not so contradictory as might, on first view, have been supposed." ^Setjiost, § 1369, and chapter XLIX, on Checks, sections xiii and xiv. ^ 1363. ESTOPPEL AS TO FORGERY. ;^'/;^ § 1363. T/ie ad^nission of the acceptor extends only to the signature of the drawer, and not to the terms of the in- strument itself. And when the signature is genuine, but the amount in the body of it has been altered after it left the drawer's hand, and he has paid the excessive amount to a bo7ia fide holder, he may recover it back from him, provided he was not himself negligent in disregarding evidences that the instrument had been tampered with, which appeared upon its face.^ And as the holder demanding payment war- rants the genuineness of the instrument under which such demand is made, we should say that the negligence of the payor should be very great and positive, to deprive him of the risrht of restitution. But if the drawer had drawn the bill so carelessly as to afford an, opportunity for the altera- tion to be made without disfiguring, marring, or marking the instrument in such a way as to attract the attention of a prudent man, it has been held that he would then be charg-eable in his account with the drawee;^ and there- ' White V. Continental N. B.. 64 N. Y., 317 ; Kingston Bank v. Eltinge, 40 N. Y., 323; Young V. Lehman, 63 Ala., 519. See ante, § 540, vol. i; Bank of Commerce v. Union Bank, 3 Comst., 230. The draft in this case was originally drawn upon the bank plaintiff, payable to order of J. Durand, for one hundred and five dollars. The name of Durand was altered to Bennet, and the word hundred to thousand ; and as altered was paid. And the plaintiff sued the in- dorsee to whom it had been paid, to recover back the whole amount. Ruggles, J., delivering the opinion of the court that the plaintiff should recover, said : "There is no ground for presuming the body of the bill to be in the drawer's handwriting, or in any handwriting known to the acceptor. In the present case, that part of the bill is in the handwriting of one of the clerks of the canal and banking company in New Orleans. The signature was in the name and handwriting of the cashier. The signature is genuine. The forger)- was com- mitted by altering the date, number, amount, and payee's name. No case goes the length of saying that the acceptor is presumed to know the handwriting of the body of the bill, or that he is better able than the indorsers to detect an alteration in it. The presumption that the drawee is acquainted with the draw- er's signature, or able to ascertain whether it is genuine, is reasonable. In most cases it is in conformity with the fact. But to require the drawee to know the handwriting of the residue of the bill is unreasonable. It would, in most cases, be requiring an impossibility. Such a rule would be not only arbitrary and rigorous, but unjust. The drawee would be answerable for negligence in paying an altered bill, if the alteration were manifest on its face." See chapter on Checks. ^ Young V. Grote, 4 Bing., 253 (see chapter XLix, on Checks, section xiv). This case does not conflict with the case of Bank of Commerce v. Union Bank, cited above, as in that case there was no negligence on the part of the drawer. 374 FORGERY OF NEGOTIABLE INSTRUMENTS. § 1 3 64. fore he could not recover back the amount paid to the holder.* § 1364. Acceptance 710 admission of indorsers sig7iature. — But the drawee who accepts or pays a bill is never regarded as thereby admitting the genuineness of the signature of an indorser ; for although it is true that every indorser is in respect to his liability the same as a new drawer to the bill, yet the acceptor can not be presumed to have any such knowledge of this signature as he has of the drawer's, and therefore he is not presumed to admit it.^ If the drawee or acceptor of a bill were to pay it, and it turned out that the indorsement of the payee or a special indorsee were forged, the result would be that he could not charge the amount in account against the drawer, and that the payment would be invalid ; but as his act implies no admission of the genuine- ness of the indorser's signature, he could recover back the amount from the holder to whom he paid it' " Neither acceptance nor payment," says Cowen, J., in a case cited below, " at any time nor under any circumstances, is an ad- mission that the first or any other indorser's name is genu- ine."* The payee, or indorsee of a bill, or note, whose sig- nature has been forged to an indorsement upon it, may re- cover upon it ; and such a payee or indorsee of a check paid by a bank upon his forged indorsement may recover the amount of the bank.^ § 1365. The distinction between the acknowledgment of the drawer's and of the indorser's signature is carried so far, that, if the bill be made payable to the drawer's own 'Bank of Commerce v. Union Bank, 3 Comst., 230. See Hortsman v. Hen- shaw, II How., 177. *See ante, % 538, vol. i ; Story on Bills, §§ 262, 412; Edwards, 190. 290, 400; 2 Parsons N. & B., 590 ; White v. Continental Nat. Bank, 64 N. Y., 320. ' Ibid. ; Canal Bank v. Bank of Albany, i Hill (N. Y.), 287 ; United States v. National Park Bank, 6 Fed. R., 852 : Smith v. Chester, i T. R., 654; Robinson V. Yarrow, 7 Taunt., 455 ; 2 Parsons N. & B., 590. * Canal Bank v. Bank of Albany, supra. 'Johnson v. First Nat. Bank, 13 N. Y. S. C. (6 Hun), 124 ; Talbot v. Bank of Rochester, i Hill, 295. § 1366. ESTOPPEL AS TO FORGERY. 375 order, and indorsed by him, the acceptance is regarded as admitting the drawing only, and not the indorsement, al- though the name is the same, and they profess to be, and apparently are, written by the same party. ^ If, however, the name of the drawer be fictitious, and the indorsement is in the same name and handwriting, it would be different ; for then acceptance by acknowledging the drawing would impliedly acknowledge the indorsing also.^ § 1 366. When money paid on forged indorsement can not be recovered. — Yet there may be circumstances under which the acceptor, who has paid a bill under a forged indorsement, could not recover the amount from the holder. Thus, if the forged indorsement were upon the bill at the time when the bill was issued by the drawer, the drawer or acceptor paying it could not maintain an action to recover the amount from the holder, for the reason why such actions are generally allowed would not apply. The holder could himself recover from the drawer, as the latter could not deny the genuineness of signatures which he had himself sent into the world. For the like reason the drawer or acceptor could charge the amount in account against the drawer. And the rule would not be altered where the acceptor had no funds of the drawer in his hands ; for if he chose to accept for the draw- er's accommodation, that is no reason why he should re- cover from the holder.^ This view has been taken by the United States Supreme Court, and seems also to obtain in New York ; but in that State it is confined in its applica- tion to cases where the payee whose name is forged had no interest in the bill.^ •Beeman v. Duck, 11 M. & W., 251 ; Robinson v. Yarrow, 7 Taunt., 455 ; Williams v. Drexel, 14 Md., 366; Story on Bills, §§ 412, 538, vol. i. " Cooper V. Meyer, 10 B. & C, 468 ; 5 Man. & G., 387. * Hortsman v. Henshaw, 11 How., 177 (1850) ; Coggill v. American Exchange Bank, i Corns., 113 (1847). It is not stated in this case that the bill was put in circulation by the drawer. * In Bigelow on Estoppel, 432, and in Redfield & Bigelow's Leading Cases, 61, it is said, in remarking on the case of Hortsman v. Henshaw : " A similar case arose in 1847, in Coggill v. American Exchange Bank. In that case one ^f'jd FORGERY OF NEGOTIABLE INSTRUMENTS. § 1 367. If the acceptor of a bill accept and negotiate the bill with knowledge that there is a forged indorsement upon it, he would be thereby estopped to deny its genuineness.^ § 1367. Recognized exceptions to general rule that dramee or acceptor can not recover where drawer s signature is forged. — Several exceptions are taken, even where the gen- eral rule is recognized, to the doctrine that the drawee or acceptor is precluded from recovering back the amount paid on a forgery of the drawer's signature. First : Where payment is made to the payee ; for it is said the payee can be no loser by refunding money paid under such a forgery. His debt against the one whose name was forged as drawer, if the latter owed the payee anything, would remain — it could not be paid by a forgery. He could still recover it, whether he refunded to the acceptor or not. And so, not being involved in any loss by being required to refund, it would be great injustice to the acceptor to allow the payee to retain the money.^ Secondly : It has been considered that the general rule would not apply where either by ex- press agreement, or a settled course of business between of the drawers of the bill forged the payee's name, and then procured it to be discounted, and at maturity the plaintiff (the drawee) paid it. On discovering the forgery, he sued the defendant, a bona fide holder, to whom he had paid the h)ill, to recover the sum paid. The court held that the action could not be main- tained, but based their decision on the fact stated in the report that the payee had no interest in the bill, comparing it to a bill payable to a fictitious person, such a bill being in effect payable to bearer. The point made in Hortsman v. Henshaw was not noticed — that in such cases the drawer is estopped to deny the genuineness of the indorsement ; that he is thus liable to a bona fide \io\^&x ; and that, therefore, the drawee is entitled on payment to a credit against the drawer. Whence it would follow that it is immaterial that the payee had no in- terest in the bill, when the drawee himself puts it into circulation bearing the payee's indorsement. But, according to Coggill v. American Exchange Bank, explaining on this point Canal Bank v. Bank of Albany, i Hill (N. Y.), 287, if the payee owned the forged bill, the acceptor would be entitled to recover the sum paid to the holder. The two cases can not be reconciled, unless the language of the court in Hortsman v. Henshaw is used with reference to the case of a payee having no interest in the bill. But that can not be true ; for how, then, could it be said that in such case the drawee has paid to one not entitled to re- ceive the money ? The case clearly covers the whole ground of a payee who owned the bill, and of one who had no interest in it." ' Beeman v. Duck, 1 1 Mees. & W., 251. ' Redfield & Bigelow's Leading Cases, 664. § 1369. MONEY PAID ON FORGED INSTRUMENTS. ^ the parties, or by a general custom in the place applicable to the business in which both parties are engaged, the holder takes upon himself the duty of exercising some material precaution to prevent the fraud, and by his negligent fail- ure to perform it has contributed to induce the drawee to act upon the paper as genuine, and to advance the money upon it. And so, also, where the parties are mutually in fault.^ We think it far better not to recognize the gen- eral principle at all save in favor of a holder who has taken the paper on the faith of the drawee's recognition of it as genuine. § 1368. Where a party jjtakes payment for the honor of the drawer, without having first seen the bill, and without negligently omitting to do so, he would not be precluded from recovering back the amount upon discovering, as soon as he saw the bill, that it was a forgery, and pronouncing it such ; and it would make no difference that it was too late to send due notice of dishonor to the indorser.* SECTION IV. RECOVERY OF MONEY PAID UPON FORGED INSTRUMENTS. § 1369. It is a general principle of law that money paid, under a mistake of fact may be recovered back.'^ And ac- * Redfield & Bigelovv's Leading Cases, 665 ; Bigelow on Estoppel, 428, note 2, 445 ; Ellis V. Ohio Lite Ins., etc., Co., 4 Ohio St., 628. Tn this case it was shown that, by the course of dealing between banks in Cincinnati, checks presented by one bank, drawn by individuals on other banks, were always recei\ed from the, bankers presenting them in bundles, with a ticket mark on the back stating thej amount of the checks, and that, when such checks were pre.sented, the banks were not accustomed to exercise that scrutiny which was usual when the checks were presented by a stranger, it being presumed that caution had already been exercised by the bank taking the check. The check in this case had been added up against the drawer, and the forgery was not discovered for ten days. It was held that, under the circumstances, the bank on which it was drawn could re- cover the amount from the bank which presented the check. See, also. National Bank of N. A. v. Bangs, 106 Mass., 441. ^ Goddard v. Merchants' Bank, 4 Coms., 149. ' Louisiana V. Wood, 102 U. S. (12 Otto), 298; Moses v.McTerlar, 2Burr, 1005, Carpenter v. Northborough Nat. Bank, 123 Mass., 69; Nat. Bank of N. A. v. 378 FORGERY OF NEGOTIABLE INSTRUMENTS. § I369. cordingly, where one pays money on forged paper by dis- counting or cashing it, he can always recover it back, pro- vided he has not himself contributed materially to the mis- take by his own fault or negligence, and provided that by an immediate or sufficiently early notice he enables the party to whom he has paid it to indemnify himself as far as pos- sible.* And now the doctrine is favored that even negli- gence in making the mistake is no bar to recovery, unless it results in loss or damage.^ This rule is of general appli- cation ; but in order to understand it, it will be necessary to consider the circumstances and relations of the parties who contend for or against it ; and this we shall presently pro- ceed to do. It follows from the rule as stated, that if a valid instru- ment be rendered up, and one that is forged given in place thereof, it will constitute no valid payment ; ^ and even an indorser of the note surrendered up will not be discharged — his liability having been fixed by due demand and notice.^ In Massachusetts, where A., through fraud, obtained a promissory note from B., signed by him, payable to the order of C, and then forged the indorsement of C. and got the note discounted at a bank, and B. paid the note at ma- turity to the bank, it was held that B. could maintain an action for money had and received against the bank, al- though it acted in good faith in taking the note.^ A party Bangs, 106 Mass., 441 ; Boylston Nat. Bank v. Richardson, loi Mass., 287 ; Merriam v. Wolcott, 3 Allen, 258 ; Welch v. Goodwin, 123 Mass., 71 ; Young v. Lehman, 63 Ala., 523 ; see § 1655 ^/ seq. 'Allen V. Sharpe, 37 Ind., 73 ; 2 Parsons N. & B., 597. " Lawrence v. American Nat. Bank, 54 N. Y., 435 ; National Bank of Com- merce V. National M. B. A., 55 N. Y., 211 ; Young v. Lehman, 63 Ala., 523 ; Fraker v. Little, 24 Kansas, 599 ; U. S. v. National Park Bank, 6 Fed. R„ 852; see ante, % 1362. 'Allen V. Sharpe, 37 Ind., 68; Bell v. Buckley, 11 Exch., 631 ; Goodrich v. Tracy, 43 Vt., 319; Ritter v. Singmaster, 73 Penn. St., 400. *Ritter v. Singmaster, 73 Penn. St., 400. ^ Carpenter v. Northborough National Bank, 123 Mass., 69, Lord, J. : " This is simply the payment of a note to a party who has no legal or equitable right interest in the promise of the maker The money having been paid by mistake to a person who has no right to demand it, the case is within the gen- eral rule, and the party paying may recover back the amount thus paid." $ I370- MONEY PAID ON FORGED INSTRUMENTS. 379 making payment upon a security bearing a forged signature of hunself, supposing it to be genuine, may recover back the amount if he is diligent in giving notice, and if rights of third parties have not intervened to estop him.^ And if his signature be genuine, but the instrument has been so altered as to render it void, the accommodation party, who pays it by mistake in ignorance of the alteration, may re- cover back the amount.^ And so, if a party execute a note in renewal of one that was materially altered no recovery can be had against him if he was ignorant of the fact, ex- cept by a bona fide holder without notice.^ § 1370. Bank paying forged paper of depositor. — When a bank pays forged paper of a depositor, and returns it to him with his check-book or account-book, such depositor may, of course, immediately repudiate the charge entered up against him, as it has been improperly made.'* And it seems further that the depositor owes the bank no duty which requires him to examine his pass-book or vouchers, with a view to detection of forgeries of his name, and may therefore repudiate such a charge whenever the forgery is discovered. And accordingly, where it appeared that checks were forged by the confidential clerk of the deposi- tor, paid by the bank, and charged to the depositor on his bank-book, the book balanced, and the forged checks re- turned to the clerk, who examined the account at the prin- cipal's request, and reported it correct, and the principal did not discover the forgery until several months afterward, ' Welch V. Goodwin, 123 Mass., ']'], Lord, J., saying- : " The question we are called upon to decide is whether, under any circumstances, a party may recover back money paid upon a security bearing a forged signature of himself, supposing^ il, at the time of payment, to be his genuine signature. We can have no doubt that he may. This is entirely clear in case he was induced to make the payment by fraud or misrepresentation. Nor is it necessary that fraud or misrepresenta- tion should exist. An innocent mistake, whether arising from natural or tem- porary infirmity, or otherwise, made without fault upon his part, entitles him to the same relief." " Fraker v. Little, 24 Kansas, 598. ' Fraker v. Cullum, 21 Kansas, 555. * Mackintosh v. Eliot National Bank, 123 Mass., 393. //t-/^/, bank not ab- solved from liability to depositor, because his name was forged by a clerk on a blank form taken from depositor's check-book, and stamped with his office stamp. 380 FORGERY OF NEGOTIABLE INSTRUMENTS. § 1 371. when he immediately informed the bank, it was held that the amount could not be retained by the bank, as the depositor had done nothing to contribute to or facilitate the fraud.^ Where forged commercial paper is paid without inspection, under circumstances giving the party paying no previous opportunity for inspection, he is not precluded from receiv- ing back the amount paid. But he is bound to use due diligence in making the inspection, as soon as he has the opportunity, and in giving notice of the forgery.^ § 1 37 1. When notice of forgery must be gzveji, and de- mand for restitution made. — It is undoubtedly necessary that the maker, acceptor, or other party who demands res- titution of money paid under a forged indorsement, or under a forged signature of the drawer of a bill, should make the demand without unreasonable delay. Where there is an indorser upon the instrument, which was surren- dered up by the holder, who was entitled to notice, the return of the instrument and demand for the money must be made in time for the holder to notify the indorser, ac- cording to the English authorities. And a delay until the day after payment has been considered fatal.^ Seven,"* ten,^ ' Weisser v. Dennison, 10 N. Y., 69 ; Welsh v. German-American Bank, 73 N. Y., 424 ; National Bank v. Tappan, 6 Kansas, 465 ; see § 1655 ei seq., and Hardy v. Chesapeake Bank, 51 Md., 562. ^ Allen V. Fourth National Bank, 59 N. Y., 12. " Cocks V. Masterman, i B. & C, 902 (17 E. C. L. R.) In this case, bankers who had paid a forged bill gave notice of the forgery, and demanded the money by one o'clock on the following day. The court said : " In this case we give no opinion on the point whether the plaintiffs would have been entitled to recover if notice of the forgery had been given to the defendants on the very day on which the bill was paid, so as to enable the defendants on that day to have sent notice to the other parties to the bill. But we are all of opinion that the holder of a bill is entitled to know, on the day when it became due, whether it is an honored or dishonored bill ; and that, if he receives the money, and is suffered to retain it during the whole of that day, the parties who paid it can not recover it back. The holder, indeed, is not bound by law (if the bill be dishonored by the acceptor) to take any other steps against the other parties to the bill till the day after it is dishonored. But he is entitled so to do if he thinks fit ; and the parties who pay the bill ought not, by their negligence, to deprive the holder of any right to take steps against the parties to the bill on the day when it becomes due." Mather v. Maidstone, 18 Com. B., 273 ; Bigelow on Estoppel, 442. * Smith V. Mercer, 6 Taunt., 76. * Ellis V. Ohio Life, etc., Co., i Handy, 97, overruled in same case, 4 Ohio St., 648. ^ 1372. MONEY PAID ON FORGED INSTRUMENTS. 38 1 fourteen,^ fifteen^ days have been held to be too great delays, independent of any question in regard to an indorser, whom it was then too late to notify of dishonor. 8 1372. Dema7id for restitution may be made in reason- able time.— But there is high authority for the more liberal, and, we think, wiser and juster doctrine, that the demand for restitution may be made within a reasonable time after the forgery is discovered, and that the mere space of time is not important, provided it be clearly shown that the holder will be put to no more liability, trouble, or expense by a restoration then, than if it had been called for on the day of payment.^ Nor does the circumstance that there are genuine indorsers prior to the holder, but subsequent to the forged name, seem to us to alter the case. Their indorsement of the instrument being a warranty of its genu- ineness, they would not be entitled to notice, as it was not genuine in all respects ; * and besides the right to sue them as indorsers, the holder, on being compelled to refund the money, could recover back the amount paid by him to his predecessor, and so on, until the instrument rested where the loss should fall. This view was most forcibly presented in New York, where the drawee paid the bill upon which the payee's name had been forged ; and it was held that he could recover back the amount, although over two months had elapsed before notice of the forgery was given, and there were indorsers prior to the holder, whom it was, of course, too late to notify of dishonor in due form.^ ' Davies v. Watson, 2 Nev. & M., 709. '' Gloucester Bank v. Salem Bank, 17 Mass., 33. ' Third Nat. Bank v. Allen, 59 Mo. ; Koontz v. Central Nat. Bank., 51 Mo., 275 ; 2 Parsons N. & B., 598. See White v. Continental Nat. Bank, 64 N. Y., 316; Welch V. Goodwin, 123 Mass., 77. * See chapter XXXIII, on Excuses for Want of Notice, § 1113 ; Goddard v. Merchants' Bank, 4 Comst., 149 ; Ellis v. Ohio Life, etc., Ins. Co., 4 Ohio St., 658. " Canal Bank v. Bank of Albany, i Hill (N. Y.), 291 (1841), Cowen, J., saying: " I am not willing to concede that delay in the abstract, as seems to be supposed, can deprive the party of his remedy to recover back money paid under the cir- cumstances before us. It is said the defendants had indorsers behind them o 82 FORGERY OF NEGOTIABLE INSTRUMENTS. § 1372^. § 1372(2. Whe7i forged paper need not be returned. — If the party has paid money for or upon a forged instrument, and some parties to it are genuine, he must in a reasonable time after discovering the forgery offer to return the paper, so as to enable the party responsible to him to make the best of it he can ; but if it be an utter forgery, with no genuine party to it but the transferrer, it would be an idle ceremony to it, and the consideration paid may be recovered without doing so.^ § 1372^. If a person wrongfully convert a bill or note and receive the amount, the owner may either sue in tort, or may waive the tort and recover the money as received to his use.^ And the party wrongfully collecting, and holding on deposit, the amount paid to him, upon a check bearing a forged indorsement, is liable to the owner, notwithstanding he may have forwarded the check in a negligent manner ; such negligence being collateral to the transaction, and not the proximate cause of leading the third party into the mistake committed.^ and by delay they were prevented from charging them, by giving seasonable notice. Admit this to be so ; the plaintiffs did not stand in the relation of a holder. They were the drawees, and advanced the money by way of payment. They would never, therefore, think of notice to the defendants till they acciden- tally discovered the forgery. If there had been any unreasonable delay after such discovery, another question would be presented. I infer from the rigor of the case cited by the defendants' counsel (Cocks v, Masterman, 9 Barn. & Cress., 902), that he would exact as great, indeed greater, diligence in giving notice than is necessary to fix an indorser." . ..." I doubt whether this case can be sustained, except upon its own peculiar circumstances, if it can be sustained at all. In all the previous cases, where a recovery had been denied, there was carelessness or delay, or both." 'Brewster v. Burnett, 125 Mass., 68; Smith v. McNair, 19 Kansas, 382; First N. B. V. Peck, 8 Kansas, 660. " Lamine v. Dorrell, Ld. Raymond, 1216 ; Neate v. Harting, 6 Exch., 349 J Hollins V. Fowler, 44 L. J. (Q. B.), 169 ; Arnold v. Cheque Bank, i C. P. Div. L, R., 578. » Arnold v. Cheque Bank, i C. P. Div. L. R., 578 (1876) ; 18 Moak's E.R., 20d. CHAPTER XLIII. ALTERATION OF NEGOTIABLE INSTRUMENTS. I SECTION I. DEFINITION AND NATURE OF ALTERATION. § "^ZyZ- Any change in the terms of a written contract which varies its original legal effect and operation, whether in respect to the obligation it imports, or to its force as matter of evidence, wiien made by any party to the con- tract, is an alteration thereof, unless all the other parties to the contract gave their express or implied consent to such change. And the effect of such alteration is to nullify and destroy the altered instrument as a legal obligation. § 1373^. Differe^tce between Spoliation and Altej^ation. — This principle of law is essential to the integrity and sanctity of contracts ; and in Enijland it has been extended to a degree which has not found favor in the American courts. There it has been adjudged that a deed, bill, note, guaranty, or other written executory contract is avoided by any material change in the terms thereof, although that change be made by a stranger, upon the ground that the custodian of an instrument is bound to preserve its integrity ; and as it would be avoided if altered by himself, so it should be avoided if, through his negligence, it were altered by another.^ And the like views prevail in Scotland.^ ' Master v. Miller, 4 Term R., 320 ; 2 H, Bl., 140, where the alteration was made by a stranger. Davidson v. Cooper, 11 M. & W., 778 ; 13 M. & W., 243. ' Robinson's Practice (N. ed.), 137 ; Byles on Bills (Sharswood's ed.), 472; Murchie v. Macfarlane, Thomson on Bills, 1 10. (383) 384 ALTERATION OF NEGOTIABLE INSTRUMENTS. §1373^. In the United States a more liberal view prevails as to the rights of the beneficiary of a written contract, and if a strancrer, without any complicity with him, intermeddles and changes its terms, he is deemed a spoliator, and the act is termed a spoliation, being an infringement of the right of all parties ; but it is considered more the misfortune than the fault of the holder, that a third party should have tres- passed on his property, and he is not, therefore, made the victim of his conduct. Therefore, the term alteration in this country is understood to signify a material change in the contract by a party thereto, and no spoliation will avoid a bill or note (being the act of a stranger), unless it be so great as to render the words unintelligible or uncertain, in which case it is regarded as a virtual destruction of it.^ The English doctrine that spoliation by a stranger avoided the instrument, has been characterized by Judge Story as repugnant to common sense and justice, and de- serving no better name than a technical quibble.^ In California, where a draft was delivered to S. for plaintiff, and S. altered it, it was held, in the absence of proof, that the plaintiff authorized the alteration to be a spoliation, and not to vitiate the draft.^ Alteration may be made before delivery to the payee as well as afterward. Thus if a note be signed by a surety, or coparty, and left in the hands of a coprincipal, be altered before delivery by one of the promisors, the surety copromisor is discharged, although the alteration be made without the payee's knowledge.'' ' Piersol v. Grimes, 30 Ind., 129 (1868) ; Crockett v. Thomason, 5 Sneed, 342 ; Bi^elowv Stephen, 35 Vt., 521 ; Terry v. Hazlewood, i Duvall, loi ; Lubbenng V Kohlbrecher, 22 Mo., 596 ; Medlin v. Platte & Co., 8 Id., 235 ; Ford v. Ford, 17 Pick , 418 ; Lee v. Alexander, 9 B. Mon., 25 ; Waring v. Smith, 2 Barb. Ch. R., 119; Davis V. Carlisle, 5 Ala., 707 ; Vogle v. Ripper, 34 111., 106 ; Blakey v. Johnson, 13 Bush (Ky.), 197 ; Laugenberger v. Kroeger, 48 Cal., 147 ; Cochran V. Nebeker, 48 Ind., 459 ; Bucklen v. Huff, 53 Ind., 474 ; Union N. B. v. Roberts. 45 Wise, 373. "" United States v. Spalding, 2 Mason, 478. ' Laugenberger v. Kroeger, 48 Cal., 147. * Greenfield Savings Bank v. Stowell, 123 Mass., 196 ; Draper v. Wood, 112 Mass., 315 ; Wood v. Steele, 6 Wall., 80; Fay v. Smith, i Allen, 477 ; Goodman V. Eastman, 4 N. H., 455 ; 17 American Rep., 92, 97 ; Blakey v. Johnson, 13 § 1375- DEFINITION AND NATURE OF ALTERATION. 385 And if a note be indorsed by tlie payee for the maker's accommodation, be materially altered, however innocently, by the accommodation maker, and then discounted, the holder can not recover.-' § 1374. It was insisted at onetime that the avoidance by alterations applied only to deeds, because of their solemn character ; but where the date of a bill was altered by the payee, and then indorsed by him to a holder for value with- out notice, it was held that the latter could not recover, and it was well said by Ashurst, J. : ^ " There is no magic in parchment or wax, and the principle to be extracted from the cases is that any alteration avoids the contract." And such are the constant and essential uses to which negotiable instruments are put, that it has been considered that more dangerous consequences would flow from a leniency toward alterations in bills and notes than in deeds.^ § 1375. In what alteration consists. — The alteration may consist in changing (i) its date, or (2) the time or (3) place of payment, or (4) the amount of principal or (5) interest to be paid, or (6) the medium or currency in which pay- ment is to be made, or (7) the number or the relations of the parties, or in (8) the character and effect of the instru- ment as matter of obligation or evidence. And the alteration may be effected by adding to the in- strument some new provision, or by substituting one pro- vision for another, or by obliterating or subtracting from it some provision incorporated in it. It will be no answer to a plea of alteration that its opera- tion is favorable to the parties affected by it, whether in lessening the amount to be paid, enlarging the time of pay- Bush (Ky.), 202 ; Bank of U. S. v. Russell, 3 Yates, 391 ; Aldrich v. Smith, 37 Mich., 470; Bradley v. Mann, 37 Mich., i ; contra, Bingham v. Reddy, 5 Ben., 266. ' Aldrich V. Smith, 37 Mich., 470. ^ Master v. Miller, 4 Term R., 320 ; 2 H. Bl., 140. ' U. S. Bank v. Russell, 3 Yeates, 391. Vol. II.— 25 386 ALTERATION OF NEGOTIABLE INSTRUMENTS. § 1 3 76. ment, or otherwise. No man has a right to vary another's obHgations at his discretion, whether for his good or ill. It ceases when varied to be that other's act, and it suffioes for him to say, '' Non hcBc in foedera venir It may be ques- tioned whether or not prolongation of time, decrease of amount, or other apparently beneficial alteration, is really so. A debtor may make provision for payment on one day, and not be ready on another. A decrease of the amount destroys the identity, and confuses the traces of his obligation, and every reason of policy and principle forbid that the laws should tolerate tampering with the rights and engagements of others. In Indiana, where the note bore interest at ten per cent., and the holder inserted the words " after maturity " it was held that these words avoided it " because they changed in a material matter the legal effect of the note," although they did not operate to the prejudice of the maker.-' An alteration of a bill before acceptance discharges drawer and indorsers.^ Evidence of alteration is admissible under a plea of non assumpsit, or nil debetf but it is safer to allege the alteration.* SECTION II. ALTERATIONS OF DATE, TIME, PLACE, AMOUNT, AND MEDIUM OF PAYMENT. § 1376. In \.\\t first place, as to the date of the bill or note, it is obviously a most material part of it, indicating the time it became a subsisting contract, and the time when the contract is to be performed in many cases, and a thou- sand circumstances may arise adding additional consequence ' Coburn v. Webb, 56 Ind., 100. ' Bathe v. Taylor, 16 East., 412, ' Boomer v. Koon, 13 N. Y. S. C. (6 Hun), 645 ; Cook v. Coxwell, 2 C. M. & W., 291. * Van Santvoord on Pleading (3d ed.), 565. § 137^- DATE, TIME, PLACE, AND AMOUNT. 387 to the question when the instrument was issued. There- fore, any change in the date imparts a new legal effect and operation to it, and is a material alteration, which avoids it as against prior parties and sureties even in the hands of a bona fide holder without notice.^ It matters not that the time of payment, by relation to the date, may be prolonged, for suffice it to say it was not the time agreed on. Thus, in a case before the United States Supreme Court, where the maker of the note, drawn payable one year from date, changed " September 11" to "October ii" before delivery, without consent of his surety, it was held that the note was avoided as to him.' The alteration may be in the year,^ or the month,* or the day of the month,^ or in all three.® Even where a note was altered in date to one day pre- vious, and the effect as to its time of maturity remained unchanged, because of the circumstance that originally it would have fallen due, as its face imported, on Sunday, and therefore would have been legally due on Saturday, and by the change of date it fell due on Saturday, so that in point of fact Saturday in either case was its day of payment, it was held that it was avoided by the alteration. "^ And the ' Master v. Miller, 4 Term R., 320; 2 H. Bl, 140; Owings v. Amott, 33 Miss., 406; Britton v. Dierker, 46 Mo., 592; Brown v. Straw, 6 Neb., 536; Overton v. Mathews, 35 Ark., 147. See as to Checks, § 1658. = Wood V. Steele, 6 Wall., 80 (1867), Swayne, J., saying: "The grounds of the discharge in such cases are obvious. The agreement is no longer the one into which "the defendant entered. Its identity is changed ; another is substi- tuted without his consent, and by a party who had no authority to consent for him. There is no longer the necessary concurrence of minds. If the instru- ment be under seal, he may well plead that it is not his deed, and if it be not under seal, that he did not so promise. In either case the issue must necessarily be found for him. To prevent such tampering, the law does not permit the plaintiff to fall back upon the contract as it was originally. In pursuance of a stern but wise policy, it annuls the instrument, as to the party sought to be wronged." ' Russel V. McNab (Scotch case), Thomson on Bills, in. * Jacob V. Hart, 2 Stark., 45. ' Outhwaite v. Luntley, 4 Camp., 179; Master v. Miller, 4 T. R , 320. See tupra. ' Walton V. Hastings, 4 Camp., 223. ^ Stephens v. Graham, 7 Serg. & R., 505. Approved in Craighead v. McLoney S. C. Penn., January, 1882 ; Central L. J., March 10, 1882, p. 193. 388 ALTERATION OF NEGOTIABLE INSTRUMENTS. § 1377. decision seems clearly right. The maker appeared to be bound as of a day prior to his binding himself. The iden- tity of his contract was destroyed, and its legal effect changed. Questions of his own and of others' solvency might arise, making a day material. His memory and his memoranda might be challenged or contradicted. And then, although no actual injury might result, the inflexi- bility of the principle is essential to prevent its possibility. It has been held, that the date of an indorsement or as- signment is not a material part of it, and that an alteration of it will not vitiate the holder's title to the whole amount ;^ but the date may be very material when the question arises whether or not the indorsement was made before or after maturity, and this doctrine does not seem to us maintain- able. § 1377. Alteration in time of payment. — In the second place, as to the time of payment, specified or implied in the bill or note, a change of such time is obviously of the same nature as a change in the date, identical in principle and effect ; and whether such change delays, accelerates, or pre- serves in legal effect the time specified or implied for pay- ment, it constitutes a material alteration.^ Thus, if the note be changed so as to fall due a year later,^ or if the bill be payable on demand, and is altered to read one day after date, it is materially varied;* so a substitution of "after date" for "after sight ";^ or the date of day, or month, or year, effects the same result.^ And where a party gave au- thority to another to draw a bill upon him at " ninety days from the loth of April," an alteration to the " i6th of 'Griffith V. Cox, i Tenn., 210. ^Miller v. Gilleland, 19 Penn. St., 119; Lesler v. Rogers, 18 B. Mon., 528; Outhwaite v. Luntley, 4 Camp., 179 ; Bathe v. Taylor, 15 East., 412. ' Wyman v. Yeomans, 84 111., 403. * Murdoch v. Lee, 4 Pat. Ap. Ca., 261 (Scotch case), Thomson on Bills, in, the object being, as the annotator observes, to make the bill bear interest. ' Long V. Moor, 3 Esp., 155, note; Anderson v. Langdale, 3 B. & Ad., 660. •Thomson on Bills (Wilson's ed.), in ; Lewis v. Kramer, 3 Md., 265. § 137^- DATE, TIME, PLACE, AND AMOUNT. 389 April," unauthorized by him, was held to discharge his lia- bility as acceptor under the authority, although the time of payment was extended six days.^ § 1378. Altej'atio7t in the place of payment. — In the third place, as to place of payment, when the bill or note has been drawn payable at a particular place, the obliteration of such place so as to make it payable generally constitutes a material alteration as against all parties not consenting ;^ and likewise where no place is designated, it is a material alteration to insert one.^ And a fortiori it is a material al- teration to obliterate one place and insert another ; as, for instance, to erase an acceptance payable at " Bloxham & Co.'s," and insert the name of " Esdaile & Co." in lieu.'* Where the drawer of a bill, after acceptance and without acceptor's consent, wrote after the acceptance "payable at Mr. B.'s, Chiswell street," it was held a material alteration, and the acceptor discharged ;^ though in England it was formerly held otherwise.^ So, striking out "in London," and thus making the bill payable generally.'' So, adding to a note "payable at the Bank of Smyrna."^ Even a bona fide holder can not recover upon an acceptance so altered, nor upon a note so altered against parties prior to the one ' Lewis V. Kramer, 3 McL, 265. See Benedict v. Miner, 58 111., 19. ' McCurbin v. TurnbuU (Scotch case), Thomson on Bills, 112. ' Chitty on Bills (13 Am. ed.), [*i83, 184], 209-211; Nazro v. Fuller, 24 Wend., 374 ; Townsend v. Star Wagon Co., 10 Nebraska, 615 ; Whitesides v. Northern Bank, 10 Bush (Ky.), 501. In this Kentucky case the indorsee of a bill, accepted generally, caused to be written after the word " accepted " the ad- ditional words " payable at the First National Bank of Franklin," it was held, that all parties not consenting to the alteration were discharged. * Tidmarsh v. Grover, i Maule & S., 735 (1813) ; Bank of Ohio Valley v. Lock- wood, 13 W. Va., 392. * Cowie V. Halsall, 4 B. & Aid., 197 (E. C. L. R.) ; 3 Stark., 36 ; see also Tid- marsh V. Grover, i Maule & S., 735 ; Rex v. Treble, 2 Taunt., 328. *Trapp V. S])earman, 3 Esp., 57, in which case the insertion in a bill " when due at the Crosskeys, Blackfriar's Road," was held immaterial. See also Marsor V. Petit, I Camp., 82. ' Burchfield v. Moore, 25 Law & Eq., 123 ; 5 EI. & B., 683. ' Sudler v. Collins, 2 Hous., 538. See also Morehead v. Parkersburg Nat Bank, 5 W. Va. (Hagans), 74. 390 ALTERATION OF NEGOTIABLE INSTRUMENTS. § ^379- making the alteration.* Changing the place of date would change the rights of the parties, and hence is an altera- tion.^ § 1379- Effect of statutory provisions as to general acceptances do not vary principles applicable to alteration, — In England, and in many of the United States, it is pro- vided by statute that acceptances of bills drawn payable at a banking house, or other particular place, shall be deemed general acceptances, unless the drawer adds special words limiting the payment to a particular place. The effect of these statutory provisions is that it is not necessary to aver or prove presentment at such place in an action against the acceptor, who, however, may show any loss resulting from non-presentment there. But an indorser is absolutely dis- charged by failure to make due presentment there.' These provisions do not affect the rules applying to al- terations, because, though the acceptance be general, the insertion of a particular place induces the holder to present the bill there, instead of to the acceptor himself ; and the bill might be treated as dishonored, and the acceptor put to inconvenience, when in fact no presentment had been made.* The acceptor has a right to deposit the amount at the particular place designated, and that done his obligation is discharged. Therefore, the insertion of a particular place by the holder would materially vary his rights. Besides, as said by Abbott, C. J. : " Suppose a bill so altered to be in- dorsed to a person ignorant of the alteration, his right to sue his indorser would, as the bill appears, be complete, upon default made where the bill is payable ; whereas, in truth, the acceptor, not having in reality undertaken to ' Nazro v. Fuller, 24 Wend., 374 ; Sudler v. Collins, 2 Hous., 538. * Mahaiwe Bank v. Douglass, 31 Conn., 170. 3 See I and 2 Geo. IV., c. 78 ; chapter XX, on Presentment for Payment, § 641 etseq., vol. i ; Chitty on Bills [*i82], 209 ; 2 Parsons N. & B., 548 ; also chapter XVIII, § 519, vol. I. ♦ Ibid. § 1379- DATE, TIME, PLACE, AND AMOUNT. 39I pay there, would have committed no default by such non- payment. I am of opinion, therefore, that the alteration is in a material part of the bill, and the acceptor is, in conse- quence, discharged."^ And the principle has been applied in a number of American cases.^ ' Mackintosh v. Haydon, Ry. & M., 362; to same effect, Desbrowe v. Weathcrby, I M. & Rob., 438 ; Cowie v. Halsall, 4 B. & Aid., 497 ; Taylor v. Moseley, i M. & Rob., 439 n. ; Gardner v. Walsh, 5 El. & 13., S3 ; Burchficld v. Moore, 5 El. «& B., 683. In Burchtield v. Moore, 25 Eng. L. & Eq., 123 ; 5 El. & B., 683. the holder of a bill, without the acceptor's consent, altered it by inserting " payable at the Bull Inn, Aldgate." Lord Campbell, C. J., said : " By virtue of the i & 3 Geo. IV., c. 78, these words, if in the handwriting of the defendant, would still leave the acceptance a general acceptance. Nevertheless, three very eminent judges have successively held — :Lord Tenterden, in Mackintosh v. Haydon ; Lord Chief-Justice Tindal, in Desbrowe v. Weatherby ; and Lord Lyndhurst, in Taylor v. Moseley, 6 Car. & P., 273— that such words, although they do not alter the direct liability of the acceptor, do vary the contract between others who are parties to the bill ; therefore, that if interpolated without his consent, they may prejudice the acceptor; that they amount to a material alteration of the bill, and that they discharge the acceptor. These decisions were only at Nisi Prius, but they have been long acquiesced in, and we do not disapprove of them. The plaintiff here is a bona fide holder for value, without notice of the alteration ; but the bill must be considered as vitiated in the hands of a prior holder. The de- fendant was discharged from his liability as acceptor from the moment when the alteration of the bill had been consummated, and the instrument having ceased in point of law to be an accepted bill, the indorsee afterward could be in no bet- ter situation than the indorser. As soon as it is established that there has been a material alteration in a bill of exchange, the particular nature of the alteration becomes immaterial, and Master v. Miller, 4 Term Rep., 320 ; S. C., 2 H. Black, 140, becomes an authority. There a bill was drawn payable to A. B. While in his possession the date was altered, and the bill being subsequently indorsed to the plaintiffs, who were (like the present plaintiff) bona fide indorsees for value, the judgment was that they could not recover against the acceptor. Ashurst, J., says : 'If A. B. had brought the action, he could not have recovered, because he must suffer from any alteration of the bill whilst in his custody ; and the same objection must hold against the plaintiffs who derive title from him.' We con- ceive, therefore, that in this case the plaintiff's remedy is confined to a right to recover the consideration for the bill, as between himself and the party from whom he received it. A similar remedy may be resorted to till the party is reached through whose fraud or laches the alteration was made. He ought to suffer ; for ' a party who has the custody of an instrument made for his benefit, is bound to preserve it in its original state.' And Lord Denman, in delivering the judgment of the Exchequer Chamber, in Davidson v. Cooper, intimates a strong oi)inion that Bigot's Case, 11 Rep., 26, in which this principle is acted upon, has hitherto been, and still ought to be, upheld. The negotiability of bills of ex- change is to be favored ; but with this view, it is material that their purity should be preserved." 2 Hill V. Cooley, 46 Penn. St., 259 ; Oakey v. Wilcox, 3 How. (Miss.), 330 ; White V. Haas, 32 Ala., 430 ; Nazro v. Fuller, 24 Wend., 375. In this case there was added to the note the words "payable at Wayne County Bank." Nelson, C. J., delivering the opinion of the court, said : " I was at first inclined to think the addition, even if regarded as annexed to the body of the note, was not such a material alteration as invalidated it, for the reason that the desig- nation of the place of payment did not affect the rights of the makers. 392 ALTERATION OF NEGOTIABLE INSTRUMENTS. § I380. § 1380. Right of drawee in particular city or town to desio-nate place of payment therein. — Where a bill is ad- dressed to a drawee at a particular town or city, but with- out any designation of a particular place of payment therein, it has been held that he may name in his acceptance a par- ticular place in the city, without its having the effect of .... But, upon further consideration, I am inclined to think, when the courts use the language that the note is payable generally and universally, though the place of payment be fixed, they only mean to say that it is so to be regarded for the purposes of the remedy, and that payment must still be made at the place ; and a tender elsewhere is no bar. I have found no authority beyond this ; and on speaking of the right of discharge by tender, the language used limits it to the place designated." But the contrary has been held in American National Bank v. Bangs, 42 Mo., 454. The note sued on was as follows : " $1,000. St. Louis, October 10, 1866. " Three months after date, we promise to pay to the order of Fritsch & Simonton, New York, one thousand dollars, for value received, negotiable and payable without defalcation or discount. "Due at Goodyear Bros. &^ DuramVs, New York, Jan. 10-13. "Bangs & Deady." (Indorsed.)—" Fritsch & SiMONTON." The words italicised : " Due at Goodyear Bros. &> Durand's, New York, Jan. 10-13," were inserted after the execution of the note, and without knowledge of the makers. It was held no alteration. And the court said : " The question, then, is, whether these words attached to the foot of the instrument are to be taken as a part of it, or only a private memorandum, which can in no way affect the liability of the maker. It will be found, upon an examination of the authori- ties upon this question, that where such words are not incorporated in the body of the contract itself, nor in any manner annexed to the instrument by the maker, for the purpose of fixing a place of payment, they are to be taken as a mere memorandum, and therefore immaterial. Story on Prom. Notes, § 49 ; Exon v. Russell, 4M. & S., 505; Williams v. Waring, 10 Barn. & Cres., 2. The same doctrine is fully recognized by the American courts in all the leading cases that have been examined. 19 Johns, 391 ; 24 Wend., 374. It should be kept in mind that this action is against the makers themselves. It was not declared upon as a note payable at the city of New York. There is no contest here as to a right to tender the amount at any designated place of payment, but simply as to the effect of the addition upon their general liability to pay. The principle is everywhere recognized that the maker is generally and universally liable, and a demand at the place is not a condition precedent of payment. Nazro v. Fuller, 24 Wend., 374. The memorandum in this case does not increase or vary, in any respect, the liability of the defendants, and therefore presents no obstacle to the recovery of the plaintiff". It is admitted that m cases where there was a contest between the holder and indorser, such an addition or memorandum, without the knowledge and consent of the latter, has been held sufficient to dis- charge him. But as to the makers themselves, the question is altogether differ- ent. This opinion has proceeded upon the idea that the words in question were simply a memorandum made at the bottom of the note after its execution, and not intended to be a part of the contract itself. Such appears to be the fact, so far as the case is presented here by the record ; but we will not assume it to be so for the purpose of entering up judgment in this court. The case proved at the trial did not authorize the declaration of law made by the court that the plaintiff was not entitled to recover." § 1382. DATE, TIME, PLACE, AND AMOUNT. 393 altering the bill so as to discharge the drawer or indorser, the place named becoming pro hac vice the place of business of the acceptor.^ " Such acceptance is not a departure from the tenor of the bill. It merely fixes a place of payment for the mutual convenience of the acceptors and the holder, and can work no possible injury to the drawer or indorsers, as it will not affect the time for the presentment of the bill to, or for the service of notice of non-payment on, the par- ties entitled to such notice."^ And it has been said that even if the bill were payable at a particular store, counting- house, or office in the city, it would not be a material alter- ation to name in the acceptance another place in the same city.^ § 1 38 1. Drawee can not designate place of payment in another city or town. — But if the drawee were to accept a bill so as to make it payable at another city or town, it would be a qualified acceptance, and the holder by taking it would discharge the drawer and indorsers."* It was so held in New York, where a bill addressed to " E. C. H., of New York," was " accepted payable at American Exchange Bank, Clayville Mills," which was in another county;^ and so where a bill addressed to A. Y. & Co., at Coburg, Upper Canada, was accepted " Payable at the Bank of Upper Canada, Port Hope."^ § 1382. Right to insert place of payment over drawee s signature of acceptance. Query ? — In Kentucky, it has been held, that where one indorses a bill for accommoda- tion of the drawee, it bearing at the time the drawee's name ' Troy City Bank v. Lauman, 19 N. Y., 480 (1859) ; Niagara District Bank v. Fairman, 31 Barb., 405 (i860) ; Shuler v. Gilette, 19 N. Y. S. C. (12 Hun), 280 (1877). '^ Niagara District Bank v. Fairman, supra, E. D. Smith, J. ' Troy City Bank v. Lauman, supra. Strong, J. ♦ Rowe V. Young, 2 B. &; B., 165 (6 E. C. L. R.) ; Redfield & Bigelow's Lead. Gas., 329. " Walker v. Bank of the State of N. Y., 13 Barb., 637 (1852). ' Niagara District Bank v. Fairman, 31 Barb., 404 (1S60) ; see Todd v. Bank of Ky., 3 Bush (Ky.), 645, infra. 394 ALTERATION OF NEGOTIABLE INSTRUMENTS. § 1 3 82. written across its face, and leaves it in the drawee's hands to be used by him to raise money, he thereby confers au- thority on him to write the acceptance above his signature, and designate therein a place of payment. And the court — ■ basing its decision also upon the ground that the acceptance being in blank, the parties to the bill had afforded an oppor- tunity for it to be filled up m a manner different from their agreement, would be bound to a bona fide holder without notice — sustained action by the holder against all the par- ties thereto/ In a subsequent case this view was confirmed by the court, not, however, without indications of reluctant acquiescence in it.^ And indeed it does not seem to us sustainable upon reason or authority. The mere name of the drawee written across the bill does not signify an in- choate, skeleton undertaking, like that of an indorser in blank ; or if a bill is blank in respect to amount, time, or place of payment, it constitutes a full and complete accept- ance in itself ; and although it may be readily varied by additions, without imparting a suspicious appearance to the bill, that is a consequence of the nature of the engagement, and not of the carelessness or confidence of the acceptor. Therefore if it be varied, an alteration is made, and the prior parties are discharged. ' Rogers v. Posters, I Mete. (Ky.), 645 (1858). "^ Todd V. Bank of Ky., 3 Bush (Ky.), 626 (1868). In this case the drawee of the bill wrote over his acceptance, " accepted payable at the Northern Bank, Lexington." Held^ that the indorser was not discharged, Williams, J., saying : "Although we might be inclined to deny this implied power in the drawee as the better opinion, if this question was now for the first time before this court, yet, in the face of an express decision of this tribunal, which has remained for ten years unaltered by legislative action or judicial construction, and when hun- dreds of thousands of dollars of this class of paper have been taken, and are perhaps now held on its faith, and regarding this rule, since the adoption of it by this court, as impliedly entering into all such contracts, we do not deem it of sufficient importance to overrule it, and thus unsettle a recognized rule of con- tracts, and perhaps jeopardize a large amount of such paper. Besides, there is much reason, when the paper is for the accommodation of the drawers and ac- ceptor, as in this instance, to infer, from the transaction and nature of the paper, an implied authority in those for whose use it is made to appoint the place ot payment, unless one has been already expressly designated in the bill, as this would more generally make the paper answer the purposes of the beneficiaries and objects of its creation." ^ 1383. DATE, TIME, PLACE, AND AMOUNT. 395 § 1383. Memorandum of place of pay )ne7it. — Whether a memorandum of the place of payment is to be considered as a part of the contract, or merely as a direction where payment will be made, has been questioned ; but it seems now settled that it enters into the contract and is a material alteration. In Bank of America v. Woodworth, i8 Johns, 315, it appeared that an accommodation note had been made, dated, and indorsed in blank at Albany, where the parties resided, and that the maker, without the indorser's knowl- edge or consent, wrote in the margin, " payable at the Bank of America," i. e., in New York City. The Supreme Court held the alteration immaterial, on the ground that an in- dorser in blank leaves the place of payment, w^hen none is designated, to the subsequent discretion of the maker, ex- cept only when he appoints one in bad faith, or at an un- reasonable distance. But this decision was overruled on appeal (Woodworth V. Bank of America, 19 Johns, 391), the court deciding that a written instrument might be varied by a memoran- dum in the margin, and that the terms of such memorandum had the same effect as if contained in the body of the in- strument,^ and that this was a material alteration, because "it subjected the indorser to new and unexpected liabilities. By the note, as originally drawn, he bound himself to pay in the event of non-payment on a demand being made of the maker personally, or at his residence ; by the addition of the memorandum, he is made liable upon a demand of payment at New York, which, but for that memorandum, would have been perfectly nugatory. It rendered valid a notice of non-payment, which was received one or two days later than that which he contemplated at the time of his indorsement — a circumstance by which he does not indeed ' Starr v. Metcalf, 4 Camp., 217 ; Trecothick v. Edwin, I Stark., 469 ; Piatt v. Smith, 14 Johns, 368 ; Jones v. Fales, 4 Mass., 244. 396 ALTERATION OF NEGOTIABLE INSTRUMENTS. § 1 3 84. appear to have been injured, but which certainly increased his risks, and lessened his prospects of indemnity."^ § 1384. Alteration in amou^it of principal and interest. — In tht fourth place, as to the amount of. principal for which the bill or note is executed, any change thereof is a material alteration, whether it be increased^ or lessened ;^ as where, for instance, the amount is changed from $500 to $400,^* for it is a palpable variance of the instrument's legal effect in its most vital part. Indeed, an alteration to a larger amount is a forgery ; and so also of a smaller amount, if with fraudulent intent. It has been held that where the principal altered a note so that its amount was lessened, and then delivered it to the payee, the surety was not discharged.^ Certainly the identity of the contract was destroyed, and it is difficult to reconcile this case with the principles and authorities al- ready stated. Doubtless, the idea that it was a release, and therefore a benefit to the surety, pro tanto, had a weighty influence with the court ; but the law denominates any change in the legal effect of a contract an alteration, and its policy is to tolerate no tampering with written instru- ments. § 1385. Alteration in interest. — In thQ fifth place, as to interest, any addition of words making the bill or note bear interest when it originally did not, or changing the time when interest should run, or varying the percentage of in- terest, is of the same character as if it changed the princi- pal.^ Where the words " with lawful interest " were written ' See also Dewey v. Reed, 40 Barb., 17 ; and see contra, American National Bank v. Bangs, 42 Mo., 454 ; ante, § 1379, p. 391, note 2. "^ Bank of Commerce v. Union Bank, 3 Coms., 230 ; Goodman v. Eastman, 4 N. H., 455- ' Stevens v. Graham, 7 S. & R., 505 ; Leith v. Elphiston (Scotch case), Thom- son on Bills (Wilson's ed.), in ; Hewins v. Cargill, 67 Me., 554; State Savings Bank v. Shaffer, 9 Neb., 7 ; ^tna Bank v. Winchester, 43 Conn., 391. * Hewins v, Cargill, 67 Me., 554. ' Ogle v. Graham, 2 Penn., 132. * Schnewind v. Hacket, 54 Ind., 248 ; Harsh v. Klepper, 28 Ohio St , 200 ; see ante, § 1375 ; Reeves v. Pierson, 23 Hun, 187 (30 N. Y. S. C. R.) ; Craighead v, McLoney, S. C. Penn. Central L. J., March 10, 1882, p. 192. $> 1385. DATE, TIME, PLACE, AND AMOUNT. 397 on the corner of the note ;^ where "with interest from date" were incorporated in it ;^ and where " with interest" were written by the maker after it had been indorsed, but before delivery to the payee, it was alike held to be material, and to avoid the note as against non-consenting parties ; ' where " with interest payable semi-annually " were inserted before delivery to payee ;* and where they were inserted afterward,^ the surety was discharged ; and where "with in- terest " was added, but without fraudulent intent,^ and " in- terest to be paid annually." '^ So adding "eight per cent, interest";® or "bearing ten per cent, interest from matu- rity";^ or " with half legal interest until maturity ";^° and so where " after maturity " was added to interest clause ;^^ and so where the like words in the interest clause were erased.^' A change of percentage is of like effect. Thus, where " nine per cent." was added to the words of a note " on de- mand and interest ";^^ and where twelve per cent, was chanored to ten.''* So interlining the word " paid " before " annually " in the expression : " the above to be at ten per cent, annu- ally." ^^ But where the word "annually" was inserted in the interest clause of a note, dated January loth, 1869, and payable on or before October 15th, 1870, it was construed * Warrington v. Early, 2 El. & B., 763 ; see also Sutton v. Toomer, 7 B. & C, 416. " Brown v. Jones, 3 Port. (Ala.), 420. ' Waterman v. Vose, 43 Me., 504 ; see also McGrath v. Clark, 56 N. Y., 36 ; Schwarz v. Oppold, 74 N. Y., 307, where the note was payable on demand. * Neff V. Horner, 63 Penn. St., 327. ^ Dewey v. Reed, 40 Barb., 16 ; Glover v. Robbins, 49 Ala., 219. ° Fay V. Smith, i Allen, 477 ; Draper v. Wood, 112 Mass., 315. ' Boalt V. Brown, 13 Ohio N. S., 364. * Hart v. Clouser, 30 Ind., 210. ' Lee V. Starbird, 55 Me., 491 ; see also Kilkelly v. Martin, 34 Wis., 525 ; Franklin Life Ins. Co. v. Courtney, 60 Ind., 349. " Lamar v. Brown, 56 Ala., 157. " Cobum v. Webb, 56 Ind., 96. " Dietz V. Harder, 72 Ind., 208. " Ivory v. Michael, 33 Miss., 398. '* Whitmer v. Frye, 10 Mo., 348 (a bond). In Moore v. Hutchinson, 69 Mo., 429, the note bore one per cent, per month. Payee erased " one." H^/d that it was a material alteration vitiating note however purely done. " Patterson v. McNeely, 16 Ohio St., 348. 398 ALTERATION OF NEGOTIABLE INSTRUMENTS. § 1 386. to relate to the rate of interest, and not to time of pay- ment, and therefore that it was not a material alteration.^ § 1386. Alteration ijimedium of payment. — \x\.Xh^ sixth place, as to the medium of payment, a change of the kind of currency, as by the addition of the words " in specie" to a bond after the sum ;^ or the word " gold" after the term "dollars" in a note;^ or of the denomination, as "from pounds into dollars ; from sterling pounds into current pounds,"* even though it could do no possible injury, would avoid the instrument, and there might be cases in which positive or possible injury would result. And so the eras- ure of such words would equally amount to alteration.^ In a recent case before the U. S. Supreme Court, the words in an order which made it payable " in drafts to the order of H. G. A." were erased with a pen, and " in current funds " inserted in their stead ; and the paper was held avoided thereby.^ So, if the instrument be payable in goods, on the same principle, if the style or character of the goods were changed, it would be vitiated. It was so held where a note was payable " in merchantable meat stock," and the word " young " was interpolated after mer- chantable;'^ so adding "good hard" before " wood"; ^ so writing " good " before " merchantable wool." ^ * Leonard v. Phillips, 39 Mich., 182. "^ Darwin v. Rippey, 63 N. C, 318. = Bogarth v. Breedlove, 39 Tex., 561. '' Stevens v. Graham, 7 S. & R., 505. ' Church V. Howard, 24 N. Y. S. C. (16 Hun), 5, where the words "gold or its equivalent " were stricken out. ^ Angle V. N. W., etc., Ins. Co., 92 U. S. (2 Otto), 330. ^ Martendale v. Follett, i N. H., 95. * Schwalm v. Mclntyre, 17 Wis., 232. * State V. Cilley, quoted in i N. H., 97. § 1387- ALTERATIONS IN RESPECT TO PARTIES. 399 SECTION III. ALTERATIONS IN RESPECT TO THE PARTIES TO THE INSTRU- MENT. § 1387. In the seventh place, as to the parties to a bill or note, any change in the personality, number, or relations of the parties is, as a general rule, a material alteration. Thus, where C, member of the firm of C. & Co., obtained an accommodation indorsement to his individual note, and then added "& Co." to his signature, thus making it his firm's note, it was held a material alteration.^ When there are several makers or cosureties, the addition of another maker ^ or cosurety^ constitutes a material alteration; for the addition of another maker destroys the integrity of the original contract ; and the addition of another cosurety changes the right of the sureties in respect to the proportion of contribution for which each is liable to the others. '^ And the erasure of the name of one of two drawers or makers,^ or payees,^ who have indorsed the paper, or of one of sev- eral cosureties,' is likewise a material alteration. So the ' Haskell v. Champion, 30 Miss., 136. ''Hamilton v. Hooper, 46 Iowa, 516; Dickerman v. Miner, 43 Iowa, 508; Wallace v. Jewell, 21 Ohio N. S., 163; Hall v. McHenr\', 19 Iowa, 521 ; Lunt V. Silver, 5 Mo. Ap., 186; Gardner v. Welsh, 5 El. & B., 82; overruling Catton V. Simpson, 8 Ad. & EI., 136 ; see Gould v. Combs, i C. B., 543 ; 2 Parsons N. & B., 556, 557. But the additional maker is himself bound. Hamilton v. Hooper, 46 Iowa, 516 ; Dickerman v. Miner, 43 Iowa, 508. = McVean v. Scott, 46 Barb., 379 ; overruled in Card v. Miller, 8 N. Y. S. C. (i Hun), 504. ' In Monson v. Drakeley, 40 Conn., 552 (1873), where after deliver)' a party signed a joint and several note of a maker and two sureties as surety, no ques- tion of alteration was raised. The court held that he would not, unless in pur suance of arrangement at time of execution or delivery, become a joint promisor or maker, and that the subsequent undertaking was independent of, and collat- eral to, the original ; but the surety so signing was bound for contribution to the original sureties. 'Mason v. Bradley, 11 M. & W., 590 ; Gillett v. Sweat, i Gilm., 475 ; Callan- dar V. Kirkpatrick (Scotch case), Thomson on Bills (Wilson's ed.), 112. ° Cumberland Bank v. Hall, i Hals., 215. 'McCramer v. Thompson, 21 Iowa, 244; Hall v. McHenry, 19 Id., 521. 400 ALTERATION OF NEGOTIABLE INSTRUMENTS. § I388. substitution of one drawer or drawee, or maker or comakei for another, is of like effect.^ But it has been held, that where A. signed as principal and B. as surety, the cutting off the memorandum of suretyship from B.'s name was no material alteration, because as such it did not vary the meaning, nature, or subject-matter of the contract, B. being liable any way.^ This view does not seem tenable, and the contrary view has been taken in Texas.^ § 1388. Adding a maker when there is but one. — Whether or not, when there is only one maker, the addi- tion of another is an alteration which discharges him, is a question upon which the authorities are divided. In New York, where a note was offered in part payment of a pur- chase, and the seller refused to take it unless the buyer add- ed his name under the maker's, such a signature and trans- fer was held to make the signer jointly and severally liable with the maker to the holder of the note, and an action was allowed against both as joint makers.^ So where hold- ers, in order to get a note discounted as makers, signed their names as makers, and afterward paid the note, it was held they had lost no rights, and could sell or transfer it.^ But in a subsequent case, where the payee wrote his name under the maker's, adding to it the word " security," it was held a material alteration.^ There are other cases in the same State, in which it is held that the addition of another name as maker, where there was but one, is not a material alteration, the additional maker being regarded as a guaran- ' Davis V. Coleman, 7 Ired., 424; Mahaiwe Bank v. Douglas, 31 Conn., 170; State V. Polk, 7 Blackf., 27 ; Richmond Mfg. Co. v. Davis, Id., 412 ; Smith v Weld, 2 Bair, 54 ; Fleming v. Leiper, Thomson on Bills, 112. * Vance v. Collins, 6 Cal, 530 ; but queer el 'Rogers v, Tapp, S. C. Texas Dec. 5, 1881 ; Central L. J., Jan. 13, 1882, p. 38. Held that where one of the signers of a promissory note adds to his signature the word surety, and the others do not, the presumption is that the note was given for value by the other makers, and that they are the principal debtors ; and that the erasure of the word " surety " would be a material alteration. *Patridge v. Colby, 19 Barb., 248 ; see also McVean v. Scott, 46 Barb., 379. ^Muir v. Demaree, 12 W^end., 468. ° Chappell v. Spencer, 23 Barb., 584 ^ 1 39 1. ALTERATIONS IN RESPECT TO PARTIES. 4OI tor.* And in the latest case it was held that such party was bound as a several maker.^ In Scotland, it has been decided, in opposition to the English authorities, that where a new acceptor had been added to the address of the bill, and had accepted without the drawer's knowledge, after delivery of the bill to the other acceptor, for whose accommodation it was drawn, it was not a material alteration. " But," says Parsons, commenting on this decision, " we think the wiser rule is that which looks first to the integrity of the instrument, and secures that, though there be no actual in- jury nor purpose of fraud." '^ If a blank were left for the name of the promisor so that the paper could be made joint and several, and new parties unite in and sign it, then, except as to those who knew that the authority to fill the blank was exceeded, the instrument would be valid.^ § 1389. The preservation of the integrity of the instru- ment is certainly a matter of prime importance, and where there are several makers, the addition of another would prima facie operate as a material alteration. Even if it were explained that the third was added as a surety, the difficulty w^ould not seem to be entirely gotten over. If one of the original makers signed for accommodation, his apparent rights of contribution would be changed, and two parties, instead of one, would have to be resorted to. And if the original makers owed the debt, the third, by adding his name, confuses the evidences of it, and changes the form of their obligation. Still it may be urged with great force that the chance of damage is so remote, and the hard- ship of avoiding the instrument so great, that it should be regarded as an immaterial alteration. Where there is but ' Brownell v. Winnie, 29 N. Y., 400 ; McCaughey v. Smith, 27 N. Y„ 39, Bal- com, J., dissenting. ' Card V. Miller, i Hun, 504 (1874) ; 8 N. Y. S. C. R. overruling Chappell v. Spencer and McVean v. Scott. ' 2 Parsons N. & B., 559. * Snyder v. Van Doren, 46 Wise, 602. See ante, §§ 143, 147. Vol. II.— 26 402 ALTERATION OF NEGOTIABLE INSTRUMENTS. »^ 1 39O. one maker to a note, and another is added, these views apply with enhanced emphasis. The addition does not vary the original maker's liabilities in any respect. There could be no motive of fraud upon him or others to induce the addition. And while it would come within the letter of those declarations of courts that maintain anything which affects the integrity of the instrument, to be a material alteration, it does not seem to us to come within their spirit. And, on the whole, we think it may be re- garded as an immaterial alteration.^ § 1390. Change of personality. — A change of the personality of the party is material. Thus adding or eras- ing "junior," in the signature,^ or changing the christian name from ''William" to "Thomas."^ Alterations in the name, number, or relation of the accept- ors or indorsers, stand on same footing as of other parties. Changing an indorser's christian name,* or adding,^ or erasing ^ that of an acceptor. The interhning of the words " jointly and severally," or ' Miller v. Finley, 26 Mich., 249 (1872). In this case it appeared that a party added his signature as surety to a sole note. It was held an immaterial altera- tion. Campbell, J., said : " In the recent case of Aldous v. Cornwell, L. R., 3 Q. B., 573, Cotton V. Simpson is cited as authority on the point that an altera- tion will not vitiate, unless material ; and the case of Gardner v. W^alsh was referred to, merely to say that it only overruled the former case on the question whether such an alteration as that passed upon was material. Aldous v. Corn- well is somewhat pointed in condemning the early decisions which paid no attention to the materiality of alterations. And the doctrine that immaterial alterations should not be regarded, is too well based on good sense to be over- thrown. The addition of a surety was not, in either of those cases, held to discharge a principal. It has always been competent for a person to become surety by signing the note of the principal, so as to become a joint and several maker. There is no rule which requires that a contract of suretyship must be contemporaneous with the principal obligation. And unless the principal's lia- bility is in some way affected by the addition, it can not be material. It is very difficult to see how such a change can affect him in any but a mere technicality, which neither changes, increases, nor diminishes his liability." See also Gano V. Heath, 36 Mich., 441. "^ Broughton v. Fuller, 9 Vt., 373. ' Macara v. Watson (Scotch case), Thomson on Bills, 112. See post, § 1398. * Macara v. Watson, supra. ' Howe v. Purves (Scotch case), Thomson on Bills, 112. • M'Ewenv. Gordon, Thomson on Bills, 112. § I390- ALTERATIONS IN RESPECT TO PARTIES. 403 "severally," or "or either of us" in a note joint and not several, would be a material alteration, as they would engraft upon the joint a several obligation.^ But where a joint note has the effect to bind the parties jointly and severally, the insertion of those words would be immaterial, because merely expressing what was already implied.^ And the changing of a note from " I promise" to " We promise " is material, because it changes a joint and several note into one joint only.^ Adding the word " collector " by the payee to his name was recently held in New Jersey a material alteration/ Where the name of a surety was erased by agreement between himself and the payee, it was held that the princi- pal was not affected, as the payee had a right to release the surety if he chose to ; and therefore it was no alteration ;' but if the payee erased the word " surety " from a party's name without his assent, such party would be discharged.* The striking out of the name of an indorsee on a special or full indorsement ; ' or changing a blank indorsement so as to read, " pay to the order of E. S. at the rate of 25 fr. 75 c. per ^i, 'utretro," etc. ; and writing the same on the face of the bill, materially alters the indorser's contract, and the latter also the acceptor's.^ Writing a waiver of demand, protest, or notice over an indorsement would convert a contingent into an absolute liability, and therefore discharge the indorser.^ ' Perring v. Hone, 2 Car. & P., 401 ; 4 Bing., 28. See Draper v. Wood, 113 Mass., 315. "Gordon v. Sutherland, Thomson on Bills (Wilson's ed.), 113; Miller v. Reed, 27 Penn. St., 244. ^ Humphreys v. Guillow, 13 N. H., 385 ; Hemmenway v. Stone, 7 Mass., 58 Clark V. Blackstock, Holt N. P., 474. * York V. Jones (S. C. N. J., June, 1881), 43 N. J. L. R., 332. ^ Broughton v. West, 8 Ga., 248 ; Huntington v. Finch, 3 Ohio St., 445. ° Laub V. Paine, 46 Iowa, 551. 'Grimes v. Piersol, 25 Ind., 246 •* Hirschfield v. Smith, Law Rep., i C. P., 340. ° Farmer V. Rand, 14 Me., 225. 404 ALTERATION OF NEGOTIABLE INSTRUMENTS. § 1 39 1 SECTION IV. ALTERATIONS IN THE OPERATION OF THE INSTRUMENT. § 1 39 1. In the eighth place, a change in the character or effect of the instrument, whether in respect to its obliga- tion or to its weight in evidence, is a material alteration. Thus, the addition of a seal to the signature of the maker of a note converts it into a bond, against which no plea of want of consideration can be made, and thus invests his contract with attributes which he declined to impart to it.^ Consequently the note is avoided. So a bond is avoided by detaching the seal.^ So when a seal is added to the name of one of several comakers of a note, all are discharged, because the holder could not have the same recourse against the three which he held before ; one would be estopped from denying a want of consideration which might inure to the benefit of all, and new relations and obligations would be created.^ § 1392. Addition of witnesses names. — Many questions have arisen as to the effect of adding to a note after its de- livery the names of parties purporting to be witnesses to its execution. In States where a distinction is made between witnessed and unwitnessed notes, whether by the statute of limitations or otherwise, it would seem to us clear that the subscription of his name by the witness after the delivery would be a material alteration as to all parties not consent- ing, because it would change the legal effect of the instru- ment* Thus, where an unattested note was barred by six years, and one attested stood on the foot of a bond, not * United States v. Linn, I How., 104; Marshall v. Gougler, 10 Serg. & R„ 164; Vaughan v. Fowler, 14 S. C, 357. * Piercy v. Piercy, 5 West Va. (Hagans), 199. ' Biery v. Haines, 5 Whart., 563. * Eddy v. Bond, 19 Me., 461. § 1393- ALTERATIONS IN THE OPERATION. 405 being barred until twenty, and ten years after its execution, being four after the bar had accrued, the attestation was added, it was held a material alteration, as " it at once infused life into an instrument which had lost all legal efficacy."^ So, too, we should say, that if the payee should procure a person not present at the time of execution of the instru- ment to sign his name as a subscribing witness, it would be prima facie evidence of some fraudulent design, and would in itself constitute a material alteration.^ § 1393. If, however, a party actually witnessed the exe- cution of a bill or note, and afterward, by request of the holder, should, without others' consent, subscribe his name as witness, it has been held that it does not work a material alteration, as it can work no harm.^ And the suggestion that the appearance of such attestation might weigh with ' Brackett v, Mountfort, 11 Me., 115. "^ Homer v. Wallis, 11 Mass., 309 ; see 2 Parsons N. & B., 555. In Adams v. Frye, 3 Met., 107, where the obligee of a bond procured a person not present nor authorized to attest it to sign it as a witness, it was held material. Dewey, J., said : " By adding to the bond the name of an attesting witness, the obligee be- came entitled to show the due execution of the same by proving the handwriting of the supposed attesting witness, if the witness was out of the jurisdiction of the court. It is quite obvious, therefore, that a fraudulent party might, by means of such an alteration of a contract, furnish the legal proof of the due execution thereof, by honest witnesses swearing truly as to the genuineness of the handwriting of the supposed attesting witness, and yet the attestation might be wholly unauthorized and fraudulent. It seems to us that we ought not to sanction a principle which would permit the holder of an obligation thus to tam- per with it with entire impunity. But such would be the necessary consequence of an adjudication that the subsequent addition of the name of an attesting wit- ness, without the privity or consent of the obligee, is not a material alteration of the instrument, and would, under no circumstances, affect its validity. But we thmk that it would be too severe a rule, and one which might operate with great hard- ship upon an innocent party, to hold inflexibly that such alteration would, in all cases, discharge the o;)ligor from the performance of his contract or obligation. If an alteration, like that which was made in the present case, can be shown to have been made honestly, if it can be reasonably accounted for, as done under some misapprehension or mistake, or with the supposed assent of the obligor, it should not operate to avoid the obligation. But, on the other hand, if fraudu- lently done, and with a view to gain any improper advantage, it is right and proper that the fraudulent party should lose wholly the right to enforce his original contract in a court of law." ^ Rollins v. Barlett, 20 Me., 319 ; 2 Parsons N. & B., 555. 406 ALTERATION OF NEGOTIABLE INSTRUMENTS. § 1394- the jury in a question as to the genuineness of the signature, has been thought of httle force.^ But it is treading on dangerous, and at least doubtful, ground to countenance this doctrine. It is true that where proved to have been done honestly througliout, little, if any, harm could be wrought ; but, if permitted at all, it is by no means clear that, by forging the names of promisors and of witnesses, the door might be opened for extensive frauds. Upon the minds of a jury, the more solemn the form of an instrument, the greater its weight. Indeed, every mark of authenticity must insensibly or otherwise have its effect upon all minds. Certainly a court should exact very rigid proof of perfect good faith ; and we are sustained by high authority in the opinion which our mind has reached, that it would be better not to permit such liberties to be taken with the rights of others.^ Where the name had been accidentally neglected, so that its addition was really in addition of an original understanding, it would be different.^ And very slight circumstances might prove such understanding. It has been held that where the payee of a note cut off the name of an attesting witness he can not recover at law, because it might be that it would impede the proof of con- sideration should a defence be made ; and that equity would not relieve him, as it presumes everything against a spoliator.* The converse doctrine would seem to us ap- plicable when the name had been added. § 1394. Alteration in terms of consideration. — It has been held that if a bill be expressed generally " for value received," and words are added describing such considera- tion as " for the good-will and lease in trade "^ of a certain person, or "for a certain tract of land,"^ it is materially al- » 2 Parsons N. & B.. 554. * 2 Parsons N. & B., 556. ' Smith V. Dunham, 8 Pick., 256. *Sharpe v. Bagwell, i Dev. Eq., 115. ' Knill V. Williams, 10 East., 413. ° Low v. Argrove, 30 Ga., 129. I § 1395. ALTERATIONS IN THE OPERATION. 407 tered and avoided. The reasons assigned are, first, that it makes the note a confession in evidence of a fact which might otherwise require extraneous proof ; and seco?td, that it puts the holder upon inquiry whether that consideration passed.^ The first reason seems to us in itself sufficient. But the second is, at least, according to several cases, and as it seems to us upon principle, incorrect in its statement of fact. The statement of the specific consideration is an as- surance of some consideration, and does not charge the holder with inquiring about it.^ Inserting words making the note a charge upon her separate, would be a material alteration as to a married woman.^ § 1395. Alteration iji words of negotiability. — The addi- tion of the negotiable words, " or order," or " bearer," is not an alteration when they were intended to have been in- serted, and were accidentally left out.* But where the ef- fect of such addition is to impart negotiability to an instru- ment not designed to be negotiable, it is a most material alteration in the nature of the contract, and the bill or note is thereby avoided.^ So the interhneation of "or bearer " in a negotiable note, payable to a certain person or order, is an alteration of it, because it materially changes the manner of its negotiability. It would not without the payee's indorsement be evidence of the amount paid to him upon being returned after payment ; and it might possibly deprive the defendant of a set-off otherwise available.^ The '2 Parsons N. &: B., 562. " Herieh v. Merchants' Nat. Bank, 34 Ind., 3S0; Bank of Commerce v. Barrett, 38 Ga., 126 ; see § 797, vol. i. ^ Reeves V. Pierson, 23 Hun (N. Y.), 185. * Kershaw v. Cox, 3 Esp., 246 ; 10 East., 437 ; Byrom v. Thompson, 1 1 Ad. & El., 31. See Cariss v. Tattersall, 2 Man. & G., 890. ^ Bruce v. Westcott, 3 Barb., 274; Johnson v. Bank U. S., 2 B. Mon., 310 ; Pepoon V. Stag:g, i Nott & McC, 102 ; Edwards on Bills, 95 ; The State v. Stratton, 27 Iowa, 424 ; Brown v. Straw, 6 Neb., 536 ; McAuley v. Gordon, 64 Geo., 221. • Booth V. Powers, 56 N. H., 30 ; Scott v. Walker, Dudley (Ga.), 243 ; The State v. Stratton, 27 Iowa, 424 ; Union N. B. v. Roberts, 45 Wise, 373- 408 ALTERATION OF NEGOTIABLE INSTRUMENTS. § 1 3 96. substitution of "or order" for " bearer" would be different » because it would only affect the transfer of title between holder and transferee.^ So the addition of the words, " without defalcation or set-off," where they have the effect they import,^ or making note negotiable my making it payable in bank,^ would con- stitute an alteration. And writing over an indorser's signa- ture the words, '' without recourse," is a material altera- tion.^ § 1396. Alteration of words on back of instrument. — In some cases, words on the back of a bill or note are not re- garded as a part of it ; and it has been held that the can- cellation of an indorsement of part payment need not be explained unless called in question.^ But still an indorse- ment on the back of the bill or note might be material as a part of it, as its construction is to be gathered from every source of information which an inspection of it supplies.^ And it may be shown by evidence that an indorsement annexing a condition to the payment was on the instrument when delivered, in which case it would be deemed a ma- terial part of it.'' § 1397. Alteration by making or obliterating m-emoranda on bills and notes. — An alteration of the legal import and operation of a bill or note may be effected as readily by making or obliterating material memorandum upon it, as by inserting or erasing provisions in the body of it. Thus, where the words " with lawful interest " were written on the corner of a note after its execution, it was said in Eng- land, by the Court of Queen's Bench : " This forms part of ' Flint V. Craig, 59 Barb., 330. " Davis v. Carlisle, 6 Ala., 707. ' McCoy V. Lockwood, 71 Ind., 319 ; Toomer v. Rutland, 57 Ala., 379. * Luth V. Stewart, 6 Victorian R., 383. * Commonwealth v. Ward, 2 Mass., 397 ; see Warner v. Spencer, 7 J. J. Marsh, 340. * See Muldrow v. Baldwell, 7 Mo., 587 ; 2 Parsons N. & B., 545 ; ante, §§ 149 et seq., vol. I. ' Blake v. Coleman, 22 Wis., 415. § 139^- IMMATERIAL AND AUTHORIZED CHANGES. 4O9 the contract. It would clearly have been so if it had been written in the body of the note, and we think a memoran- dum of this kind written in the corner of this note is equally part of the contract, because the contract must be collected from the four corners of the document, and no part of what appears there is to be excluded."^ So, where the maker of a note payable generally wrote on the margin, " payable at Bank of North America," it was held vitiated as to the indorser.^ Cutting off or obliterating a material memorandum which had the effect to make a note written on demand payable on time;^ or which annexed a condition to the payment of the note j** or provided for a delay of collection until a certain person should take it up, the maker having paid it ; ^ or which made the note payable out of the profits of a certain business.** SECTION V. IMMATERIAL AND AUTHORIZED CHANGES OF THE INSTRUMENT. § 1398. Not every change in a bill or note amounts to an alteration. If the legal effect be not changed, the instru- ment is not altered, although some change may have been made in its appearance, either by the addition of words which the law would imply, or by striking out words of no legal significance. Thus, writing out the name of the bank after the name of the signature " cashier," which was intended ' Warrington v. Early, 2 El. & Bl., 763 ; see also Benedict v. Cowden, 49 N. Y., 396 (1872) ; ante, §§ 149 et seq., vol. i. " Woodvvorth v. Bank of America, 19 Johns, 381 (overruling 18 Johns, 319, 391) ; see ante, § 1367, ' Wheelock v. Freeman, 13 Pick., 165. * Wait V. Pomeroy, 20 Mich., 425. But query, if there was no disfigurement. See post, §§ 1405, 1407 et seq. ^ Johnson v. Heagan, 23 Me., 329. • Benedict v. Cowden, 49 N. Y., 396. 4IO ALTERATION OF NEGOTIABLE INSTRUMENTS. § 1 398. to bind the bank, is merely expressing more clearly the legal effect of the signature, and is not an alteration.^ So the in- sertion of a dollar mark before the numerals expressing the amount in dollars ; ^ or insertion of the word " annually " after the interest clause in a note payable on or before a certain time ; ^ or changing the marginal figures so as to conform them to the written amount ; ^ or the addition in full of the christian names of the drawers whose surnames had been affixed before the acceptance ; ^ the interlineation of the surname of the payee, after deUvery ; ^ the running of a pen through the words " Providence Steam-Pipe Co.," which was one name under which a firm did business, and writing over it their style in the copartners' names,' were likewise adjudged immaterial. So also where a bill was addressed to a firm by the style of "A., B. & Co.," and on being accepted by them in the name of " A. & B.," and the address was changed to conform to the acceptance, there being no question as to the identical firm intended, and the acceptors being liable either way.^ So erasing " R.," where the payee's name was written " B. R. C," instead of " B. C," as intended,^ and correct- ing " Franklin E.," so as to read " Francis." ^^ So adding " agent" to a maker's name as mere descriptio personcsP- And in no case is a change in the phraseology of the in- strument material when it does not essentially change its legal effect. ^^ > Bank of Genesee v, Patchin Bank, 3 Kern, 309 ; Folger v. Chase, 18 Pick., 63. ' Houghton V. Francis, 29 111., 244. ^ Leonard v. Phillips, 39 Mich., 182, Cooley, J., saying that in such a note " the rate of interest to be paid annually must be understood as naming only the rate to be paid for the yearly period." * Smith V. Smith, i R. I., 398. See ante, chap. HI, § Z6, vol. i, note 6. " Blair v. Bank of Tennessee, 1 1 Humph., 84. • Manchet v. Cason, i Brev., 307. ' Arnold v. Jones, 2 R. I., 345. « Farquhar v. Southey, Moo. & M., 14. ' Cole v. Hills, 44 N. H., 227. " Desby v. Thrall, 44 Vt., 414. " Manufacturers', etc., Bank v. Follett, 1 1 R. L, 92. '' Holland V. Hatch, 15 Ohio St., 464- In Gushing v. Field, 70 Maine, 50, a note was indorsed on its face " subject to a contract made," which was changed to " subject of a contract made." Held immaterial. §1400. IMMATERIAL AND AUTHORIZED CHANGES. 4II § 1399. T'^nmaterial niejnoranda on the margin or other portions of the bill or note stand on the same footing as immaterial insertions incorporated in it. If they be merely explanatory of some circumstance connected with the transaction, they are immaterial. Thus, where a drawer, who held a bill indorsed in blank by the payees, wrote under his signature, " Left with Mr. B. (the plaintiff) as collateral," it was held immaterial.^ So where a party's residence was noted on the instrument after his name.^ So an indication, for the convenience of the holder, where he would find his money when duc.^ So, where several makers of a note had appended to their signature the words " As trustees of the First Universalist Society," which appendix was torn off, it was held immaterial, as the note was the personal undertaking of the signers, and so remained unchanged in its effect.'* The figures denoting the number in a particular series to which the instrument belongs is no part, and its alteration or erasure is imma- terial.^ § 1400. Other illiLstrations of iin77iaterial alterations. — So there are some changes of a purely immaterial character, which do not change the effect or impair the identity of the instrument, and therefore are not alterations. Thus, retracing a faded name in clear ink ; ^ or writing over in ink a word written in pencil ; ''' or correcting a misspelling.^ Where the number of a negotiable bond was changed, but it did not appear that the numbering was required by statute, nor in any way affected the holder's rights, it was ' Bachellor v. Priest, 12 Pick., 399 ; Thomson on Bills, 113. " Struthers v. Kendall, 5 Wright, 214. ' Walter v. Cubley, 2 Cr. & M., 151. " Buriingame v. Brewster, 79 111., 515. To same effect see Hayes v. Mathews, 63 Ind., 412. ' City of Elizabeth v. Force, 29 N. J. (Eq.), 591, overruling S. C. 28 N. J. (Eq.), 587 ; Commonwealth v. Industrial Savings Bank, 98 Mass., 12 ; Berdsell v. Rus- sell, 29 N. Y.. 220. See § 1499a. * Dunn V. Clements, 7 Jones Law, 58. ^ Reed v. Roark, 14 Tex., 329, ' Leonard v. Wilson, 2 Cromp. & M., 589. 412 ALTERATION OF NEGOTIABLE INSTRUMENTS. § I4OI. held immaterial;^ and so in England the alteration of the number of certain Bank of England notes was considered immaterial, Coleridge, J., saying that though in a popular sense it was a material alteration because it interposed some difficulty in the way of detecting fraud, it did not vary, or attempt to vary, the contract.^ Where the consideration of a note was gold, and the payee inserted " paid in gold, gold having been the consideration," it was held immaterial to the maker, and also as to the surety, if he knew that the consideration was gold when he signed.^ § 1 40 1. Changes by express or ifuplied consent. — It is quite obvious that where all the parties to a bill or note expressly agree to a change in any of its terms that they can not complain of such change as an alteration. They have as much right to change as to make a contract. And where all do not consent, those consenting are bound, while the rest are discharged.^ Consent may be given before the change is made, or it may be given afterward by ratification.^ It may be express, or it may be implied from custom,^ or from the acts of the parties.''^ In all cases where a change has been made, it will be a question for the court to determine whether or not it amounts to an alteration ; ® but the question whether or not the par- ties affected consented to it, is solely with the jury.'^ • ' Commonwealth v. Emigrants' Bank, 98 Mass., 12 ; State ex rel. Plock v. Cobb, 64 Ala., 1 58. ^ Sufifell V. Bank of England, O. B. D. Central L. J., Dec. 9, 1881, p. 455. * Hanson v. Crawley, 41 Ga., 303. ■• Grimstead v. Briggs, 4 Iowa, 559 ; Wilson v. Jamieson, 7 Barr, 126 ; Bank of Ohio Valley V. Lockwood, 13 W. Va., 392. * National State Bank v. Rising, 11 N. Y. S. C. (4 Hun), 793 ; Cariss v. Tat- tersall, 2 Man. & G., 890 ; Morrison v. Smith, 13 Mo., 234. ' Woodworth v. Bank of America, 19 Johns, 391. ' Clute V. Small, 17 Wend., 238; Bowers v. Jewell, 2 N. H., 543. * Stevens v. Graham, 7 S. & R., 505 ; Bowers v. Jewell, 2 N. H., 543; Jones V. Ireland, 4 Iowa, 63. ' Stout V. Cloud, 5 Lit., 205 ; Stahl v. Berger, 10 Serg. & R., 170; Overton v, Mathews, 35 Ark., 147. I § 1402. IMMATERIAL AND AUTHORIZED CHANGES. 413 If a note be altered by one signer without the consent of the other, and be sued upon as their joint note, the plain- tiff may recover against the signer who made the alteration, but the other will be entitled to his costs.^ Where two of three joint makers of a note consented to its alteration, it has been held that the holder can recover against them, provided he had no knowledge that the third maker had not consented.' Under the English stamp acts there are a number of de- cisions to the effect that no change can be made after issue, even by consent of all parties.^ As soon as the instrument is issued the stamp has filled its function. Any change af- terward is virtually a new contract, requiring a new^ stamp. § 1402. Evidence of conse?it to alteration. — Consent mig-ht be inferred to the insertion of negotiable words where the party indorsed the note as if it were negotiable ; so also from a subsequent acknowledgment of validity by payment of interest, consent would be implied.^ So a promise to pay after full knowledge of alteration, and an offer to give security for payment, would be competent evidence of consent ;^ but a renewal note signed by an ac- commodation indorser, without knowledge of the fact that the original note indorsed by him had been materially al- tered, would be without consideration ; and would not bind him, save to a bona fide holder without notice.''^ So the supplying of an omission, such as stating on whose account the bill was drawn, there being no dispute as to the fact.^ Where the last indorser of an accommodation bill made ' Broughton v. Fuller, 9 Vt., 373 ; Wills v. Wilson, 3 Oregon, 308. * Myers v. Nell, 84 Penn. St., 369. ' Bowman v. Nichol, 5 T. R., 547 ; Bathe v. Taylor, 15 East., 412 ; Downes v Richardson, 5 B. & Aid., 674, * Kershaw v. Cox, 3 Esp., 246. ' Cariss v. Tattersall, 2 Man. & G., 890. ' Humphreys v. Guillow, 13 N. H., 385, ' Fraker v. CuUum, 21 Kansas, 555. * Commercial Bank v. Paton, Thomson on Bills, 113. 414 ALTERATION OF NEGOTIABLE INSTRUMENTS. § I403. a memorandum at the foot directing its proceeds to be credited to the drawer, it was held no part of the bill, and its obliteration of no consequence.^ § 1403. Changes to correct mistakes, supply omissions, and effectuate parties intentions. — In like manner, where the change is made by implied consent, as, for instance, where it is done in order to correct a mistake in which all the parties concurred, or to supply an accidental omission, and thus to effectuate the intentions of all, it does not con- stitute a legal alteration. For although it may sometimes vary the apparent legal effect of the instrument, it does not change the effect which they intended to give it ; but really effectuates their design by giving expression to it, and pre- vents it from being thwarted.^ Thus, where 1822 was in- serted by mistake for 1823, and the agent of the drawer, and acceptor to whom the bill had been given for delivery to the indorsee, rectified the mistake, it was held not an alteration.^ And so where 1868 was changed to 1869, the latter having been intended.^ § 1404. So, where the drawer intended to make the bill negotiable, and indorsed it over, but omitted the words, "or order," their subsequent insertion merely supplied his omis- sion, and it was held was not an alteration.® So, where the holder of a bill payable " twenty-four after date," inserted "months";® and where in a bill payable "in the of our Lord," the word "year " was inserted,''' it was held likewise. And where a note was intended to read " eight hundred ' Hubbard v. Williamson, 5 Ired., 397. ° McRaven v. Crisler, 53 Miss., 542. ' Brutt V. Piccard, R. & M., 273. * Duker v. Franz, 7 Bush (Ky.), 273, But see Bowers v. Jewell, 2 N. H., 543. In this case it appeared that a note was actually executed in 18 19, but dated 1809^ and subst^quently altered to 1819. There was no express evidence of the consent of the maker, and judgment for the plaintiff was reversed by the Supe- rior Court, for evidence to be taken as to whether or not the alteration, which it deemed material, was fraudulent also. ^ Kershaw v. Cox, 3 Esp., 246 ; 10 East., 437; Jacobs v. Hart, 2 Stark., 45 ; Clute V. Small, 17 Wend., 242. ° Connor v. Routh, 7 How. (Miss.), 176. ' Hunt v. Adams, 6 Mass., 519. ^ 1405. BONA FIDE HOLDER OF ALTERED BILL OR NOTE. 415 dollars," and " hundred dollars" were omitted, they were properly supplied.^ So, where " hundred " was inserted before " pounds" in a bond, having been intended.^ For like considerations, where the name of one of several payees was inserted by mistake, the indorsee of the other payees might prove the fact in a suit to recover against his indorsers, in order to show that such payee's indorsement was unnecessary to pass title to him.^ And we should say that, as such payee's name was not intended to be there, its erasure would be authorized to correct the mistake.* SECTION VI. BONA FIDE HOLDER OF ALTERED BILL OR NOTE. — WHERE PARTY AFFORDS OPPORTUNITY FOR ALTERATION HE IS BOUND. § 1405. There is a general principle which pervades the universal law merchant respecting alterations (which, when they are material, will, as we have seen, vitiate the bill or note even in the hands of a bona fide holder without notice) ; a principle necessary to the protection of the innocent and prudent from the negligence and fraud of others. That is, that when the drawer of the bill or the maker of the note has himself, by careless execution of the instrument, left room for any alteration to be made, either by insertion or erasure, without defacing it, or exciting the suspicions of a careful man, he will be liable upon it to any bona fide holder without notice when the opportunity which he has afforded has been embraced, and the instrument filled up with a larger amount or different terms than those which it * Boyd V. Brotherson, 10 Wend., 93. * Waugh V. Russell, i C. Marsh, 214; 5 Taunt., 707. » Pease v. Dwight, 6 How., 190. * Thomson on Bills (Wilson's ed.), 114 4l6 ALTERATION OF NEGOTIABLE INSTRUMENTS. § I406 bore at the time he signed it.* The true principle appli- cable to such cases is that the party who puts his papei in circulation, invites the public to receive it of any one having it in possession with apparent title, and he is estopped to urge an actual defect in that which, through his act, ostensibly has none.^ " It is the duty of the maker of the note to guard not only himself, but the public against frauds and alterations by refusing to sign negotiable paper made on such a form as to admit of fraudulent practices upon them with ease, and without ready detection."^ The inspection of the paper itself furnishes the only criterion by which a stranger to whom it is offered can test its character, and when the inspection reveals nothing to arouse the suspicions of a prudent man, he will not be permitted to suffer when there has been an actual alteration.* § 1406. Illustrations. — Thus, where the maker of a note left a blank between the amount " one hundred," and the word "dollars" following, and "fifty" was inserted between them in the same handwriting, it was held that the holder without notice could recover the w^hole amount.^ So, where the note was expressed, " with interest monthly at the rate of — per cent, per annum, per month, until final payment," and the word " five " was inserted so as to put the blank rate of interest at five per cent. ; ^ and the like decision has been rendered in Iowa.''' But, in a similar case, where a ' Young V. Grote, 4 Bing., 253. (The authority of Young v. Grote seems to be shaken in England. See Bank of Ireland v. Evans, Trustees H. of L. Cas., 389 ; Baxendale v. Bennett, cited § 842.) Isnard v. Towes, 10 La. Ann., 103 ; Garrard v. Haddan, 6^ Penn. St., 82 ; Young v. Lehman, 63 Ala., 519 ; Toomer V. Rutland, 57 Ala., 379 ; Thomson on Bills (Wilson's ed.), 109 ; also 42, 43 ; see post, chapter XLlX, on Checks, section xiv. = Van Duzer v. Howe, 21 N. Y., 538 (i860). See chapter XXVI, sec. iii, vol. I, §§ 843 et seq., and chapter XLlll, sec. vi, §§ 1405 et seq. ^ Zimmerman v. Rote, 75 Penn. St., 188 ; Brown v. Reed, 79 Penn. St., 370. * Approved in Blakey v. Johnson, 13 Bush (Ky.), 204 (1877). ^ Garrard v. Haddan, 67 Penn. St., 82. To like effect Yocum v. Smith, 63 111., 321. Ante, % 844. * Vischer v. Webster, 8 Cal., 109 ; see also 6 Cal., 577. ^ Rainbolt v. Eddy, 34 Iowa, 440 (1872). ^ 1407. BONA FIDE HOLDER OF ALTERED BILL OR NOTE. 417 blank was left after the words, "value received with interest at — ," and "ten per cent." was inserted, this doctrine was denied.^ And in a recent Iowa case, where " one hundred " was inserted before the words " ten dollars," and there was nothing suspicious in the appearance of the paper, a very strong opinion was rendered holding that a bona fide holder could not recover.^ Where after the word " at " a blank was left, and it was filled, so that the note was made payable at an unauthorized place, it was held that the word " at " implied that the blank space which succeeded it might be filled before the note should be de- liv^ered, with a designated place of payment, and that if the holder filled in a place of payment, it would not discharge the maker,** nor an indorser.* And to the like effect are cases elsewhere cited.^ And in like manner, where the note was written partly in pencil and partly in ink, and the provision in pencil an- nexing the condition, "This note is not to be paid until fourteen mills are sold," the rubbing out of the condition would not debar a bojta fide holder without notice from re- covering, the maker having been guilty of gross negligence in so making the note as to be easily altered without muti- lation.^ So where the words " without interest " were in- terlined in pencil, and afterward erased, the party was held guilty of negligence, and the bona fide holder without notice protested.''' § 1407. The addition or subtraction of a memorandum on the bill or note is, as we have already seen, as much an ' Holmes v. Trumper, 22 Mich., 427. See also Greenfield Savings Bank v. Stowellj 123 Mass., 196; Washington Sav. Bank v. Ekey, 51 Mo., 273. "^ Knoxville National Bank v. Clarke, 51 Iowa, 264. Seevers, J., delivered a very instructive opinion. * Redlich v. Doll, 54 N. Y„ 237. * Kitchen v. Place, 41 Barb., 465 ; see McGrath v. Clark, 56 N. Y., 36. 'Vol. i,§§ 149, 152. " Har\'ey v. Smith, 55 111., 224 ; see also Elliott v. Levings, 55 111., 214. ' Seibel v. Vaughan, 69 111., 257. Vol. II. — 27 41 8 ALTERATION OF NEGOTIABLE INSTRUMENTS. § I407 alteration as if the same act had been committed in respect to its incorporated terms,^ But if the memorandum were so written upon the margin or any other part of the instru- ment that it could be readily separated from it without giving it a mutilated appearance, a bona fide holder taking it without notice, we should consider unaffected by its being so severed and destroyed.^ This view was well illustrated in a late Indiana case.^ If the memorandum were oriei- nally made upon a separate paper, there can be no doubt that, although a contract binding between the parties, it would be of no effect against a third party without notice ;* and if the party who executes a negotiable instrument chooses to restrict its effect by a separable memorandum, instead of writing the entire contract in the body of the instrument, he should not be protected against a fraud of which he has laid the foundation. The holder should be protected, upon the principle that where one of two inno- cent persons must suffer, the loss should fall on the one who has furnished the opportunity. The case is analogous to those in which blanks have been filled with excessive amounts. The promisor should be held bound when he has left his contract in a form to be mutilated by the cut- ting away of a part, as well as where he has left room for an alteration to be engrafted upon it. But it has been held differently in Michigan,^ and also in New York,^ and some ^ Ante, § 1397. "^ Ante, § 1406; Phelan v. Moss, 17 P. F. Smith, 59 ; Garrard v. Haddan, Id., 82 ; Cornell v. Nebeker, 58 Ind., 428 ; Zimmerman v. Rote, 75 Penn. St., 188 ; Noll V. Smith, 64 Ind., 511. ^ Nail V. Smith, 64 Ind., 511. In this case a condition was annexed to the notes, perfect in form, that they were not to be paid unless defendant (the maker) sold within a certain time certain machines equal to the amount of the notes. The condition was severed, and the notes negotiated, and a bona fide holder was held entitled to recover. * 2 Parsons N. & B., 539. ' In Wait V. Pomeroy, 20 Mich., 425, it appeared that there was written under a promissory note for %ioo this memorandum, " If the machine should not be delivered, this note not to be paid," which was cut off and destroyed, and the note, without it, passed to a bona fide holder without notice ; the court held * Benedict v. Cowden, 49 N. Y., 396 (1872). 5 1407^- BONA FIDE HOLDER OF ALTERED BILL OR NOTE. 419 Other States;^ but it is observable that in the New York case the court says, in its opinion, that the question, whether or not there was negligence on the part of the maker, and the effect thereof, was not raised in the court below, and could not then be considered. If there were a mere mem- orandum to the effect, " This note is given on condition," and there is nothinor to show what the condition is, the severance has been held to be immaterial.^ § 1407^. Conflicting authorities. Inserting words be- tween spaces of completed instrtunents. — The authorities on this subject, as applicable to particular circumstances, are conflicting, as the text has already disclosed. Where blanks are left in the paper, they concur that their existence im- plies authority in the holder to fill them, and that therefore the bona fide holder may recover on the paper, although the blank be filled in excess of any real authority conferred. But when the paper is perfect in itself, and the parties are sought to be charged because of the fact that the words or figures have been so written that interlineations are practi- cable, without presenting a strange or suspicious appear- ance, and have been made so as to alter the purport of the instrument, a very nice and difficult question is presented. A recent Massachusetts case very forcibly presents the doc- that he could not recover, and Campbell, C. J., concluded his opinion, saying: " There seems at first a plausibility in the argument that a party by signing a note with a separate memorandum beneath, puts it in the power of the holder to gain easier credit for the note than it would be likely to gain if altered in the body. But as it was well suggested on the argument, no one is bound to guard against every possibility of felony. And practically it is a matter of every-day occurrence to feloniously alter negotiable paper as successfully by changes on the face as in any other way. The public are not very much more likely to be defrauded in one way than in another. There can never be absolute safety except by looking to the character and responsibility of the persons from whom such paper is received, and who are always bound to respond for the considera- tion if it is forged. Little v. Derby, 7 Mich., 325. If a party makes a contract in such a manner as is authorized by law, he has a right to object to being bound to any other. A bona fide holder, before maturity, is allowed to receive the genuine contract, discharged from any equities attached to the contract itself, as between the origmal parties, but he can not get a contract where none was made." ' Gerrish v. Glines, 56 N. H., 9 ; see Palmer v. Largent, 5 Neb., 223. ' Palmer v, Largent, 5 Neb., 223 ; see ante, §§41, 51, 797^ 420 ALTERATION OF NEGOTIABLE INSTRUMENTS. § I408. trine that the bona fide holder of perfected negotiable in- struments, which have been altered by the insertion of words in the spaces left between the words and figures, can not recover ; and denies that the parties to such instru- ments are guilty of any such negligence as should render them hable when their undertakings have been altered by strangers.^ § 1408. If the alteration were made without any fault on the part of the maker, drawer, or acceptor, neither will then be bound, although the alteration were so skilfully made as to escape notice upon careful observation. Thus, where a banker's check had been dexterously altered by a chemical process, the original sum being expunged, and a larger inserted, the banker was not allowed to recover of the drawer more than the sum for which the draft actually called when he drew it.^ So where the payee of a note al- tered it from $500 so as to read $1,500, no blank space having been negligently left.^ And clearly when the alter- ation is made in so clumsy or ineffectual a manner that it ought to excite suspicion and inquiry, the holder will not be protected, having only himself to blame if he takes it.* ' Greenfield Sav. Bank v. Stowell, 123 Mass., 203. In this case the cases on this subject were reviewed in an elaborate and able opinion, and the doctrine stated in the text was disapproved. In that case it appeared that George W. Bardwell obtained from the plaintiff a printed form of a note, wrote the figures "67" at the top of it, leaving a space of three-tenths of an inch between the " % " mark and these figures, and also wrote the words " sixty-seven " before the word " dollars," in the body of the note, leaving three inches of the blank space before the words " sixty-seven " unfilled. Having signed the note in this form, he presented the note to, and obtained the signatures of, two others, as joint and several makers with himself, they having no knowledge or expectation that the note was to be altered or negotiated for a larger sum than sixty-seven dollars, and giving him no authority to alter or increase the amount of the note. Bard- well, without the knowledge of the comakers who signed for his accommoda- tion, fraudulently inserted the figure " 4 " before the figures " 67," and the words " four hundred and " before the words "sixty-seven," and negotiated the note to the plaintiff as a note for four hundred and sixty-seven dollars. It was held that the plaintiff could not recover against the accommodation makers. = Hall V. Fuller, 5 Barn. & C, 75°- * Trigg V. Taylor, 27 Mo., 245. ♦ Hall v. Fuller, 5 Barn. & C., 750 ; Garrard v. Haddan, 67 Penn. St., 82 Worrall v. Gheen, 3 Wright, 388 ; Thomson on Bills (Wilson's ed.), 43. ^ 1409. BONA FIDE HOLDER OF ALTERED BILL OR NOTE. 42 1 Actual notice is not in such cases required, constructive notice suffices, and if the holder chooses to receive the paper with erasures or other marks of infirmity upon it, he takes it at his own risk.^ It has been held that the question whether the alteration bears marks of suspicion is for the court, on inspection of the instrument.^ Any addition to any instrument already complete is an undoubted forgery." § 1409. In Scotland the doctrine of the text obtains, and there the acceptor and indorser were held bound upon a bill in which the sum had been altered from " eight " to " eighty- four" pounds ; there being so much room for the alteration that it was made without giving the bill a suspicious appear- ance. I n another case in which two bills came under consid- eration — one in which the w^ords " four hundred and " had been added before "fifty-eight" without appearing sus- picious ; and the other in which an alteration had likewise been made in the sum, but so as to have a crowded appear- ance ; it was held that the acceptors were bound upon the first bill to the full amount to a bona fide holder without notice ; but upon the second, that the parties were dis- charged altogether.* A recent Pennsylvania case well illus- trates the principles enunciated. The defendant signed an agreement constituting him an agent for the sale of a pat- ented article, which agreement was so framed that a part of it could be cut off, leaving a perfect negotiable note. It was so cut without defendant's knowledge, and transferred for value to the plaintiff. It was held that the defendant was not bound, as he had not signed a negotiable note, and was not guilty of negligence in the premises.^ » Angle V. M. W., etc., Ins. Co., 92 U. S. (2 Otto), 342 ; sttante, §§ 7SS, 7S9, ' Paramore v. Lindsey, 63 Mo., 63. » Ivory V. Michael, 33 Mo., 398 ; McGrath v. Clark, 56 N. Y., 36 ; see vol. i § 142. , * Pagan v. Wylie ; Graham v. Gillespie ; see Thomson on Bills (Wilson s ed.), 42, and Ross on Bills, 104, 195. ' Brown v. Reed, 79 Penn. St., 370 (1875), Sharswood, J., distinguishes and 422 ALTERATION OF NEGOTIABLE INSTRUMENTS. § l4.lOa. SECTION VII. THE EFFECT OF ALTERATION. ' § 1410. The effect of material alteration of a bill or note will be considered, (i) in respect to fraudulent alterations, and (2) in respect to alterations innocently made. The effect of immaterial changes, not amounting to alterations, will be separately considered. § 1410^. Fraudtihiit alteration destroys instrument and extinguishes debt. — In XkiQ first place, as to fraudulent alter- ation, when a party to a bill or note fraudulently alters its legal effect, he not only destroys the instrument by thus destroying its legal identity, but he also extinguishes the debt for which it was given. And it can not afterward be made the basis of, or evidence for, a recovery in any form of action whatever ; ^ though, of course, it might be admis- sible to defeat a claim on the ground of fraud, or convict a party of a crime.^ It is necessary that the law should impose this forfeiture of the debt itself upon one who fraudulently tampers with the instrument which evidences or secures it ; and it is done upon the principle that " no man should be explains Phelan v. Moss, Garrard v. Haddan, and Zimmerman v. Rote. The paper which was perverted into a note was as follows : North East, April 3d, 1872. Six months after date I promise to pay J. B. Smith or bearer, fifty dollars when I sell by order Two Hundred and Fifty Dollars worth of hay and harvest grinders for value received, with legal interest, without appeal and also without defalcation or stay of execution. T. H. BROWN, Agent for Hay & Harvest Grinders. * The paper was divided by cutting through where the asterisks are placed, but when the paper was written the context was close and natural, with nothing to indicate that any portion was to be detached. The left-hand half was nego- tiated as a note, but was not recoverable upon as such by even a bona fide holder. ' Wheelock v. Freeman, 13 Pick., 165 ; Meyer v. Huneke, 55 N. Y., 412 ; Booth V. Powers, 56 N. Y., 31 ; Newell v. Mayberry, 3 Leigh, 254; Smith v. Mace, 44 N. H., 553 ; Clute v. Small, 17 Wend., 238 ; Merrick v. Boury, 4 Ohio St., 70 ; Wallace v. Harmstad, 44 Penn. St., 492 (a deed) ; 2 Parsons N. & B., 572. "^ Chitty on Bills (13 Am. ed.) [*i9l], 219. § 141 [. THE EFFECT OF ALTERATION. 423 permitted to take the chance of gain by the commission of a fraud, without running the risk of loss in the case of de- tection."^ Thus in Massachusetts, where a memorandum was writ- ten upon two notes, providing that they should be payable in a certain contingency in two years, and was cut off by the plaintiff, it was held presumptively fraudulent, and that he could not recover.^ § 141 1. Ill the next place, as to alterations innocently made. — It is considered by a number of authorities that when the alteration is material, the instrument is ipso facto avoided, and the original consideration forfeited ; no regard being paid to the inquiry whether or not the alteration was fraudulent as well as material ; it being said in a case of this character in Vermont, by Pierpoint, J. : " The forfeiture of the debt is one of the penalties which the law imposes upon the party who alters or tampers with the written evi- dence which he holds of his claim," ^ On the other hand, in a number of English and American cases, it has been considered that a material alteration only avoided the in- ' Newell V. Mayberry, 8 Leigh, 254; Vogle v. Ripper, 3+ 111., 107 ; Whitmer V. Frye, 10 Mo., 350. 2 Wheelock v. Freeman, 13 Pick., 168, Shaw, C. J. : " If the plaintiff claims upon the notes, he is not entitled to recover, because he has made a material al- teration in the notes since they were signed. Master v. Miller, 4 T. R., 320. That it was fraudulent is a conclusion of law from the fact that it was done wil- fully, for his own benefit and to the injury of the defendant, by accelerating the payment. It has been made a question whether the alteration was material. This is easily tested by inquiring whether the notes would have the same legal ef- fect and operation after the alteration as before. After the alteration they were payable on demand ; before it, on time. The difference is apparent. And so the parties understood it. When written ' on demand,' the defendant refused to sign tiiem, and only consented to do so after the qualifying memorandum was made. But there is no magic in the word memorandum. And it has often been decided that any words written on an instrument which qualify and restrain its operation, constitute a part of the contract. Jones v, Fales, 4 Mass. R., 245, where the words ' foreign bills,' written in the margin of the note, were held to be part of the contract ; Springfield Bank v. Merrick, 14 IMass. R., 322 ; Homer v. Wallis, II Mass. R., 309; Heywood v. Perrin, 10 Pick., 228." ' Bigelow V. Stephens, 35 Vt., 525 ; Martendale v, Follett, i N. H., 99 ; Gillette V, Smith, 18 Hun, 10 ; Savings Bank v. Shaffer, 9 Neb., i ; see Toomer v. Rut- land, 57 Ala., 379. 424 ALTERATION OF NEGOTIABLE INSTRUMENTS. § I412. strument, and if it were given for a debt,* or in renewal of a bill or note,^ the holder might still sue upon the original cause of action — no question of fraudulent intent being raised in the pleadings or appearing in the case. But the holder could not sue any party whose remedy, after making payment, would be impaired by the alteration.^ If the alter- ation is material, all authorities agree that the instrument is avoided.^ The alteration vitiates it regardless of intention.^ In New York the effect of material alteration innocently made has been stated by Folger, J., as follows : " If the alteration was made without fraudulent intention, the payee may resort to the original indebtedness, if that was independent of the note, and has not been discharged by the execution of it, and pursues the maker upon that. But to have such resort, he must be able to produce and surren- der the note."^ § 141 2. Presu7nption from material alteration. — It is maintained by a number of authorities, that if a bill or note appear on its face,''' or be shown by extraneous evidence to have been materially altered, there will be no presumption that such alteration was fraudulent, and that, therefore, al- though the instrument be destroyed as the foundation of an action, the party who held it may recover upon the original consideration, or enforce any other security for the debt.^ On the other hand, others maintain that if the * Atkinson v. Hawden, 2 Ad. & E., 169 (29 E. C. L. R.) Bill altered in date from 30th to 28th of December. Held, drawer could recover original considera- tion of acceptor. Warren v. Layton, 3 Harring., 404; Clute v. Small, 17 Wend., 242; Clough V. Seay, 49 Iowa, in ; 2 Parsons N. & B., 572 ; see § 1413. ^ Sloman v. Cox, i C. M. & R., 471. Bill given in renewal altered in date from 20th to 24th of June, and it was held that there could be suit on original bill. ^ Alderson v. Langdale, 3 Barn. & Ad., 660. ^ Angle V. N. W., etc., Ins. Co., 92 U. S. (2 Otto), 342 ; Harsh v. Klepper, 20 Ohio St., 200; Booth v. Powers, 56 N. Y., 31. ^ Evans v. Foreman, 60 Mo., 449 ; Moore v. Hutchinson, 69 Mo., 429. "Booth V. Powers, 56 N. Y., 31 ; see also Clute v. Small, 17 Wend., 238; Meyer v. Huneke, 55 N. Y., 412. ' Gist V. Evans, 30 Ark., 286. * Vogle V. Ripper, 34 III, 100. A note secured by mortgage was materially altered. Held, that a mortgage securing it might be enforced, the mortgagot not alleging fraud- ^ 14 1 3. THE EFFECT OF ALTERATION. 425 alteration be material, it will be presumed to have been fraudulent also, and that until this presumption be rebutted by explanation there ean be no recovery in any form of ac- tion whatever.^ The latter doctrine seems correct. The party in default should bear the burden of explaining it, and of extricating himself. He must know the circum- stances which induced the alteration, and to require the party wronged to go into his enemy's camp for testimony would be to facilitate the inventions of fraud. Still, the question is one that must be resolved by the peculiar cir- cumstances of each case, and the presumptions which arise are frequently so slight and so shifting that no fixed and invariable rule can well be established.^ § 141 3. S7cz^ not maintainable on altered instrument. — When an instrument has been materially altered it can not be sued upon in its altered form, nor read in evidence to support an action, even when brought by a bona fide holder without notice.^ But when the party making the alteration discharges the burden of proof upon him by showing that the material alteration was made by mistake and without fraud- ulent intent, the right of action upon the consideration for which it was given remains.* And there is authority to the effect that although the alteration be material and fraudu- lent — that since a bill or note suspends, and is not absolute payment of, the debt for which it is given — such alteration only extinguishes the security, and the original considera- tion remains.^ But this is not, we think, sound doctrine. ■ Whitmcr v. Frj'e, 10 Mo., 349, Scott, J, : "There is no question but that the alteration was a material one, and it \s p>-tiiia facie fraudulent." Wheelock v. Freeman, 13 Pick., 165 ; Robinson v. Reed, 46 Iowa, 221. ^Kountz V, Kennedy, 63 Penn. St., 190, Thompson, C. J. : "Each case must stand much more on its own facts than upon the rules announced in any given case." Craighead v. McLoney, S. C. Penn., Central L. J., March loth, 1882, p. 193- ' State Savings Bank v. Shaffer, 9 Neb., i. *Hunt V. Gray, 35 N. J. Law, 227 ; Matteson v. Ellsworth, 33 Wis., 488; State Savings Bank v. Shaffer, 9 Neb., 7; an/e, § 141 1. ' Matteson v. Ellsworth, 33 Wise, 48S, obiter. 426 ALTERATION OF NEGOTIABLE INSTRUMENTS. § I414. In Massachusetts, where P., the maker of a note for $500, got R. to indorse it for P.'s accommodation, and then by aid of chemicals raised it to $2,000, and got it discounted at banic ; but before it fell due the fraud w^as discovered, the writing restored, and the note as for $500 protested, it was held that R. was not liable, the only note accepted by the bank, the plaintiff being due for $2,000, which note R. did not indorse.-' § 1 41 4. Right of restoration of mstrwnent innocently altered. — There may be many cases of innocent material alterations in which it would work injury, loss, or inconven- ience to confine the holder to a suit upon the original con- sideration. If the indorser were sued, and were held liable, he could not have the maker's note restored to him as a foundation for his action if it were utterly annihilated by the alteration. And the indorsee might have rendered such a consideration as could not be recovered back : for instance, professional services, labor, or another note. For these reasons it would seem just to allow a more specific remedy ; and while we have seen no precedent which so decides, it has been suggested that a court of equity would, under its jurisdiction over mistakes, correct an alteration innocently and mistakenly made, and restore the instru- ment to its original form.^ And there is no sufficient reason why the party should not himself be permitted to undo what he has mistakenly done, provided no other per- son has become so situated toward the instrument that it would operate prejudicially upon him.^ The burden of proving innocence would be a sufficient safeguard to prior parties ; and when innocence is clearly proven, and the prima facie presumption of guilt overthrown, it would ^Citizens' Nat. Bank v, Richmond, I2i Mass., no. See also Walpole v. Elli- son, 4 Houston, 322. * See Chadwick v. Eastman, 53 Me., 16. This seems to be hinted. In Shep- ard V. Whetstone, 51 Iowa, 457, it is doubted. '2 Parsons N. & B., 570. I 5 141 5. THE EFFECT OF ALTERATION. 427 seem too rigorous to inflict upon the innocent a penalty only deserved by the guilty.^ § 141 5. Ilhistrations of restoration of altered notes. — This latter view was forcibly presented in Pennsylvania in a case where within an hour or two after the note was signed, the payee returned to the maker's office, where his clerk, at the payee's request, but without knowledge or consent of the indorser, inserted " with interest." The maker ratified the clerk's action. But subsequently the payee had the insert- ed words expunged, apparently with chemicals, and sued the indorser upon it in its original form. The latter claimed that the note had been avoided as to him by the alteration ; but it was held, that no fraud having been in- tended, the plaintiff had a right to restore it to, and sue upon it in, its original form.^ And in Massachusetts, where a special indorsement was erased by mistake, and no one could suffer from its restoration, the cancelled words were allowed to be replaced, the court saying: "Justice requires and the law allows it to be done."^ In a late Iowa case, where the payee of a note, being desirous of transfer- ring it, but ignorant of the appropriate method, erased his own name and inserted that of the transferee, and subse- quently, before delivery, restored it to its original form, and then indorsed it, the alteration was deemed immaterial, and an action by the indorsee against the maker sustained.* ' See Shepard v. Whetstone, 51 Iowa, 457, and § 141 5. ''Kountz V. Kennedy, 63 Penn. St., 187 (1870), Thompson, C. J., sajing: " Now it seems to me, that, as the identity of the note remained, and there was nothing in it to enlarge the obligation of the indorser, and as what had beea done was innocently but mistakenly done, and expunged, for aught we know, within the hour after it had been done, there is no rule of law unreasonable enough to hold it avoided by this. I admit that if there had been evidence of a fraudulent tamp'ering with the note, a different rule would apply. But regard- ing it as mistakenly done, in an attempt to make the note comply with the con- tract, and assented to by the original parties, one of them the principal in it, and without fraud, ought the consequences of such an act, done under such cir- cumstances, be made to rank with fraud and perjur>' ? It ought to be regarded, as it manifestly was, to the indorser immaterial." Sharswood, J., dissented. See also Collins v. Makepiece, 13 Ind., 448. 'Nevins v. DeGrand, 15 Mass., 436. ■•Horst V. Wagner, 43 Iowa, 373 (1876). See Ames v. Brown, 22 Minn., 257. 428 ALTERATION OF NEGOTIABLE INSTRUMENTS. § I416. And in another case where a blank after the word "at" was filled without fraudulent design with the w^ords, " with ten per cent, interest from date," and the note was subse- quently restored to its original form, and negotiated to an innocent holder without notice, it was held he could recov- er upon the note.^ In California the principles presented in the text were applied in the case of an innocently altered and restored bond.^ Where the alteration is fraudulent, there can not be any restoration.^ § 141 6. Effect of immatei'ial change with fratiduleni intent. — It is said by some of the authorities, and by Green- leaf in his Treatise on Evidence, that if the alteration be fraudulently made by the party claiming under the instru- ment, it does not seem important whether it be in a ma- terial or an immaterial part ; for in either case, he has brought himself under the operation of the rule established for the prevention of fraud ; and having fraudulently de- stroyed the identity of the instrument, he must take the peril of all the consequences.'' There are other cases in wdiich this doctrine is laid down ;^ but in none of those quoted by the learned author, or which we have seen, did it appear that the alteration was immaterial, and was held to have vitiated the instrument by reason of the fraudulent intent. If the change destroys the identity of the instru- ment, it is material ; but it has been well said, " an imma- terial alteration may be treated as no alteration";^ and ac- cordingly held that if the act itself is immaterial and can work no injury, it is irrelevant to inquire into the niotives with which it was committed. Intent not manifested in a material respect is nugatory, and this we conceive to be the true doctrine. »Shepard v. Whetstone, 51 Iowa, 457. » Rogers v. Shaw, S. C. Cal., Nov., 1881 ; Central L. J., Jan'y 13, 1882, p. 36. 'Citizens' National Bank v. Richmond, 121 Mass., no. *Greenleaf on Evidence, vol. i, 568. *Lubbering v. Kohlbrecher, 22 Mo., 598 ; Turner v. Billagram, 2 Cal., 523. •Mogev. Herndon, 30 Miss., 120. k 5 14.17. BURDEN OF TROOF OF ALTERATION. 429 SECTION VIII. BURDEN OF PROOF OF ALTERATION. § 141 7. Whether or not a negotiable instrument has been altered, may appear upon its face, or may be shown by the defendant to have been made so skilfully, or in such a manner, as not to be apparent to the observer. When an alteration is apparent on the face of the instrument, the question arises whether the burden of proof is upon the holder to show that it was made before, or contemporane- ously with, its issue ; or is upon the defendant to show that it was made after it was issued. It may seem harsh to the holder, and may frequently devolve loss upon an innocent party, to require him to explain an alteration which may have been made before he came into possession of the in- strument and with which he had no privity. But it would frequently be equally harsh to hold the defendant to the responsibility of showing not only that his contract has been altered, but in addition that the alteration was made after it left his hands. The principle which prevails according to the current of English and American authorities has been w^ell stated by Chief-Justice Gibson, in a case where the words " payable at the Bank of Pittsburgh," written at the end of a note, were in a handwriting different from that of the defendant. He said : " Without a presumption to sustain him, the maker would in every case be defenceless. It may be said that the holder, with such a presumption against him, would also be defenceless. But it was his fault to take such a note. As notes and bills are intended for negotiation, and as payees do not receive them when clogged with impedi- ments to their circulation, there is a presumption that such an instrument starts fair and untarnished, which stands till it is repelled ; and a holder ought, therefore, to explain why 430 ALTERATION OF NEGOTIABLE INSTRUMENTS. § I418. he took it branded with marks of suspicion, which would probably render it unfit for his purposes. The very fact that he received it is presumptive evidence that it was un- altered at the time ; and, to say the least, his folly or his knavery raised a suspicion which he ought to remove. The maker of a note can not be expected to account for what may have happened after it left his hands ; but a payee or indorsee who takes it, condemned and discredited on the face of it, ought to be prepared to show what it was when he received it.^ § 141 8. The same rule has been applied where it appeared that "May 4th, 1837," had been altered to "April 4th";' where " ;^40 17^-. 6 Chitty on Bills (13 Am. ed.), [*22o], 251 ; Story on Bills, § 220; Story on Notes, § 178 ; Byles on Bills (Sharswood's ed.), [*353], 529 ; see also Edwards on Bills, 260; 2 Parsons N. & B., 603, 604; see chapter XXI, on Transfer by Indorsement, §§ 725 et seq., vol. i. § 1437- HOW FAR SET-OFF IS APPLICABLE. 443 after it became due ; for the defendant it was insisted that he had a right to set off against the plaintiff's claim a debt due to him from Fearn, who held the note at the time when it became due. On the other hand, it was contended that this right of set-off, which rested on the statute of set- off, did not apply. The impression on my mind was, that the defendant was entitled to the set-off ; but on discussion of the matter with my Lord Tenterden and my learned brothers, I agree with them in thinking that the indorsee of an overdue bill or note is liable to such equities only as attach on the bill or note itself, and not to claims arising out of collateral matters."^ In a subsequent case, where it was averred that the indorsee received the bill with notice of the set-off, it was held that it could not be pleaded against him.^ And in a more recent case it was held that the right of an indorsee of an overdue bill to sue the acceptor was not defeated by the existence of a debt due from the drawer to the acceptor, and notice by the latter to the drawer before indorsement, of his election to set off the amount against the bill ; and that the indorsee was not affected by the right of set-off between the acceptor and the drawer, although the bill was indorsed without value, and for the purpose of defeating the set-off.^ § 1437. American doctrine. — In the United States there is a conflict of decisions. In some of the States the English rule, excluding set-offs which existed at the time of the transfer of the overdue paper, is follow^ed.^ In others such set-offs are admitted.^ But it seems to be the uniform ' Burroiigh v. Moss, 10 B. & C, 558 ; 5 M. & R., 296 ; Chitty, Jr., 1481. " Whitehead v. Walker, 10 Mees. & W., 696. ' Oulds V. Harrison, 28 Eng. L. & Eq., 524. * Davis V. Miller, 14 Grat., 8 (the court seems to favor the English rule) ; Annon v. Houck, 4 Gill, 332 ; Hughes v. Large, 2 Barr, 103 ; Epler v. Funk, 8 Id., 468 ; Clay v. Cottrell, 6 Han, 413 ; 2 Rob. Prac. (new ed.), 252, 253. * Peabody v. Peters, 5 Pick., i ; Braynard v. Fisher, 6 Id., 355 ; Grew v. Bur- ditt, 9 Id., 265 ; Pettee v. Prout, 3 Gray, 502 ; Shirley v. Todd, 9 Greenl., 82 ; McDuffie V. Dame, 1 1 N. H., 244 ; Martin v. Trowbridge, i Vt., 477 ; McKenzie V. Hunt, 32 Ala., 494 ; Bond v. Fitzpatrick, 4 Gray, 89 ; Nixon v. English, 3 McC., 549 ; Perry v. Mays, 2 Bailey, 254. 444 THE LAW OF SET-OFF. § 1437- ruling everywhere, that, although the paper be transferred after maturity, no set-offs between antecedent parties, which arose after the transfer, will be available against the in- dorsee.^ In some of the States this questions is settled by express statute on the subject. In New York, for instance, the statute admits set-offs existing at the time of transfer of the overdue note or bill.^ ' Davis V. Miller, 14 Grat., 8. Moncure, J., said on this subject : " Whatever conflict of authority there maybe upon the question whether the equities subject to which an indorsee takes an overdue note, embrace set-offs in favor of the maker against the payee, existing at the time of the indorsement, I have been able to find no case in which it was held, or even said, that set-offs between those parties, arising or acquired after the indorsement, even though without notice thereof, are good against the indorsee. On the contrary it was expressly decided in Baxter v. Little, 6 Mete, 7, that they are not." Shaw, C. J., in his able opinion, said : " A note does not cease to be negotiable because it is over- due. The promisee by his indorsement may still give a good title to the indorsee. Notes or other matters of set-off acquired by the defendant against the promisee after such transfer can not be given in evidence in defence to such note, ahhough the maker had no notice of such transfer at the time of acquiring his demand against the promisee. The indorsee of a note overdue takes a legal title ; but he takes it with notice on its face that it is discredited, and therefore subject to all payments, and offsets in the nature of payment. The ground is, that by this fact he is put upon inquiry, and therefore he shall be bound by all existing facts of which inquiry and true information coald apprise him ; but these could only apprise him of demands then acquired by the maker against the payee." « Edwards on Bills, 260. The point was considered doubtful (outside of the statute) in Miner v. Hoyt, 4 Hill, 193, 197. CHAPTER XLV. EXCHANGE AND RE-EXCHANGE ; AND DAMAGES, UPON DIS- HONORED NEGOTIABLE PAPER. SECTION I. NATURE OF DAMAGES, AND OF EXCHANGE. § 1438. Statutory enactme-nts. — In the United States the whole subject of re-exchange and damages has been very much simplified by the enactment of statutes establishing fixed amounts of damages in lieu of re-exchange ; and even previous to statutory provisions on the subject, mercantile custom had, in some of the States, prescribed fixed rates of damages equally as effectually. Immemorial usage, at an early day, allowed 10 per cent, as damages in lieu of re- exchange on bills drawn in Massachusetts on England, and returned protested,^ and twenty per cent, on the like bills drawn in New York.^ In England it seems that a similar rule was adopted in the commerce between England and the East Indies, to allow a certain per cent, in particular cases in lieu of re-exchange, but it was merely conventional as between parties agreeing to it.*^ Such custom, however, would not apply in the absence of an agreement, express or implied, to allow re-exchange.* In 1 700 a statute was passed in the Colony of Pennsyl- vania allowing twenty per cent, on bills drawn upon Eng- ' Grimshavv v. Bender, 6 Mass., 157. ' Hendricks v? Franklin, 4 Johns, 119. ' Auriol V. Thomas, 2 Term R., 52. *Willans v. Ayres, 3 Appeal Cases, 82 (1877) ; stt post, § 1446. (445) 446 EXCHANGE AND RE-EXCHANGE. § 1 439- land or any part of Europe ; ^ and, in 1 743, Rhode Island adopted one of similar purport.^ Now every State has recognized the convenience and utility of regulating the matter by statute, and their codes contain ample provisions on the subject. But they lack uniformity, and consequently, in transactions between the States, there is great diversity in the rights and liabilities of parties. It has been thought that Congress has a right to prescribe fixed rates of damage, under the clause of the constitution authorizing it to regulate commerce between the States.^ But no action has been taken by that body. § 1439. These statutory damages are not given as a pen- alty for drawing without authority, but as commutation for interest, damages, and re-exchange.* "It is, in truth," says Gibson, C. J., "a liquidation of the damages, not by the parties, but by the law fixing the compensation for the loss beforehand, to save time and litigation ; and if damages need not be specially laid where there is no statute on the subject, as they certainly need not be in England, no rule of pleading requires them to be laid in their liquidated form." ^ The damages given by statute constitute as much a part of the contract as the interest* But now while they are now universally fixed in amount by statute, the whole theory from which they are derived springs from the right of the holder to indemnity for dishonor of the bill, which was formerly worked out through the doctrine of re- exchange. And it is still necessary to a thorough under- standing of the subject of damages that the rules of the law merchant respecting exchange and re-exchange should be held in view. * Francis v. Rucker, Ambler, 672. " Brown v. Van Braum, 3 Dallas, 344. ^ Mr. Verplanck's report to House of Representatives, March 22, 1826; Ed- wards on Bills, 750; Sedgwick on Damages, 274; i Parsons ]>>. & B., 654. * Bangor Bank v. Hook, 5 Greenl., 174; Allen v. Union Bank, 5 Whart., 420 Lenning v. Ralston, 23 Penn. St., 137. ' Lloyd V. McGarr, 3 Barr, 474. ' Bank U. S. v. U. S., 2 How,, 711. § I440- NATURE OF DAMAGES, AND OF EXCHANGE. 447 § 1440. Function of bills of exchajige, and the nature of exchange. — The very name of the instrument, " Bill of Exchange," indicates the office which it so frequently per- forms, that of exchanging a debt in one place or country for a debt in another place or country. When a person in one place or country owes monc}^ to a party in another place or country, he does not in general discharge the debt by transmitting the money, which would involve risk and expense, but purchases from some banker, or other person who has money due him at the place where he has the amount to pay, a bill drawn for that amount upon the banker or such other person's debtor. This bill is drawn payable to the purchaser's creditor, or to himself, and in- dorsed by him to his creditor, as he sees fit, and when pre- sented to and paid by the drawee it extinguishes the original debt. The facility with which such a bill may be procured depends upon the commercial relations between the two places or countries betwixt which it is required. Thus : If there are more debts due from New York to London than from London to New York, the demand in New York for bills on London will be greater than the demand in London for bills on New York ; and, conse- quently, in London, where there are many creditors of debtors in New York, it will be easier and cheaper to pro- cure a bill of exchange on New York than it will be in New York, where there are a less number of creditors of London debtors, to procure a bill on London. It would follow from this state of affairs that in London bills on New York would be at a discount, creditors pre- ferring to take lesser amounts of cash in hand than to undergo the trouble and delay of collecting their debts in New York. This discount, which is in fact a sum paid by the London drawer of an order of payment on his New York debtor, is called exchange, and the course of ex- chano-e is said to be ao^ainst New York. It is also in favor of London, for in New York a draft on London, being in 448 EXCHANGE AND RE-EXCHANGE. § 1 441' greater demand, would bear a premium ; that is, a pur- chaser would pay for it more than the amount of its face. This premium is also called exchange.^ § 1440^. The rate of exchange. — It follows that the rate of exchange between two countries is that amount of premium which it will cost to replace a sum of money in the one country in the other ; or which a right to a sum of money in one country will produce in another country. In other words, it is the difference in the value of the same amount of money in different countries. § 1 44 1. Natural and artificial exchange. — The rate of exchange between two countries is sometimes natural and sometimes artificial. "Thus," observes Parsons, "an ex- change is never nominally at par, because our statute makes the pound sterling equal to only four dollars and forty-four cents, which is nearly ten per cent, less than it is really when paid in gold. Accordingly, while ;^ioo is legally worth only $444, to pay that sum in London one must pay in New York, if the exchange is actually at par, about $484. A recent United States statute has provided that, for the purpose of estimating duties on imported goods, the pound sterling shall be calculated at $4.84, which is about its true value. (Statute July 27, 1842, ch. 66, 5 U. S. Statutes at Large, 496.) But the matter of exchange is left to itself. Merchants regulate that by adding from nine to ten per cent, to the actual rate of the day (or that which would be the rate if it were determined by business alone), and thus the buying and selling rate is made. This is seldom less than eight per cent., for if it falls so low, or nearly so low, gold comes over from England, and seldom more than eleven, for if it rises so high, or near this rate, gold instead of bills is sent to England."^ ' See Thomson on Bills, 439. " I Parsons N. & B., 663. By more recent enactment of Congress, the value of the sovereign or pound sterling is placed at four dollars eighty-six cents and six and one-half mills. See Revised Statutes U. S., 707 ; act March, 1873, ch. 268, vol. 17, p. 603. ^ 1442. NATURE OF DAMAGES, AND OF EXCHANGE. 449 § 1442. Par of exchange. — By the par of exchange is meant the precise equahty of any given sum of money in the coin or currency of one country, and the Hke sum in the coin or currency of another country into which it is to be exchanged, regard being had to the fineness and weight of the coins so fixed by the mint standard of the respective countries.^ Marius says : ''Pair,'' as the French call it, " is to equalize, match, or make even, the money of exchange from one place with that of another place ; when I take up so much money for exchange in one place to pay the just value thereof in other kind of money in another place, \vithout having respect to the current of exchange for the same, but only to what the moneys are worth. "^ It is nec- essary to this purpose to ascertain the intrinsic values of the different coins ; and then it is a mere matter of arithmetical computation to arrive at the amount of the one which will be the exact equivalent of a certain amount of the other, into which it is to be exchanged. When this has been ac- complished, and the exact equivalent of a certain amount in one currency has been ascertained in another, should it be desired to transmit such amount from one country to another, the rate of exchange between the countries will be added to or subtracted from such amount, accordingly as the course of exchange is in favor of the one country or the other. So the par of exchange is the equivalency of amounts in different currencies, while the rate of exchange is the difference between these amounts at different places. § 1443. Gilbert remarks on this subject, in his Treatise on Banking : " The real par of exchange between two countries is that by which an ounce of gold in one country can be replaced by an ounce of gold of equal fineness in the other country. In England gold is the legal tender, and its price is fixed at ^3 lys. lokd. per ounce. In France silver is the currency, and gold, like other commodities, ' Cunningham on Bills, 417 ; Story on Bills, § 30. * Marius on Bills, 4. Vol. II. — 29 450 EXCHANGE AND RE-EXCHANGE. § 1443' fluctuates in price according to supply and demand. Us'u ally, it bears a premium or agio. In the abov^e quotation, this premium is stated to be 7 per 7nille ; that is, it would require 1,007 francs in silver to purchase 1,000 francs in gold. At this price the natural exchange, or that at which an ounce of gold in England would purchase an ounce of gold in France, is 25. 32^. But the commercial exchange — that is, the price at which bills on London would sell on the Paris Exchange — is 25 francs, 25 cents, showing that gold is 0.30 per cent, dearer in Paris than in London. Tables have been constructed to show the results of each fluctuation in the premium of gold in Paris and Amster- dam."^ And in Cunningham on Bills it is said: " By the par of exchange is meant the precise equality between any sum or quantity of English money, and the money of a foreign country into which it is to be exchanged, regard being had to the fineness as well as to the weight of each. When Sir Isaac Newton had the inspection of the English mint, he made, by order of council, assays of a great num. ber of foreign coins to know their intrinsic values, and to calculate thereby the par of exchange between England and other countries ; of which a table is given by Dr. Ar- buthnot. And he says you may thereby judge the balance of trade, as well as the distemper of a patient by the pulse. And this, it seems, induced Mons. Dutot, in a late book, entitled ' Reflexions Politique sur les Finances,' to follow the same path in calculating the par of exchange, and to say that the balance of trade may be thereby as well judged of as the weather by a barometer."^ ' Gilbert on Banking, 424, 425. * Gilbert on Banking, p. 417. 1^ 1444- NATURE OF RE-EXCHANGE. 45 1 SECTION II. NATURE OF RE-EXCHANGE AND DRAWER'S LIABILITY. § 1444. From the use which bills of exchange subserve in transmitting money, arises the liability upon the part of the drawer for the payment of what is termed " re-exchange," in the event of the dishonor of the bill in the place or country upon which it is drawn. Thus, suppose A. in San Francisco, California, desires a thousand dollars in New York City, New York. He purchases a bill of exchange from a San Francisco banker, drawn by himi on a house in New York, and pays therefor a premium of (say) three or five per cent. In other words, he purchases New York exchange in San Francisco, and is entitled to demand in New York of the drawee the thousand dollars for which he has paid the premium. Now, should it happen that the bill were dishonored in New York, it is obvious that if the holder could only recover of the drawer in California the thousand dollars which he should have received in New York, he would lose the premium which he paid for the exchange, and suffer without remedy the loss and incon- venience of returning the bill to California for recourse against the drawer. And even if no premium had been paid, the holder enti- tled under the drawer's contract to receive the thousand dollars in New York, would not be indemnified if he could only sue for and obtain that amount in California. From these circumstances grew the customary right of the holder of the bill, by the law merchant, to draw a bill upon the drawer — literally a bill of re-exchange — for the principal amount which he should have received, increased by the costs of protest, and the sum which it will cost to replace that principal amount at the place where it should have been paid. Thus, if the exchange between New York and 452 EXCHANGE AND RE-EXCHANGE. § 1 445. California were ten per cent, the holder of a bill for a thousand dollars drawn in California on New York, would, upon its protest in New York, be entitled to redraw upon the California drawer for eleven hundred dollars, with his necessary expenses and interest added.^ § 1445. Re-exchange, then, may be defined to be the amount for which a bill may be purchased in the country where the original bill is payable, drawn upon the drawer in the country where he resides, which will give the holder a sum exactly equal to the amount of the original bill at the time when it ought to be paid, or when he is able to draw the re-exchange bill, together with expenses and interest ; for that is precisely the sum which the holder is entitled to receive, and which will indemnify him for its non-payment. The cross-bill is called in French the retraite. The amount for which it is drawn is called in law Latin, ricam- biunl, in Italian, recambio, and in English, re-exchange. In point of fact, the re-exchange bill is seldom, if ever, drawn in England or in the United States, but the right of the holder to draw it is recognized by the law merchant of all nations, and it is by reference to this supposed redraft upon the drawer that the re-exchange is computed.^ § 1446. The United States Supreme Court remarks on this subject : " The doctrine of re-exchange is founded upon equitable principles. A bill is drawn in this country, payable at Paris, France. The payee gives a premium for it, under the expectation of receiving the amount at the time and place where the bill is made payable. It is pro- tested for non-payment. Now the payee and holder is en- titled to the amount of the bill in Paris. The same sum paid in this country, including costs of protest and other charges, is not an indemnity. The holder can only be re- ' See D'Tastet v. Barring, 11 East., 265. «Byles on Bills (Sharswood's ed.) [*402], 588. § 1447- NATURE OF RE-EXCHANGE. 453 munerated by paying to him, at Paris, the principal, with costs and charges ; or by paying to him in this country those sums, together with the difference in value between the whole sum at Paris and the same amount in this coun- try. And this difference in value is ascertained by the pre- mium on a bill drawn in Paris, and payable in this country, wiiich should sell at Paris for the sum claimed."* By Sir J. Colville, in the Privy Council, it was recently said : " If an ordinary bill of exchange is drawn in one country upon persons in another and distant country, the holder who has contracted for the transfer of funds from the one country to the other almost necessarily sustains damages by the dis- honor of the bill. He must take other means to put him- self in funds in the country where the bill was payable. Hence the right to 're-exchange' which is the measure of those damages." And accordingly it was held that where the holder of a bill drawn in London on a party in Aus- tralia, had no occasion to transfer funds to Australia, but sent the bill there to have it negotiated and the proceeds remitted to London, he could not, upon dishonor of the bill, recover re-exchange.^ § 1447. Drawer may limit re-exchange. — The drawer may, if he pleases, limit the amount of re-exchange and expenses, in the event of the bill being dishonored, by sub- scribing : " In case of non-acceptance or non-payment^ re-exchange and expenses not to exceed $ ," or some sucli words. And then the holder can not recover a larger amount.^ It might be better to say, " re-exchange and ex- penses shall be so much," for then the amount is definitely determined.'* » Bank of the United States v. United States, 2 How., 737. 'Wellans v. Ayres, 3 Appeal Cases, 133 (1877) ; 24 Moak's E. R., 82. • Chitty on Bills (13 Am. ed.) [*i66], 190. * i Parsons N. & B., 653. 454 EXCHANGE AND RE-EXCHANGE. ^ 1 448. SECTION III. indorsee's AND ACCEPTOR'S LIABILITY FOR ^RE-EXCHANGE AND DAMAGES. — ACCUMULATIONS OF RE-EXCHANGE AGAINST DRAWER AND INDORSER, § 1448. Every indorser of a bill is a new drawer, and the holder may therefore redraw upon any indorser (as well as upon the drawer) for the re-exchange between the country upon which the bill is drawn and that where the indorse- ment was made. And as soon as the indorser pays the re- exchange, he may thereupon redraw upon any antecedent indorser, or upon the drawer, for the whole amount, in- cluding the re-exchange between the place of dishonor and of indorsement, which he has been required to pay ; and, in addition, the re-exchange between the place of such payment and the place upon which the redraft is drawn.* This principle rests upon the obvious equity and justice of indemnifying each several and successive party for the Icjs which he suffers by the breach of contract of his antece- dents ; and although when the bill has passed through nu- merous hands, the drawer may be burdened with successive re-exchanges between different places, it is only the conse- quence of his own engagement, and what is necessary to reimburse and save harmless those who trusted to its per- formance.^ ' Chitty on Bills (13 Am. ed.) [*686], 767 ; Edwards on Bills, 732 ; i Parsons N. & B., 652 ; Wharton's Conflict of Laws, § 458 ; Westlake on Int. Law, § 234. " D'Tastet v. Baring, 11 East., 265 ; Crawford v. Branch Bank, 6 Ala. N. S., 15 ; Mellish v. Simeon, 2 H. Bl., 379 (1794). In this case the bill was drawn in England by Simeon on Boyd & Co., in Paris. It was negotiated through Am- sterdam, in Holland, and refused payment, and was sent back to the indorser at Amsterdam, and by him to the English drawer, with the accumulation of ;^300 damages. Lord Chief-Justice Eyre said : " I see no distinction between this case and the common one of a bill being refused payment. The drawer must pay for all the consequences of the non-payment, and the loss on the re-exchange seems to me to be part of the damages arising from the contract not being per- formed. I thought, indeed, at the trial, that it might be a question whether the drawer was liable for the re-exchange occasioned by the circuitous mode of re- turning the bill through Amsterdam, but the jury decided." BuUer and Heath, JJ., concurred. § 1448. indorser's and acceptor's liability. 455 Story says, upon the authority of Joussc, that if there be a direct comniercial intercourse between the country where the acceptance and payment are to be made, and the country where the drawer lives, the rate of that re-exchange is the proper amount to be allowed to the holder, and intimates that it is only when such intercourse is disturbed that the drawer is bound for the re-exchange accumulating by the cir- cuitous mode of transmitting and negotiating the bill in the various countries through which it must pass.^ But none of the Enirlish cases cited rccoonize this distinction, nor does it appear to be a principle of the law merchant resting either upon reason or authority. As the indorsers are drawers, there is no reason why the holder should not draw upon the one as well as another, and that the party who has put his bill in circulation, should not indemnify those who received it. Even the fact that the drawee is prohibited by the laws of his country from accepting or paying the bill does not release the drawer's liability, for he " who undertakes for the act of another, undertakes that it shall be done at all events." ^ But no indorsee can avail himself of but one satisfaction of re-exchange, nor will any drawer or indorser be liable for re-exchange except when it is allowed by the laws of the country where the bill is drawn, or the indorse- ment made.^ * Story on Bills, § 402, quoting Jousse Comm, sur L'Ord, 1673, tit. 6, art. 4, pp. 139, 140. In Scotland, Story's view has been taken by Forbes and Glen (see Forbes, 151 ; Glen, 274). But Thomson exposes its fallacy with his usual clear- ness and discrimination. See Thomson on Bills, p. 445, where it is said : "It has been said that the drawer ought not to be liable for any but the direct re- exchange between the place of drawing and the place of payment, unless he has given permission to negotiate the bill in other places. But such a j^ermission is implied by the drawer issuing a negotiable document, since the holder for the time is ent'itled to indorse it to any person he pleases ; and, on the other hand, the last holder, being entitled, in case of its dishonor, to redraw on any previous in- dorser, in order to make good his recourse against such indorser, who again has a right to do the same with any prior indorser, the drawer, as he is liable lor all the consequences of dishonor, must be liable for the accumulated re-exchange arising on the successive redrafts, because tJiat results from the negotiability ol the document which he has issued." * Hellish V. Simeon, 2 H. BL, 376, Heath, J. » Stor)- on Bills, § 403. 456 EXCHANGE AND RE-EXCHANGE. § 1449' § 1449. Whether or not acceptor liable for re-exchange. — Many of the commentators on bills of exchange state em- phatically that the liability for re-exchange is peculiar to the drawer and indorser of a bill, and does Qot extend to the acceptor.^ Others consider the acceptor equally liable.^ And others still take an intermediate view, that he is liable only when he has agreed with the drawer or indorser, for a valuable consideration, to pay the bill, and has failed to do so ; and the drawer or indorser has consequently been com- pelled to pay re-exchange. Then they say he is bound to reimburse them.^ In England, where an English mercantile firm had directed an American merchant of Pennsylvania to purchase corn for them, and draw on them for reimburse- ment — and the bills drawn in pursuance of this direction were not paid, some of them not even accepted — the Penn- sylvania merchant w^as permitted to prove against the English firm not only the principal amount, but also for twenty per cent, allowed by the laws of Pennsylvania against *' the drawer and all others concerned," when bills upon England were returned protested.* This case would seem clearly to maintain the acceptor's liability for re-exchange to the drawer. But it was after- ward held in England, that the holder could not recover re-exchange from the acceptor, who, it was said, by his ac- ceptance only charges himself with the liability to pay ac- = Chitty on Bills (13 Am. ed.) [*686], ^(i^ ; Chitty, Jr., on Bills, \i ; Byles on Bills (Sharswood's ed.) P402], 588 ; 3 Kent Com., lect. 44 ; Edwards on Bills, 733- "^ Thomson on Bills (Wilson's ed.), 446 ; i Parsons N. & B., 650. Bayley saj^s p. 306, chap. X, note 41 : " It seems reasonable that he shoulcl be liable to all parties when he has effects, and to all excepting the drawer when he has not." In Kyd on Bills, 141, it is said : " The acceptor must pay re-e.\change and all charges." Pothier, 117 ; i Bell Com. B. 3, chap. 2, § 4, p. 407 (5th ed.) = Story on Bills, § 398 ; Sedgwick on Damages [242], 271. ^ Francis V. Rucker, Ambler, 672 (1768), Lord Campbell saying: "The 20 per cent, is a liquidated thing, and therefore differs from the case of re-exchange. The reason of not admitting proofs of the difference upon re-exchange is because it is uncertain damage which can not be proved The nature of the en- gagement is to pay the bills or the 20 per cent., the consequential damages ac- cording to the law of Pennsylvania, the same as if it had been by express stipu- lation." § I450- indorsee's and acceptor's liability. 457 cording- to the law of this country ; and if he do not pay, the holder has his remedy over against the drawer.^ And Lord Ellenborough said, in one of the cases where it was sought to charge the acceptor for re-exchange because the holder had suffered to that extent by the dishonor : " You may as well state that, by reason of the bill not being paid, the plain- tiff was obliged to raise money by mortgage."'' But in a recent case before the Chancery Division of the High Court of Justice, it was held that the drawer of a bill of exchange in a foreign country, upon its dishonor and protest, is entitled to recover from the acceptor not only the amount of the bill with interest, but also all such reasonable expenses as may have been caused by the dishonor, including the ex- penses of re-exchange. And Yice-Chancellor Malins, re- ferring to Lord Ellenborough's decision, said : " But as to that nisi priiis case, if it had been expressly in point, it could not outweigh the solemn decision of Francis v. Rucker. Now, I can not accede to the argument that a drawer is under greater liability than an acceptor. I am of opinion that the primary liability is on the acceptor. The liability of the drawer is secondary, and if the drawer is liable, so must the acceptor be."^ § 1450. In the United States Supreme Court, the drawee, who had instructed the drawer to purchase salt for him, and to draw for reimbursement, was held liable for re-exchange upon ground broad enough to include every case in which there is an authority to draw, or an acceptance.'' But in ' Napier v. Schneider, 12 East., 420 (1810). '^ Woolsey v. Crawford, 2 Camp., 445 (1810) ; Dawson v. Mort,^an, 9 Barn. & Cres., 61S ( 1829), Lord Tenterden, C. ]., saying : " The custom does not give a right to an indorser ( against the acceptor) to recover re-exchange." Mn re. General South American Co., 7 Ch. Div. Law R., 645 (187S). See also Walker v. Hamilton, I D. F. & J., 502. Prehn v. Royal Bank of Liverpool, Law R., 6 Exch., 92. * Riggs v. Lindsav, 7 Cranch, 500, Livingston, J., saying : " As Lindsay was expressly authorized' to draw, he certainly had a right to do so ; and whether the defendants accepted his bill or not, so' as to render themselves liable to the holders of them, there can be no doubt, that, as between Lindsay and them, it was their dutv, and that they were bound in law to pay them. Not having done 458 EXCHANGE AND RE-EXCHANGE. § I45O. this country the decisions generally deny the acceptor's lia- bility.^ Our view is this : If the di-awee authorizes the bill to be drawn (which is a virtual acceptance as to the drawer who draws the bill, or the holder who takes 4t, on the faith of the authority), or if there is an acceptance when the bill is presented for acceptance, the acceptor is bound for all damages, including re-exchange, which may result to the drawer immediately from the dishonor of the bill. If the holder sues the drawer and recovers re-exchange, the ac- ceptor should reimburse him, as his own default occasioned the liability. If the holder sues drawer and acceptor to- gether, the acceptor would likewise be liable, because the drawer, on paying the amount, would immediately have a claim over against him. And even if the acceptor was sued alone, he should be held bound for the re-exchange. We can see no philosophy in the cases which hold him liable only when he has specially instructed the drawer to draw for a separate valuable consideration. His liability arises out of his contract to pay the bill. A precedent debt is a valuable consideration ; and if he accepts to pay the so, and Lindsay, in consequence of their neglect, having taken them up, he must be considered as paying their debt, and as this was not a voluntary act on his part, but resulted from his being their surety (as he may well be considered from the moment he drew the bills), it may well be said that in paying the amount of these bills, which ought to have been paid, and was agreed to be paid by the drawees, he paid so much money for their use. Nor can any good reason be assigned for distinguishing the damages from the principal sum, for if it were the duty of the defendants to pay such principal sum, it is as much so to reimburse Lindsay for the damages, which, by the law of South Carolina, he was compelled to pay, and which may, therefore, also be considered a part of the debt due by the defendants in consequence of the violation of their promise." * Newman v. Gozo, 2 La. Ann., 642. In Alabama damages in lieu of re-ex- change and other charges are recoverable only of the drawer or indorsers. Tramwell v. Hudmon, 56 Ala., 237 ; Hanrick v. Farmers' Bank, 8 Porter, 539. In Watt v. Riddle, 8 Watts, 545, the statute of Pennsylvania was held not to include the acceptor as liable for re-exchange. Bowen v. Stoddard, 10 Mete, 377 (1845), Hubbard, J., saying : " In cases where the drawers have been obliged to take up bills, and pay damages, because the acceptors suffered them to be protested when they had funds of the owners in their hands, and were as be- tween themselves and the drawers bound to accept, they may recover such damages of the acceptors, because the loss is occasioned by their default and neglect. This rests, however, on the relations existing between them, and not on the ground that the acceptor as such is liable to pay damages by reason ol his acceptance." §1451- INDORSER's AND acceptor's LIABILITY. 459 debt in a particular way, he should bear the consequential damao-es which his default occasions, and as Thomson has o well said : "If the drawer or indorser is liable for such damage to the holder, there seems to be no reason why the acceptor, who is more immediately bound to him, should not also be liable for this direct consequence of his breach of contract."^ § 145 1. What laws determine liability of drawer and drawee. — The drawer of a bill undertakes that the drawee shall accept, and afterward pay the bill according to its tenor, at the place and domicile of the drawee, if it be drawn and accepted generally ; at the place appointed for payment, if it be drawn and accepted payable at a different place from the place of domicile of the drawee. If this contract of the drawer be broken by the drawee, either by non-acceptance or non-payment, the drawer is liable for pay- ment of the bill, not where the bill was to be paid by the drawee, but where he, the drawer, made his contract, with his interest, damages, and costs, as the law of the country where he contracted may allow.^ And so the indorser, who is a new drawer, is liable for damages according to the law of the country where he indorses.^ § 1452. Indorser s liability for damages. — It results from the doctrine that the indorser is bound only according to the law of the place of indorsement, that several and suc- cessive indorsers may be bound to the holder in different amounts of damages. For the holder can only recover damages against the indorser according to the measure al- lowed by the law of the place of indorsement. And as the indorser can only recover damages against prior parties when allowed, and to the extent allowed by the law of the * Thomson on Bills, 447. * Allen V. Kemble, 6 Moore, P. C, 314; Gibbs v. Fremont, 9 Exch. Eng. L. & Eq., 555 ; see §§ 998-9, vol. i. * Story on Bills, § 153. 460 EXCHANGE AND RE-EXCHANGE. § 1 45 2. place of their contracts, it follows that an indorser may be required to pay more to his indorsee than he can recover against such prior parties.^ Thus, in Maryland, the damages on bills on Europe are fixed at 15 percent.; in Pennsylvania, at 20 per cent. ; and in New York, at 10 per cent. And, for the sake of illustration, let us suppose that at Rio de Janeiro, Brazil, no damages whatever are al- lowed against the indorser of a bill or note. Now, suppose a bill be drawn by A. in Maryland, in favor of B. in New York, on C. in Liverpool, England, and then indorsed by B. to D. in Rio, and by D. to E. in Pennsylvania, and by E. in Pennsylvania to F. of Liverpool, England. In such case, in the event of dishonor, F., the holder, could recover against A., the Maryland drawer, the 15 per cent, damages; against B., in New York, 10 per cent, damages; against D. in Rio he could recover no damages ; and against E. in Pennsylvania he could recover 20 per cent, damages. But suppose, now, the amount, with 20 per cent, damages, be paid by E. in Pennsylvania, he can recover no damages against the indorser in Rio. But he may recover against the Maryland drawer and the New York indorser the amount in full paid by him, with the 20 per cent, damages added ; and, superadded, the exchange between Pennsyl- vania and Maryland or New York, as the case may be. And the Rio indorser, while not bound to the holder for any damages, may recover against the drawer and indorser the principal amount paid, with the damages allowed between Brazil and Maryland or New York, as the case may be. But, by the law merchant, in the absence of any statutory enactment, each indorser is bound to indemnify his succes- sors fully for all damages they have been compelled to pay, as we have already seen. '2 Parsons N. & B., 342, 346; Story on Bills, § 153; 2 Kent. Com. [*46o], 596. See also Wharton Confl. of Laws, § 458, § 1454' DAMAGES UPON PROMISSORY NOTES. 461 SECTION IV. RE-EXCIIANGE AND DAMAGES UPON PROMISSORY NOTES.— OTHER CHARGES. § 1453. Promissory notes are not, by the law merchant, within the rule entitling the holder to re-exchange, or dam- ages in lieu thereof ; but they may be drawn with the ex- press provision that they are to be paid, with exchange on a certain place.^ And it has been held that, when indorsed, they come within the reason and spirit of the rule ; for the indorser of a promissory note is, in effect and in legal con- templation, the drawer of a bill upon a maker, who is re- garded as its acceptor, and there is great force in this view.^ But it does not seem to be in accordance with the doc- trines of the law merchant, whose peculiar rules in respect to the subject are confined strictly to bills of exchange. § 1454. While, ordinarily, promissory notes do not carry re-exchange, it is the doctrine of the English courts, and of some of the United States authorities, that when an amount is contracted to be paid in a certain State or coun- try (say, for instance, the case of a note made in A^irginia for one hundred pounds sterling, payable in London), the creditor ought to recover, wherever his suit may be brought, a sum equal to the debt due, with interest ; and also as much as might be necessary to replace the money in the country where it ought to have been paid.^ This doctrine has been forcibly expressed by Mr. Justice Story, in a * Pollard V. Herries^ 3 Bos. & P., 335 ; Grutacap v. Woulluise, 2 ]\IcLean, 584. ''Howard v. Central Bank, 3 Kelly, 375 (1847). The note was made in Georgia, payable in New York. Thomson on Bills, 442-3. ^ Grant v. Healey, 3 Sumn., 523 ; Smith v. Shaw, 2 Wash. C. C, 167 ; Lee v. Wilcocks, 5 Serg-. & R., 48 ; Bank of Missouri v. Wright, 10 Mo., 719 ; Scott v. Bevan, 2 Barn. & Ad., 78 ; Cash v. Kennion, 11 Ves., 314; Edwards on Bills, 726-9; I Parsons N. & B., 664. 462 EXCHANGE AND RE-EXCHANGE. § I455. case presenting the question/ and seems to be, as he has well observed, " founded on the true principles of recip- rocal justice," but it has been denied by authorities of great weight.* In a case where the payment was to be in Turkish piastres, but it did not appear where the contract was made or payable, it was held to be the settled rule, " where money is the object of the suit, to fix the value according to the rate of exchange at the time of the trial." ^ But Story says it is impossible to say that a rule laid down in such general terms ought to be deemed of universal application ; and cases may easily be imagined which may justly form exceptions,* The measure of damages for conversion of a bill or note \?, prima facie the amount of the note.^ § 1455. It has been held in England that where the jac- ceptor pays a part of the bill, and it is protested as to the residue, or damages in lieu thereof is to be reduced propor- tionately, and allowed only on the amount unpaid.^ And this view has been taken in several cases in the United States, it being considered that damages are not given as a liquidated arbitrary mulct, but as compensation for remis- sion of an amount of money which should bear relation to that amount.'^ But it would seem that the drawer contracts that the bill shall be honored, and if not, that he will pay the re-exchange, or damages in lieu thereof, provided by statute, they being as fixed and determinate an obligation • Grant v. Healey, 3 Sumn., 523, Story, J., saying : " But the rate of exchange is not recoverable on a note when the venue is laid in the State where suit is brought, and there is no count or allegation to cover the difference of exchange." Grutacap v.Woulluise, 2 McLean, 581. = Martin v. Franklin, 4 Johns, 124; Day v. Scofield, 20 Johns, 102 ; Adams v. Cordis, 8 Pick., 260 ; Lodge v. Spooner, 8 Gray, 166. = Lee V. Wilcocks, 5 Serg. & R., 48. * Story on Bills, § 150. '■ McPeters v. Phillips, 46 Ala., 496. ^ Laing v. Barclay, 3 Stark., 38 ; Story on Bills, § 399; Chitty on Bills (13 Amer. ed.) P687], 768. ' Bangor Bank v. Hook, 5 Greenl., 174 ; Warren v. Combs, 20 Me., 139. § 145^- DAMAGES UPON PROMISSORY NOTES. 463 as the debt itself.* The question may turn in some cases on the construction of the particular statute. § 1456. It is not necessary for the plaintiff to show that he has paid the re-exchange ; it suffices if he be liable to pay it ; but if the jury find that there was not at the time any course of re-exchange between the two foreign places, then no re-exchange is recoverable.^ § 1457. Provision. — Besides the re-exchange, the drawer and indorser of a foreign bill which is dishonored, are liable also to the holder, in like manner, for the charges of protest, postage, and provision.^ " With respect to provision," ob- serves Mr. Chitty, " it is said by Pothier that it is usual for the holder of a bill to allow his agent, to whom he indorses it for the purpose of receiving payment for him, a certain sum of money, called * provision,' at the rate of so much per cent., to recompense him not only for his trouble, but also, if such agent be a banker, for the risk he runs of losing the money which he is obliged to deposit with his correspondents in different places for the purpose of repaying his principal the amount of the money received on the bills. And it is said that one-half per cent, is not an unreasonable allowance.^ When it is necessary for the holder to send notice by a special messenger, his reasonable expenses are also charge- able upon the parties liable for payment."^ § 1458. Interest is recoverable against all the parties to a bill according to the law of the place where their several contracts were entered into or to be performed. And neither interest, or re-exchange, or damages in lieu thereof, need be specially claimed in the declaration, as they flow • Hargous v. Lahens, 3 San., 21, Sanford, J. : "The liability for damages be- comes perfect on the return of the protested bill, A subsequent part payment by the acceptor can have no greater influence than a similar part payment by the drawer or any other party. It is as fixed and determinate an obligation as the debt represented by the sum expressed in the bill itself." ' Chitty on Bills P684]. ' Chitty on Bills [*684], 765. * lb. [*688], 770. " Pearson v, Crallan, 2 Smith's Rep., 404; Chitty, Jr., 715. 464 EXCHANGE AND RE-EXCHANGE. § 1458^. out of the contract.^ But charges of protest, postage, and other necessary expenses, can only be recovered upon a special count which covers them.^ And protest must be alleged in order to the recovery of damage^, as they accrue only on the protest.^ Interest on a note payable on de- mand runs only from the time of demand, or suit brought ; * and it makes no difference that the note was given foi money received at the time it was made.^ § 1458^. Statutory and cont^'act rates of interest. — Where a certain rate of interest is fixed by law, but a higher rate is permissive by contract, the question often arises as to what rate should be adjudged against the parties bound for payment after maturity of the debt. The better opinion is that the conventional or contract rate should prevail,^ al- though there are a number of cases which take the opposite view.''^ It is clearly the case that the contract rate should run after maturity when the contract to pay the higher rate after maturity is express.^ Where the rate of interest con- * Bank U. S. v. U. S., 2 How., 711. * Kendrick v. Lomax, 2 Cromp. & J., 405. » Jordan v. Bell, 8 Port. (Ala.), 53. * Hunter v. Wood, 54 Ala., 71 ; Maxey v. Knight, 18 Ala., 300; Dodge v. Perkins, 9 Pick., 369; Brefogle v. Beckley, 16 Sergt. & R., 264 ; Dillon v. Dud- ley, I Marsh (Ky.), 66. ^ Hunter v. Wood, 54 Ala., 71 ; Schmidt v. Limehouse, 2 Bailey, 276; Pullen V. Chase, 4 Pike, 210. ^ Cecil V. Hicks, 29 Grat., i (1877). In this case the promise ran: "Six months after date to pay to H. or order the sum of $700. with interest at the rate of twelve per centum per annum after date." Held, the contract was legal at the time it was made, and was not affected by subsequent abolition of consti- tutional provision authorizing contracts for twelve per cent., and that -that rate of interest continued after maturity. See, to like effect, Seymour v. Continental Life Ins. Co., 44 Conn., 300 ; Overton v. Balton, 9 Heisk., 762 ; Pridgen v. An- drews, 7 Texas, 461 ; Thompson v. Pickel, 20 Iowa, 490 ; Hand v. Armstrong, 18 Iowa, 324 ; Phinney v. Baldwin, 16 III, 108 ; Briscoe v. Kenealy, 8 Mo. Ap., ^7 ; Hopkins v. Crittenden, 10 Texas, 189 ; Kohler v. Smith, 2 Cal, 597 ; Cox v. Smith, I Nev., 171 ; Foulay v. Hall, 12 Ohio, 615; Pruyne v. Milwaukee, 18 Wise, 568 ; Morgan v. Jones, 20 E. L. & Eq., 454 ; see Cromwell v. County ot Sac, 6 Otto (96 U. S.), 61 ; Payne v. Caswell, 68 Me., 80 ; Andrews v. Keeler, 19 Hun, 87. ' Duran v. Ayer, 6-] Me., 145 ; Eaton v. Boissonault, (>^ Me., 540 ; Perr>' v. Taylor, i Utah, 63 ; McComber v. Dunham, 8 Wend., 550 ; Ludwick v. Hut- singer, 5 Watts & Serg., 51 ; Henry v. Thompson, Minor, 209 ; Newton v. Ken- nerly, 31 Ark., 626. * Eaton V. Boissonault, (>^ Me., 540 ; Cecil v. Hicks, 29 Grat., i. § 1460. DAMAGES UPON PROMISSORY NOTES. 465 tracted to be paid is legal, the promisor may bind himself for a higher rate than that which runs by operation of law, to take effect at and continue after maturity as liquidated damages, and the increased rate is not a penalty against which equity will grant relief.^ The rule applied by the U. S. Supreme Court is to give the contract rate up to maturity of the contract, and thereafter the rate fixed by law for cases in which parties have fixed none.^ But it re- gards the question as one of local law, and follows State decisions in particular cases.^ § 1459. Costs. — The owner or indorser who is compelled to pay the bill can not charge the costs of suit to prior par- ties, for they arise as well from his breach of contract to pay the bill as from that of the principal party, and not from his indorsement.^ But it has been said, that if he is an accommodation party, he may charge to the person ac- commodated, not only the face of the paper, but the costs of an action against him.^ § 1460. It has been held in California that damages on bills do not accrue from any stipulation in the contract, but are recoverable by mere operation of law ; and that they are therefore a mere incident to the principal sued for, and where the latter can not be recovered there can be no claim for the former. If the drawee should pay only the princi- pal sum after dishonor of the bill, the right to demand damages against the drawer having already accrued, the liability of the drawer to pay them would remain. But if the holder surrender up the bill to the drawer, on payment of the principal by him, it would operate as a waiver of all claim for damages, the evidence of the debt being surren- > Bane v. Gridley, 67 111., 388. ' Holden v. Trust Co., 100 U. S. (10 Otto), 72. ' Ohio V. Frank, 103 U. S. (13 Otto), 698 ; Cromwell v. County of Sac, 96 U. S. (6 Otto), 61, explaining and distinguishing Brewster v. Wakefield, 22 Howard, 118. * Dawson v. Morgan, 9 B. & C, 618 ; Simpson v. Griffin, 9 Johns, 131. • I Parsons N. & B.. 663. Vol. II. — 30 466 EXCHANGE AND RE-EXCHANGE. § I460. dered up and cancelled. And where there are two or more of a set of bills, the acceptance of payment of the principal of one would waive damages as to another of the set which had been presented, and refused payment, as all of the set constitutes in fact but one bill.-^ The result arrived at in the case cited seems correct ; but the view taken that dam- ag^es do not inhere in the contract is not in consonance with other authorities, nor, as we think, correct.^ * Page V. Warner, 4 Cal., 395. ^ See anie, § 1423. CHAPTER XLVI. LOST AND DESTROYED BILLS AND NOTES. SECTION I. DUTIES AND RIGHTS OF THE LOSER, FINDER, AND HOLDER OF A LOST NEGOTIABLE INSTRUMENT. § 1461. As soon as it is ascertained by the owner that he has lost a bill, note, or check, he ought instantly to give notice of the loss to all the parties thereto, and to warn them not to pay the amount to any one but to the loser or his order ; and if an unaccepted draft be lost, he should advise the drawee not to accept the same.^ For if the party liable to pay the amount should pay it at maturity of the instrument, bojia fide and without notice of the loss to the holder, he discharges the debt, and the loss falls upon the loser, provided the instrument be payable to bearer or in- dorsed in blank.^ But the party liable will not be discharged if he pay the amount to the holder of the lost instrument before maturity, such a payment not being in the usual course of business.^ Nor will he be discharged if he had notice of the loss,^ unless the holder were a bona fide holder for value who could enforce payment.^ In other words, the loser of a negotiable instrument has no claim on a payor who pays it when he is bound to do so, but generally has * Edwards on Bills, 308 ; Chitty on Bills (13 Am. ed.) [*26o], 296. ° Lawson v. Weston, 4 Esp., 56. ' Da Silva v. Fuller, Chitty on Bills (13 Am. ed.), 296 ; Wheeler v. Guild, 20 Pick., 541;; ante, § 1233 ; Hinckley v. Union Pacific R.R., 129 Mass, 52. * Lovell V. Martin, 4 Taunt., 799. * 2 Parsons N. & B., 256. (467) 468 LOST AND DESTROYED BILLS AND NOTES. § I463. such claim when the payor pays it when he is under no compulsion of liability to do so, although without notice of the loss.* § 1462. The loser shoidd also iminedicUely notify the public of the loss or theft of a negotiable instrument, and warn all persons from trading for or negotiating it, by ad- vertisement in the newspapers, by circulation of handbills, and by giving notoriety of the fact through whatever medium he may command. And such notice should de- scribe the lost or stolen instrument in unmistakable terms. In this way the loser may be able to render the circum- stance of loss so well known that no banker or other person will trade for the same, and no one become a bona fide holder without notice, who could demand payment. But the notice to the public will be unavailing unless it actually reach the holder before he receives the instrument ;' although advertisement in a paper and general publicity of the fact of loss or theft would be evidence from which knowledge on his part might be presumed by a jury, when coupled with the circumstance of his taking or reading the paper or the like.^ § 1463. Advertisement of loss not necessary to holder s recovery. — The law formerly viewed the advertisement of ' 2 Parsons N. & B., 2^6. In Hinckley v. Union Pacific R.R., 129 Mass., 52 (1880), it appeared that Hinckley was the owner of certain coupons of Union Pacific Railroad bonds, payable to bearer and falling due at the company's office in Boston, on the ist March, 1876. They were stolen on the 26th January, 1876, and on February 26th, 1876, Hinckley notified the company of the theft, specified the numbers of the coupons, and requested protection. On April 1 8th, 1879, he demanded payment of the stolen coupons from the company, offering to give a bond of indemnity. On 21st April the company's agent paid the coupons to certain bankers, who presented them without making any inquiry as to their title. The court held that the payment was bad, and that Hinckley could recover of the company on tendering a bond of indemnity. Lord, T., delivered a ver}' instructive and interesting opinion which discusses the ques- tions under consideration. See also Hinckley v. Merchants' Bank, 131 Mass. and § 1470. "^ Beltzhoover v. Blackstock, 3 Watts, 20 ; Mathews v. Poythress, 4 Ga., 287 ; Lawson v. Weston, 4 Esp., 56 ; Byles on Bills (Sharswood's ed.) [*362], 539. ^ Beckwith v. Corrall, 1 1 J. B. Moore, 335, where it is said : " If in this case the plaintiff had used due diligence, and had given proper notice of the loss of the bill in question, the defendants might have been presumed to have been ap prized of that fact." But see Beltzhoover v. Blackstock, 3 Watts, 20. § 1464. DUTIES OF THE LOSER, FINDER, AXD HOLDER. 469 loss by the loser as a condition precedent to his right to re- cover of those who had taken the instrument, because it considered that if the holder received it negligently he ac- quired no title against the rightful owner ; but, on the other hand, if the owner neglected to advertise the loss, his negli- gence counterbalanced that of the holder, and the maxim was applied, potior est cotiditio possedentis} But the law on this subject is now entirely changed. Even gross negligence, unless accompanied with fraud or actual notice, does not vitiate the holder's title.^ And advertisement of the loss by the owner is not necessary in any case to his recovery and prior claim against any party who has taken or paid the in- strument (except to a bona fide holder without notice) with actual notice of the loss.^ In short, the question of the actual holder's paramount right against the world is narrowed now to the single inquiry as to his bona fides} § 1464. Loss of instrument no excuse for want of de- mand, protest, or notice. — The loss of a bill or note 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 will be at once discharged if there be failure in respect of either the demand, protest, or notice.^ This rule applies whether the bill has been accepted or not ; for the loss of the instrument does not relax the duty of the holder to make the demand for acceptance within due season.® And it is well settled that demand, protest, and notice upon ' Snow V. Peacock, 3 Bing., 411 (11 E. C. L. R.) ; see Strange v. Wigney, 6 Bing., 677 (19 E. C. L. R.) ; Beckwith v. Corrall, 11 J. B. Moore, 335 ; Byles on Bills (Sharswood's ed.) [*36i], 538 ; Chitty on Bills (13 Am. ed.) [*253], 289. "^ See chapter xxiv, §§ 774 et seq., vol. i. ' Mathews v. Poythress, 4 Ga., 287 ; Snow v. Peacock, supra. In Louisiana the code requires advertisement of loss as a prerequisite to recovery upon a lost draft or note. * See chapter XXI v, §§ 774 et seq., vol. i. '^w/r, §1173; Thackray V. Blackett, 3 Camp., 164; Blackie v. Pidding, 6 M. G. & S., 196 ; Chitty on Bills (13 Am. ed.) [*262, 263], 299 ; Story on Bills, § 348 ; Edwards on Bills, 304, 305 ; but see Abom v. Bosworth, i R. I., 401, as to delay. * See ante, §§ 1 173, 1174. 470 LOST AND DESTROYED BILLS AND NOTES. § 1 465. a copy where the original is lost is as effectual as if made upon the original itself.^ But it does not seem absolutely requisite that any copy should be used.^ § 1465. It is proper, as suggested by Marius, to accom- pany the protest of a lost bill with an offer of security against its appearance ; and he expresses the opinion that if the acceptor refuses payment on such an offer, he will be liable for all damages, including re-exchange and charges.^ But the better opinion is, that the drawee, or acceptor, has a right to insist on the production of the bill, or legal proof of its loss in an action with indemnity furnished under supervision of a court before he is obliged to pay if Neglect to offer indemnity to the maker or acceptor on demand of payment does not deprive the payee of his right of action, but it will prevent him from recovering costs, and will compel him to bear any special damages resulting from the neglect on his subsequent suit.^ § 1466. In France it has long been established that the arawer and indorsers of a bill shall be compellable to give the holder of it another of the same tenor, in case the original bill, or the accepted part, has been lost.^ In Eng- land, Mr. Chitty says " no such general rule prevails in the case of inland bills." There is, however, a proviso in the statute of 9 and lo Will. III., c. 17, sec. 3, by which it is enacted "that in case any such inland bill shall happen to be lost or miscarried within the time limited for the pay- ment of the same, then the drawer of the said bill is, and shall be, obliged to give another bill of the same tenor with that first given ; the person to whom they are delivered 1 Hinsdale v. Miles. 5 Conn., 331 ; Dehers v. Harriott, i Show, 163 ; Thomson on Bills (Wilson's ed.), 204. 2 2 Parsons N. & B., 261. ^ Marius^ go, "Thomson on Bills (Wilson's ed.), 204; Chitty (13 Am. ed.) [*263], 299; 2 Parsons N. & B., 262, note /. ^Farmers' Bank v. Reynolds, 4 Rand, 186; Commercial Bank v. Benedict, 18 B. Mon., 307 ; Allen v. State Bank, i Dev. & B. Eq., 3. * Chitty on Bills (13 Am. ed.) [*263], 299. § 1468. DUTIES OF THE LOSER, FINDER, AND HOLDER. 47 1 giving security, if demanded, to the drawer to indemnify him against all persons whatsoever, in case the said bills so alleged to be lost or miscarried shall be found again." ' And the same author adds :^ "It should seem, that from the word ' such ' the statute does not extend to all bills of exchange, but only to the particular bills therein mentioned, namely, such as are expressed to be for value received, and payable after date ;^ but it has been observed that the equity of the statute would comprehend indorsements also, and that the 3 & 4 Anne, c. 9, which gives the like remedies upon notes as were then in use on inland bills, would ex- tend the statute of William to notes."* It is stated in Byles on Bills that the above-quoted provision " is not pe- culiar to the law of England, but agreeable to the mercan- tile law of other countries."^ § 1467. " In case of a foreign bill drawn in sets, if one part be lost by the drawee, or be by his mistake given to a wrong person, or otherwise disposed of, so that the holder can not have a return of the bill, either accepted or not ac- cepted, it is said that the drawee is bound to give to the holder, or to his order, a promissory note for payment of the amount of the bill on the day it becomes due, on the delivery of the second part, if it arrive in time ; if not, upon the note ; and that if the acceptor refuse to give the note, the holder should immediately protest for non-ac- ceptance, and, when due, demand the money, though he have neither note nor bill ; and that if payment be refused, a protest must be regularly made for non-payment." * § 1468. The finder acqui7'es no title to a lost bill or note, and the owner, upon identifying it, and tracing it to ' Chitty [*263], 300. " Ibid. ^ Sedqucere (he says) ; see Walmsley v. Child, i Ves., Sen., 346, 347 ; Leftly v. Mills, 4 T. R., 170; 2 Camp., 215. * Powell V. Monnier, I Atk., 613; Walmsley v. Child, i Ves., Sen,, 346; 2 Camp., 215. ' Byles (Sharswood's ed.) [*366], 544. ' Edwards on Bills, 304, citing Beawes, 188. 472 LOST AND DESTROYED BILLS AND NOTES. § 1468^. his possession, may maintain trover against him.'^ And he may also maintain an action for money had and received for his use, if the finder has received payment of the bill or note.^ The finder has no lien on the bill or note for his expenses on account of finding the same. But in action upon lost bills such expenses would probably be set off against the owner's claim.^ When there is no question as to such expenses, he is liable for the full value of the bill or note.^ § 1468^. A bailee who tortious ly converts a negotiable instrument may be sued either in trover, or for money had and received.^ And trover lies also against the maker or drawee who wrongfully seizes or detains the note or bill.*' The measure of damages when the action is for the conver- sion of the negotiable note of a third person, is the amount of such note and interest, unless it is of less value by rea- son of payment of the same, insolvency of the maker, or some other lawful defence which legitimately impairs or diminishes from its value, or affects its validity.'^ If the maker wrongfully destroy the note, he may be sued for con- version, and the payee may recover its face value, with in- terest, as damages, notwithstanding it be barred by the statute of limitations.*' ^ 1468(5. A thief, of course, acquires no title to a nego- tiable security which he steals, nor can any one else who has notice of the theft ; and the owner may follow the se- ' Lucas V. Haynes, i Salk., 130 ; Adkin v. Blake, 2 J. J. Marsh, 40; Byles on Bills (Sharswood's ed.) [*365], 543. 2 Down V. Hailing, 4 B. & C, 330. ' 2 Parsons N. & B., 264, 265. * Holiday v. Sigil, 2 Car. & P., 176. As to rights of finder of bank note, see vol. 2, 580. =- Bleaden v. Charles, 7 Bing., 246 ; Marston v. Allen, 8 M. & W., 494 ; Gar- lock V. Geortner, 7 Wend., 198. ' Knight V. Legh, 4 Bing., 589 ; De la Chaumette v. Bank of England, 9 B. & C 208; Reynolds v. French, 8 Vt., 85 ; Lamb v. Moberly, 3 T. B. Monroe, 179. ^ Thayer v. Manley, 73 N. Y., 308 ; Sedgwick on Damages, 2d ed., 488 ; Mer- chants' and P. N. B.' v. Trustees, 62 Ga., 271. "* Outhouse V. Outhouse, 20 N. Y. S. C. (13 Hun), 130. ^ 14.70. DUTIES OF THE LOSER, FINDER, AND HOLDER. 473 curity itself, or its proceeds so long as they or their substi- tute can be identified or distinguished, in the hands of the thief or any assignee with notice.^ § 1469. How title may be acquired fi'om thief or finder. — Although the robber, or finder of a negotiable instru- ment can acquire no title against the real owner, still if it be indorsed in blank, or payable or indorsed to bearer, a third party acquiring it from the robber, or finder, bona fide, for a valuable consideration, and before (but not so, if after) ^ maturity, without notice of the loss, may retain it as against the true owner, upon whom the loss falls, and enforce payment by any party liable thereon ; upon the principle that whenever one of two innocent persons must suffer by the act of a third, he who has enabled such third person to occasion the loss must sustain it;^ And it is now settled in England and in the United States that even gross negligence on the part of such bona fide 'Sxoyiditx in receiving the instrument does not impair his title, nothing short of mala fides impeaching it.'* Not only does the 77iala fide transferee or holder of a negotiable instrument acquire no right to enforce payment, but the loser may at once hold him liable in an action of trover or assumpsit, or for money had and received.^ But under a forged indorsement even a bo7ia fide holder without notice acquires no title.^ § 1470. Presumptions as to bona fide ownership of lost bills and notes. — Some doctrines of evidence remain to be stated. The legal presumption is that the holder of a note is not a finder or thief, but a bojia fide transferee ' Newton v. Porter, 69 N. Y., 133. ' Stt post, §§ 1505, 1506. ' Murray v. Lardner, 2 Wall., 710; chapter xxiv, § 776, vol. i ; Chitty on Bills [*254], 290. See Garvin v. Wiswell, 83 111., 216. ■• See chapter xxiv, on Rights of Purchaser of Negotiable Instruments, §§ 775 et seq., vol. ) ; Story on Notes, § 382; Story on Bills, § 416; Chitty (13 Am. ed.) [*254, 255], 291-294. ' Clarke v. Shea, i Cowp., 197 ; Smith v. Braine, 16 Q. B., 244; Mafon v. Waite, 17 Mass., 560 ; Henderson v. Irby, i Speers, 43. ' Colsen V. Arnot, 57 N. Y., 253, vol. i, § 677 ; Graves v. American Exchange Bank, 17 N. Y., 205. 474 LOST AND DESTROYED BILLS AND NOTES. § 147 L for value.^ When, however, the loss by the original owner, or the theft from him, is proved, the burden of proof shifts, and the holder must show that he acquired it bona fide for value,^ and before maturity, or from some, one who had a perfect title.^ § 1 47 1. The origmal existence, genuineness, identity, and loss (9r destruction of the instrument must be proved, if disputed in a suit against the maker, otherwise a copy will not be received in evidence/ And if evidence of de- struction is not conclusive, the plaintiff must generally show that diligent search has been made for it in those places where if existing it would be most likely to be found. ^ The loss where alleged can seldom be proved by " direct and positive evidence," and therefore must, in almost all cases, be made out by circumstances.^ " As it is generally occa- sioned by negligence, it is seldom capable of being given."* The courts will be less exacting as to the measure of proof of loss or destruction, where the maker is safe against any future claim of a bojia fide transferee;^ and more exacting where the circumstances are suspicious as against the plain- tiff's claim, or the maker is not so protected and safe. Where the note is not negotiable the proof need not be so strong as where it is negotiable.^ It is not necessary for a creditor to show that a debt evidenced by a lost paper is not paid.^° ' King- V. Milsom, 2 Camp., 5 ; ante, § 812, vol. i. ° See chapter XXIV, on Rights of Bona Fide Holder or Purchaser, sec. vii, vol. I, § 815; Union N. B. v. Barber, 9 N. W. Reporter, 890, Iowa S. C, Oct., 1881. ^ Hinckley v. Merchants' Bank, 131 Mass., — . See Hinckley v. Union Pacific R.R., 129 Mass., 52. See ante, § 1461 and note. * Farmers' Bank v. Reynolds, 4 Rand, 186; Palmer v. Logan, 3 Scam., 56; Grimes v. Talbot, i A. K. Marsh, 205 ; Jackson v. Jackson, 6 Dana, 257. ^ Palmer v. Logan, 3 Scam., 56; Herndon v. Givens, 16 Ala., 261 ; Viles v. Moulton, II Vt., 470; Foster v. Mackay, 7 Mete, 531. ° Holiday v. Sigil, 2 Car. & P., 176 ; Greenstreet v. Carr, i Camp., 251 ; Lewis V. Petayvin, 16 Mart., 4. ' Walmsley v. Child, I Vesey, Sr., 341. ' Swift v. Stevens, 8 Conn., 431. ' Nagel V. Mignot, 8 Mart. (La.\ 488. '" Bell v. Young, i Grant's Cases, 175. § 1473- DUTIES OF THE LOSER, FINDER, AND HOLDER. 475 § 1472. The plaintiff's affidavit ^.ddrcsstd 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. And the question of loss or destruction is in general for the court, and not the jury. In many of the States there are statutory regulations on this subject, and to them and the adjudicated cases interpreting them, reference should be made in any particular case. A duplicate protest may be offered in evidence, without producing the original bill, when it is proved to have been lost after protest.^ And so may a duplicate notarial copy of the bill when the loss has been proved.^ In respect to a note, it has been held that the notarial copy is not necessary as primary evidence of its contents when lost.^ The copy of a lost bill or note sued on must be a full copy as to all parties.* It will not be pre- sumed, but must be affirmatively shown, that the lost in- strument was negotiable.^ Neither an acknowledgment of the debt, or a promise to pay it, dispenses with necessity of producing the instrument, or accounting legally for its absence ; for they import no more than the instrument itself, that is, an obligation to pay upon proper voucher or indemnity.® § 1473. In the case of a bill or note lost after stczt bro2ight at law, the court is not ousted of its jurisdiction,'' but the plaintiff may recover as in other cases of lost notes.^ ' Usher v. Gaither, 2 Harris & McH., 457. ''Wright V. Hancock, 3 Munf., 521 ; 2 Parsons N. & B., 307. ^Renner v. Bank of Columbia, 9 Wheat., 581. ■* Bond V. Whitfield, 32 Ga., 215. 'Wright V. Wright, 54 N. Y., 437 ; Lazell v. Lazell, 12 Vt., 443 ; Hough v. Barton, 20 Vt., 455 ; Youngling v. Kohlkass, 18 Md., 148 ; McNair v. Gilbert, 3 Wend., 344; Pintard v. Tackington, 10 Johns, 104; Edwards, 296, 302. " Vanauken v. Hornbeck, 2 Green (N. J.), 178 ; Story on Notes, § 450. ' Bliss V. Covington, 9 Dana, 265 ; 2 Parsons N. & B., 309 ; contra, Chitty on Bills (13 Am. ed.) [*266], 303. * Abbott V. Striblem, 6 Iowa, 191 ; Jones v. Fales, 5 Mass., loi ; Jacks v. Darrin, 3 E. D. Smith, 548 ; Weston v. Hight, 17 Me., 287; Renner v. Bank of Columbia, 9 Wheat., 581 ; Brown v. Messiter, 3 Maule «S: S., 281 ; Clarke v. Quince, 3 Dowl., 26 ; 2 Parsons N. & B., 309. 47^ LOST AND DESTROYED BILLS AND NOTES. § 1474- It will not be necessary for the plaintiff to offer indemnity against future liability, but the court, if asked, will stay ex- ecution until indemnity is furnished.^ In the case of a note which had been lost, and a copy sued on — but was found before the trial, and there produced — it was held that the suit at law could be sustained, though no indemnity was offered.^ Where a lost note was found before trial of an action at law, and it appeared that it was lost at the time of demand and notice, but this was not known to any of the parties, and no indemnity was tendered, it was held that recovery could be had against the maker and indorser.^ § 1474. When a debtor remits his creditor a bill or note by post or otherwise, of his own motion, and it be lost or stolen, it is his own risk and loss ; but if done by the cred- itor's direction, the loss falls on him.^ SECTION II. SUIT AGAINST PARTIES TO A LOST NEGOTIABLE INSTRUMENT. § 1475. The owner who has lost a negotiable instru- ment, and has duly fixed the liability of the parties thereto by regular demand, protest, and notice, where they are necessary, may undoubtedly enforce payment by legal proceedings against such parties. But the au- thorities are not in harmony as to the proper form of procedure. In England, where the Hne of demarcation be- tween legal and equitable jurisdiction is well defined, and strictly observed, it is well settled that the remedy upon a lost negotiable instrument can be sought only in a court of ' Bisbing v. Graham, 14 Penn. St., 14. ^ Smith V. Rockwell, 2 Hill, 482, Nelson, C. J. 'Gilbert v. Dennis, 3 Mete, 495. * Warwick v. Noakes, Peake N. P., 67 ; see anie, § 287, vol. I. § 1476. SUIT AGAINST PARTIES TO LOST INSTRUMENT. 477 equity; which alone can require the plaintiff to secure the defendants by execution of sufficient indemnity, and administer fully the equities between the parties. If the instrument be payable to bearer, or indorsed in blank, it is obvious that it might reach the hands of a bona fide holder for value, without notice of the loss ; and that if the parties liable were compellable to pay the amount thereof to the owner in a suit at law, without indemnity, such parties might, without the slightest negligence on their part, be forced to pay it a second time to such botia fide holder. The courts of law which proceed in accord- ance with established and unbending forms do not possess the elastic machinery necessary to require the owner to make suitable indemnity against the loss which might thus occur, or the lesser loss produced by defending a suit brought by a party in actual possession of the instrument. And therefore such cases are remitted to the exclusive cognizance of courts of equity.^ § 1476. It is said also, that in strict law the defendant is entitled to the instrument on payment thereof, as his voucher of discharge, as he only covenanted to pay its value on its presentment.* And it is intimated to be an exercise of equitable jurisdiction to permit a recovery without its production. But the inability of courts of law to provide indemnity is the main ground of requiring a resort to equity.^ When suit is brought against the in- ' Hansard v, Robinson, 7 B. & C, 90; Wain v. Bailey, 10 Ad. & El., 616; Price V. Price, 16 M. & W., 232 ; Pierson v. Hutchinson, 2 Camp.. 211; Uavis v. Dodd, 4 Taunt., 602 ; Mossop v. Eadon, 16 Ves., 430; Powell v. Roach, 6 Esp., 76; ex parte Greenway, 6 Ves., Jr., 812; Mayor v. Johnson, 3 Camp., 324; Crowe V. Clay, 9 Exch., 604; Rolt v. Watson, 12 J. B. Moore, 510; Powell v. Roach, 6 Esp., 76; Wright v. Maidstone, i Kay & J., 701 ; Kirby v. Sesson, 2 Wend., 551 ; Lazell v. Lazell, 12 Vt., 443; Commack v. Conrad, 30 La. An,, 503 (when note lost before maturity); 2 Parsons N. & B., 288-9. 296; Story on Notes, §§ 445-450; Story on Bills, § 448; Chitly on Bills (13 Am. ed.) [*265], 301 ; (Brown v. Messiter, 3 Maule & S., 281 ; Glover v. Thompson, Ry, & M., 403 ; and Glynn v. Bank of England, 2 Ves., Sr., 38, are overruled.) ' Hansard v. Robinson, 7 B. & C, 90 ; Hilder v. Seelye, 8 Barb. , 408. * 2 Pars. N. & B., 289 ; ex parte Greenway, 6 Ves., Jr., 812. 47^ LOST AND DESTROYED BILLS AND NOTES. § 147/. dorser of a lost bill or note, the reasons for requiring a resort to equity apply with peculiar force.^ § 1477. Whether suit at law is maintainable on a nego- tiable instrument lost after maturity. — A distinction was attempted to be established at one time, in England, be- tween the case of loss of the bill or note before it was due, and the loss of it after it had become overdue ; it being contended that in the latter case, as the bona fide holder could only acquire it subject to all the equities between antecedent parties, the very circumstance of its staleness being constructive notice of defect of title, the owner should be entertained in a suit at law, without giving in- demnity. But the contrary doctrine is well settled. For, although a bill or note ceases to be negotiable, in the most enlarged sense of that term, at its maturity, it still passes from hand to hand by indorsement or delivery ; the actual holder is always presumed to have acquired it before ma- turity ; a court of law can not judge whether an indemnity is, or is not, sufficient ; and, although the defendant may have a good defence against the subsequent holder, he may be put to risk, trouble, and expense in establishing it. And tlie courts of equity therefore maintain exclusive jurisdic- tion, even when the instrument has been lost overdue.* § 1478. In the United States the decisions of the courts vary. In Massachusetts it has been held that an action can ' In Story on Promissory Notes, where the English doctrine is approved (see § 448), it is said : "When we come to the case of the indorser, who is called upon to pay the note, in default of payment by the maker, it will be difficult to find any solid reason upon which the holder can be entitled to recover against him, without the note being produced, upon any mere parol proof of the loss of it ; since the indorser may or must thereby be put to great embarrassment in making out his own title against the maker, or against other parties, liable to him, without the production of the note. What right can the holder have to shift upon him the burden of proving the loss of the note ? Or what adequate means can he have of preserving and commanding all the proof for future use, in case of future litigation ? The English doctrine must, under such circum- stances, apply to the indorser with double propriety and force." Tuttle v. Standish, 4 Allen, 481. "Hansard v. Robinson, 7 Barn. & C, 90; Story on Notes, § 450; Story on Bills, § 307 ; Chitty on Bills (13 Am. ed.) [*266], 303 ; Byles on Bills (Shars- wood's ed.) [*363], 541. § I47S- SUIT AGAINST PARTIES TO LOST INSTRUMENT. 479 be maintained at law against the parties to a negotiable note lost before maturity, the court considering the idea that a court of law could not order or judge of the sufficiency of an indemnity " rather ideal than solid"; and that the objec- tion that the action at law would not lie, because protest of the instrument could not be made, as equally applicable in a court of equity.^ There is undoubtedly great force in the reasoning of this decision ; but, we think, the weight of au- thority and reason are both against it. And in those States where the distinction between law and equity is well pre- served, the law may be regarded as settled to the contrary, in accordance with the English precedents.* In some of the States the distinction between negotiable instruments lost before, and those lost after maturity, is recognized ; and where lost after maturity, the right to an action at law, without making an indemnity, is maintained.^ But the better opinion, sustained by high authority, is that the distinction is not well taken, and that equity must be resorted to.'* If the bill or note be indorsed specially to a particular person, its negotiation is restricted, as may be seen in another part of this work •,^ and in that case no in- demnity is needful or required in the event of its loss.® ' Fales V. Russell, 16 Pick., 315 ; Hinckley v. Union Pacific R.R., 129 Mass., 52. To same effect, see Union Bank v. Warren, 4 Sneed, 167 ; Meeker v. Jack- son, 3 Yeat., 442 ; Bullet v. Bank of Pennsylvania, 2 Wash. C. C, 172; Ander- son V. Robson, 2 Bay, 495 ; Bridgeford v. Masonville Co., 34 Conn., 546 ; Nagel V. Mignot, 7 Mart. (La.), 657 ; 8 Id., 488 ; Brent v. Ervin, 3 Martin (La.) N. S., 303; Lewis V. Peta}^in, 16 Id., 4; Bean v. Keen, 7 Blackf, 152 ; Welton v. Ad- ams, 4 Cal., 37 ; Robinson v. Bank of Darien, 18 Ga., 65, iii ; Commercial Bank v. Benedict, 18 B. Men., 307 ; Freeman v. Boynton, 7 Mass., 483 ; Page v. Page, 15 Pick., 368 ; Willis v. Cresey, 17 Me., 9. * Moses V. Trice, 21 Grat., 556 ; Rowley v. Ball, 3 Cow., 303 (1824) ; Posey v. Decatur Bank, 12 Ala., 802 ; Morgan v. Reintzel, 7 Cranch, 273 ; Hinsdale v. Bank of Orange, 6 Wend., 378 ; Thayer v. King, 1 5 Ohio, 242 ; Swift v. Stevens, 8 Conn., 431 ; Aborn v. Bosworth, i R. L, 401 ; Edwards v. M'Kee, i Mo., 123 ; Wofford v. Board of Police, 44 Miss., 579; Story on Notes, § 448; Story on Bills, § 348 ; Edwards on Bills, 295 ; 2 Parsons N. & B., 297, 298. 'Thayer v. King, 15 Ohio, 242 ; Smith v. Walker, i Smed. & M., 432 ; Jones V. Fales, 5 Mass., loi ; Chaudron v. Hunt, 3 Stew., 31 ; Brent v. Ervin, 7 Mart. (La.), 518. * Moses V. Trice, 21 Grat., 556; Rowley v. Ball, 3 Cow., 303; Chewning v. Singleton, 2 Hill, 371 ; Lazell v. Lazell, 12 Vt., 443; Hopkins v. Adams, 20 Vt., 407 ; Story on Notes, §§ 446, 450 ; Edwards on Bills, 297 ; see an/e, § 1477. * See §§ 692, 698. • Dudman v. Earl, 49 Iowa, 37. 480 LOST AND DESTROYED BILLS AND NOTES. § I479. § 1479. The like rule, that an action at law is not main- tainable, has been applied in England, where bills and notes, and bank notes (which are more frequently transmitted in halves), are divided and transmitted by post, and one half is lost and the other half arrives in safety. In such cases it has been considered that the holder of one half can not re- cover at law, because the other half may have passed into the hands of another bona fide holder,^ But the contrary view seems more reasonable, because the party who takes a half instrument does not acquire the whole, but only a part, which imposes inquiry upon him and opens all equitable defences ; and it has prevailed in the United States, the severed note being placed on the same footing as one de- stroyed.^ Notwithstanding these views, equity is generally ad- mitted to have jurisdiction of lost instruments, even where there is concurrent jurisdiction at law.^ § 1480. Tender of indemnity before payment ca7i be re- quired. — The parties liable upon a bill or note are entitled to its production and surrender before payment ; but, as this is physically impossible when it has been lost the owner should, and must, tender a sufficient indemnity in some form against any future claim, by a finder or holder, upon the lost instrument,'^ This indemnity is not, in the nature of things, 'Mayor V. Johnson, 3 Camp., 324; Byles on Bills (Sharswood's ed.), [*365], 543 ; I Parsons N. & B., 231 ; Farmers' Bank v. Reynolds, 4 Rand, 168 ; Bank of Va. V, Ward, 6 Miinf., 169 ; Exchange Bank v. Morrall, 16 W. Va., 551 (semble) ; Story on Bills, § 44S ; see chapter L, on Bank Notes, sec. vi, infra. " Bank of U. S. v. Sill, 5 Conn., 106 ; Hinsdale v. Bank of Orange, 6 Wend., 378 ; Martin v. Bank of U. S., 4 Wash. C. C, 253 ; Bullett v. Bank of Pennsyl- vania, 2 Id., 172; Armat v. Union Bank, 2 Cranch C. C, 180; Allen v. State Bank, i Dev. & B. Eq., i ; Bank of Va. v. Ward, 6 Alunf., 169 ; 2 Parsons N. & B., 312, 313; Redfield & Bigelow's Lead. Cas., 706 ; Edwards, 307; see chap. L, sec. vi. ' Farmers' Bank v. Reynolds, 4 Rand, 186 ; Bank of Va. v. Ward, 6 Munf., 166; Allen V. State Bank, i Dev. & B. Eq., 3; Stout v. Ashton, 5 T. B. Monr., 251; Smith v. Walker, i Smed. & M. Ch., 432 ; Irwin v. Planters' Bank, I Humph., 145 ; Jackson v. Jackson, 6 Dana, 257; ^.r ^ar/^ Greenway, 6 Ves., Jr., 812 ; Mossop V. Eadon, 16 Ves., 433 ; Davis v. Dodd, 4 Taunt., 602. * Fisher v. Carroll, 6 Ired. Eq., 485; Meeker v. Jackson, 3 Yeat., 442; Free- man V. Boj'nton, 7 Mass., 483 ; Donelson v. Taylor, 8 Pick., 390 ; Fales v. Rus- sell, 16 Pick., 315 ; Almy v. Reed, 10 Cush., 421 ; Exchange Bank v. Morrall, 16 W. Va., 546 ; 2 Parsons N. & B., 302 ; Edwards on Bills, 304. § 1 48 I. SUIT AGAINST PARTIES TO LOST INSTRUMENT, 48 I as adequate a protection as the delivery of the instrument to the payor, but it approximates it as nearly as practicable. And it should be offered to every party of whom payment is demanded. The indorser and drawer should be tendered indemnity as well as the maker and acceptor of a lost note or bill, because as the principals are not bound to pay with- out production of the instrument, or indemnity in case of loss, for that very reason payment ought not to be required of the drawer or indorser till the proper steps have been taken to secure them recourse against their principals. Be- sides, the indorser's and drawer's own liability upon the paper demands indemnity to himself, which should be given without delay, so that he may be in a situation to pay the demand at any time after notice, and look to the maker or acceptor.^ § 1 48 1. Exceptions as to indejnnity. — The rule requiring indemnity is applied by the courts of law, in which actions upon lost instruments are considered maintainable, as well as by courts of equity. But there are some cases in which the defendant can run no risk, and in which the plaintiff is, therefore, entertained in a court of equity or law without giving a bond of indemnity ; that is, (i) where the note is not negotiable ; ^ and the note will not be presumed to be ' Smith V. Rockwell, 2 Hill, 484 (1842), Nelson, C. J. : "Tender of indemnity should be made to both maker and indorser at the time of demand and notice, because, as the former is not bound to make payment without the production of the note, or indemnity in case of loss, for that very reason payment ought not to be required of the latter till the proper steps have been taken to secure his immediate recourse against his principal. Besides, the indorser's own liability upon the paper demands indemnity to himself, which should be given without delay, so that he may be in a situation to pay the demand at any time after notice, and look to the maker. Any prejudice he might suffer by reason of neglect on the part of the holder to give the necessary indemnity in either case, would, no doubt, afford ground for refusing to enforce payment against him on application to a court of equity for that purpose. The holder, therefore, should take the necessary steps with all reasonable diligence to secure a speedy resort to that court in behalf of the surety, as the consequences of delay would justly fall upon the holder, so far as the indorser, or any other party standing in that rela- tion upon the paper, is concerned." Wilder v. Seelye, 8 Barb., 410 ; Edwards on Bills, 305. ■ Clark v. Reed, t?. Smed. & M., 554 ; Lazell v. Lazell, 12 Vt., 443 ; 2 Parsons N. & B., 303 ; V^right v. Wright, 54 N. Y., 437. Vol. II.— -,i 482 LOST AND DESTROYED BILLS AND NOTES. § 1481. negotiable in the absence of proof ; ^ (2) where though ne- gotiable, it is payable to order and unindorsed, or has been specially indorsed ; ^ (3) where the instrument is clearly shown to have been destroyed ; ^ (4) where the lost instru- ment has been traced to the defendant's custody ;■* and (5) when it is shown that the defendant is protected by the statute of Hmitations against future liability.® In Louisiana it has been held that no indemnity will be required when it has been proved that the instrument was protested and re- turned to the plaintiff, because an indorsee would palpably acquire it subject to all precedent equities.^ But this is against the better doctrine elsewhere stated.^ Professor Parsons, after stating the general principles of the subject, observes :^ "In short, the American rule upon indemnity is simply that if it can be shown in any way that the defendant may be wrongfully injured by paying, he may require security, but only then. It has, nevertheless, in some jurisdictions been thought best, upon the whole, to require indemnity in all cases, whether the note be alleged to be lost or destroyed, notwithstanding its occasional hard- ship and inconvenience."^ In Massachusetts, where the maker of a lost negotiable note may be sued at law, indemnity being given, an indorser can not be likewise sued, the distinction being taken that a bond of indemnity will not sufficiently protect him as it would the maker ; and the plaintiff is, therefore, required to resort to equity. ^° ' Wright V. Wright, 54 N. Y., 437. ^ Sttpost, § 1484, note ; Hopkins v. Adams, 20 Vt., 407 ; Lazell v. Lazell, 12 Vt., 443. ' See post, § 1482. * See post, § 1483. " See post, § 14S5. « Brent v. Ervin, 15 Mart. (La.), 303 ; 3 Mart. N, S., 303 ; 7 Mart., 518. ' St&ante, §§ 1477-8. * 2 Parsons N. & B., 304. » Welton V. Adams^ 4 Cal., 37 ; Price v. Dunlap, 5 Id., 583 ; Wade v. New Orleans, etc., Co., 8 Rob. (La.), 140. '° Tuttle V. Standish, 4 Allen, 481. Hoar, J., delivered the opinion of the court, explaining and qualifying Jones v. Fales, 5 Mass., loi, and Rennerv. Bank «f Columbia, 9 Wheat., 581. § 1482. SUIT AGAINST PARTY TO LOST INSTRUMENT. 483 § 1482. Exceptions to the general rule as to suit at law. — The rule is different as to non-negotiable instruments, parties to which may be sued at law, and no indemnity is necessary. And there are several exceptions to the rule denying the right to sue at law when the lost instrument is negotiable. First: When the lost negotiable paper is proved to have been destroyed, for in that case it can never rise in judgment against the defendants. This view obtains now both in the United States^ and in England,^ although at one time in the latter country the doctrine prevailed that, notwithstanding the alleged destruction of the instru- ment, equity should be resorted to^ for the several reasons : (i) that because he who pays a bill or note is entitled to receive it back as a voucher ; (2) because it may have been negotiated before its destruction, and have become the property of another ; and (3) because (as stated by Story)* "evidence which is merely presumptive may be offered of the destruction of the note, and then it may expose the maker to all the inconveniences of a subsequent second payment, if the note should subsequently reappear." But if it be shown that the plaintiff himself destroyed the note or bill, this right to recover would be affected. If done deliberately and voluntarily, he could not recover at all;^ but if done by accident or mistake — of which clear proof should be required — he would then be entitled to recover.^ ' Hinsdale v. Bank of Orange, 6 Wend., 378 ; Scott v. Meeker, 20 Hun, 163 ; Moore v. Fall, 42 Me., 450; Des Arts v. Leggett, 16 N. Y., 582; Thayer v. King, 15 Ohio, 242; Bank U. S. v. Sill, 5 Conn., 106; Moses v. Trice, 21 Grat., 556 ; Hough V. Barton, 20 Vt., 455 ; Patton v. State Bank, 2 Nott & McC, 464 ; Branch Bank v. Tillman, 12 Ala., 214 ; Dean v. Speakman, 7 Blackf., 317 ; Wade V. Wade, 12 III., 89 ; Aborn v. Bosworth, i R. I., 401 ; 2 Parsons N. & B., 293, 294 ; Wells V. Wade, 20 Kansas. 'Wright V. Maidstone, i Kay & J., 701 ; Woodford v. Whitely, Moodv & M., 517 ; Clarke v. Quince, 3 Dowl., 26 ; Blackie v. Pidding, 6 Com. B., 196 ; Pier- son V. Hutchinson, 2 Camp., 211 ; Chitty on Bills (13 Am. ed.) [*267, 268J, 305 ; Chitty, Jr., 776 ; 2 Parsons N. & B., 292-295. ^ Hansard v. Robinson, 7 B. & C, 90, Lord Tenterden. * Story on Notes, §§ 107, 108, 448. "Angel V. Felton, 6 Johns, 149; Van Auken v. Hombeck, 2 Green (N. J.), 178 ; Fisher v. Mershon, 3 Bibb, 527 ; Blade v. Noland, 12 Wend., 173 ; 2 Par- sons N. & B., 293 ; Edwards on Bills, 303. ' Clarke v. Quince, 3 Dowl.. 26. 484 LOST AND DESTROYED BILLS AND NOTES. § 1 483. § 1483. Second : If the bill or note, payable to order, and indorsed in blank, or payable to bearer, be traced to the defendant's possession after its loss, then the action at law would lie, because it could then never- be negotiated save by his fault, and there would be no just ground for his demanding an indemnity.^ In such a case it would not be necessary to notify the defendant to produce the paper, but simply to substitute a copy for it, and sue at law.^ Equity, it has been held, would have no jurisdiction under such circumstances, as there would be a cbmplete and adequate remedy at law.^ Instead of suing the defendant upon the instrument itself, the plaintiff might sue in trover for its possession/ Thus, where the plaintiff placed a bill of ex- change in his attorney's hands for collection, and it was left on his office table, and there was circumstantial evidence that the acceptor had abstracted it, it was left to a jury, after notice given to produce it, to say whether or not such was the case, and to give a verdict for the plaintiff without production of the bill.'' § 1484. Third : When the instrument is not payable to order or to bearer, or is payable to order and is unindorsed by the payee, or has been indorsed in full to a particular person (and remains unindorsed in blank or to bearer by the indorsee), for in such a case no legal title could pass so as to invest any one with the privileges of a bona fide holder in the usual course of business, and no indemnity would be necessary.^ In England, this view, which obtains in the ' Smith V. McClure, 5 East., 476 ; Knight v. Legh, 4 Bing., 589 ; Paterson v. Hardacre, 4 Taunt., 114; De la Chaumette v. Bank of England, 9 B. & C, 208; 2 B. & Ad., 385; Decker v. Mathews, 2 Kern, 313; Murray v. Burling, 10 Johns, 172; Lamb v. Moberly, 3 T. B. Mon., 179 ; Buck v. Kent, 3 Vt., 99; Edwards on Bills, 303 ; Chitty (13 Am. ed.) [^265], 301 ; 2 Parsons N. & B., 293. ^Garlock v. Goertner, 7 Wend., 198; McLean v. Hertzog, 6 S. & R., 154; Robinson v. Curry, 6 Ala., 842 ; Burton v. Payne, 2 Car. & P., 520 ; Bucher v. Jarratt, 3 B. & P., 143. 'Cooke V. Darwin, 18 Beav., 60. ''Howe v. Hale, 14 East., 274. * Smith V. McClure, 5 East., 477. ' Rowley v. Ball, 3 Cow., 303 ; Pinterd v. Tackingfton, 10 Johns, 104 ; Branch Bank v. Tillman, 12 Ala., 214; Rogers v. Miller, 4 Scam., 333 ; Dean v. Speak- § 1485- SUIT AGAINST PARTIES TO LOST INSTRUMENT. 485 United States, was at one time adopted,* but was subse- quently overruled, and the right of action at law confined to those cases in which the instrument was never nego- tiable.^ § 1485. Fo2irth: When the debt, at the time of contest- ing the action at law, would be barred by the statute of limitations, if a third party were to demand payment of the instrument, it is said that then also the action at law would be sustainable, because the defendant would not be exposed to danger.^ man, 7 Blackf., 317 ; Depew v. Wheelan, 6 Blackf., 485 ; Moore v. Fall, 42 Me., 450 ; Price v. Dunlap, 5 Cal., 483 ; Cleveland v. Worrell, 13 Ind., 545 ; Hough V. Barton, 20 Vt., 455 ; Mossop v. Eadon, 16 Ves., 430; Long v. Bailie, 2 Camp., 214 ; 2 Parsons N. & B., 289-291 ; Edwards on Bills, 302 ; Chitty (13 Am. ed.), 305- > Rait V. Watson, 4 Bing., 273 ; 11 J. B. Moore, 510 ; Long v. Bailie, 2 Camp., 214. ^ Ramuz v. Growe, i Exch., 167, overruled in Clay v. Crowe, 8 Exch., 295, but re-establised in Crowe v. Clay, 9 Exch., 604. ' Moore v. Fall, 42 Me., 450 ; Torrey v. Foss, 40 Me., 74 ; 2 Parsons N. & B., 296, 303. BOOK VI. VARIETIES OF NEGOTIABLE INSTRUMENTS OTHER THAN BILLS AND NOTES. CHAPTER XLVIL COUPON BONDS. SECTION I. DEFINITION AND NATURE OF COUPON BONDS. § i486. The inventive spirit of modern finance and com- merce, stimulated by the prodigious strides of internal improvements, has thrown into circulation a new species of security for money which has sprung at once to the front rank of negotiable instruments. This security is styled a " coupon bond." It is issued by the Federal Government,^ by States,^ by Territorial Governments, or the local divisions thereof,^ by municipalities, by railroad, canal, and steam- boat companies, and all manner of trading corporations. A vast portion of the wealth of the country is represented in " coupon bonds." The reports of all the courts have been ' Ringling v. Kohn, 4 Mo. Ap„ 444; Lafayette Sav. Bank v. Stoneware Co., 4 Mo, Ap., 276. " See chapter xvi, on The Federal and State Governments as Parties to Negotiable Instruments, vol. i, §§ 440, 446. ^ National Bank v. County of Yankton, loi U. S. (il Otto), 133 ; Waite, C. J., " The Territories are but political subdivisions of the outlying- dominion of the United States. Their relation to the general government is much the same as that which counties bear to the respective States, and Congress may legislate for them as a State does for its municipal organizations." Held, therefore, that railroad aid bonds of Yankton County, Dakota Territory, authorized by act ot Congress, were valid. (486) § 14^7- DEFINITION AND NATURE OF COUPON BONDS. 487 filled for the last ten years with decisions respecting theii nature and uses. Every banker, merchant, capitalist, and business man is deeply interested in the law concerning them ; and w^e shall endeavor here to summarize the settled principles which control their issue and negotiation. § 1487. Whether individuals, as well as corporations and States, may execute negotiable coupon bojids. — Since the seal does not affect the negotiability of such securities issued by corporations and States, there is no reason why the same principle should not be extended to them when issued by individuals. In a recent New York case, in the United States District Court, where individual coupon bonds were in suit, Blatchford, J., said : " I think that on the authority of the decision of the highest courts of this State, and of the United States, the bonds and coupons in question are negotiable instruments, although issued by an individual under his seal, and not by a corporation, and are not specialties so as to make them subject, in the hands of their assignee, to equities existing against their assignor. Although under seal, they were issued, as shown on their face, to secure the payment of money on time ; and they contain on their face expressions showing that they are ex- pected to pass from one to another by delivery. Therefore, the attributes of commercial paper attach to them. Their character can not be controlled or varied by the mere fact that their maker put a seal after his name.^ Such bonds and their coupons pass by delivery ; a purchaser of them in good faith is not affected by want of title in their vendor, and the burden of proof on a question as to such good faith lies on the party who assails the possession. The evi- dence in this case shows that the Union Square National Bank became, to all substantial intents, the purchaser of these bonds and coupons in good faith for a full and fair ' Citing Brainard v. New York & Hudson River R.R. Co., 25 N. Y., 496; White V. Vermont R.R. Co., 21 How., 575; Mercy County v. Hacket, i Wall.. 83. 488 COUPON BONDS. §§ I488, I489. consideration, in the usual course of business, and without notice of any possible defect in the title of their assignor. These views proceed on the assumption that the claim of the bank will absorb all dividends on the bonds and coupons, and apply only to the interest of the bank therein. If there shall be a surplus beyond paying the claim of the bank, questions as to the title and position of their assignor may become material."^ There is no doubt that an indi- vidual may execute bonds and coupons, but whether or not they are negotiable instruments may depend upon the statutory provisions of the States wherein they are issued. Custom has fixed the negotiability of corporate securities of this character regardless of statutory tests ; but it re- mains to be seen whether individual securities of the like kind will be generally considered upon the same footing.* § 1488. Description of coupon bonds. — K coupon bond \S2iX\ instrument complete in itself, and yet composed of several distinct instruments, each of which is in itself as complete as the whole together. As originally issued, the "coupon bond" consists of — (i) an obligation to pay a certain amount of money at a future day ; and (2), annexed to it is a series of coupons, each one of which is a promise for the payment of a periodical instalment of interest. The contract between the payor and the holder is contained in the bond, but the coupons are furnished as convenient in- struments to enable the holder to collect interest without presenting the bond, by separating and presenting the proper coupon ; and it also enables him to anticipate his interest by negotiating the coupon, which represents it, to another person, at any time before its maturity. § 1489. Definition and use of coupons. — The term " coupon " is derived from the French '' couper — to cut," and it is defined by Worcester, in his dictionary, to signify ^ Simeon Leland in Bankruptcy, 6 Ben., 175. ^ Stt post, § 1507a. § I490- DEFINITION AND NATURE OF COUPON BONDS. 489 "one of the interest certificates attached to transferable bonds, and of which there are usually as many as there are payments to be made ; so called, because it is ctU off when it is presented for payment." This is a succinct and clear definition, and indicates the design of the coupons. They are furnished as attached to the bond as evidence of suc- cessive periodical liabilities. They may be severed and negotiated before the maturity of the interest they repre- sent, and thus pass as separate and independent securities,^ like other commercial instruments. For in whosesoever hands they are, they are evidence of title to demand the interest on the bond, and they serve the purpose of vouchers when the interest is paid ; but the contract to pay the interest is in the bond. Yet so intimate is the relation between it and the coupons, that legislative authority to issue bonds implies authority to issue coupons attached to them for interest.^ "Coupons are substantially a minute repetition of what is contained in more concise terms in the bond. They are attached to the bond to be separated therefrom at the convenience of the holder, and to be thereafter negotiated as money, or the representative of money by simple delivery." ^ § 1490. Coupons are either actually notes, or like them. — Coupons are more closely assimilated to promissory notes than to bank notes, bills of exchange, or checks, although in their formal wording they may sometimes less resemble them. ' Arents v. Commonwealth, 18 Grat., 776 ; Clark v. Iowa City, 20 Wall., 584 ; Commissioners of Knox County v. Aspinwall, 21 How., 539 ; Thomson v. Lee County, 3 Wall., 327 ; Town v. Culver, 19 Wall., 84; City v. Lamson, 9 Wall., 477 ; Beaver County v. Armstrong, 44 Penn., 63 ; Clarke v. Janesville, 10 Wis., 136; Maddox v. Graham, 2 Melc. (Ky.), 56; Rose v. City of Bridgeport, 17 Conn., 243 ; Brainard v. N. Y. & H. R.R., 25 N. Y., 496 ; Railway v. Cleneay. 13 Ind., i6i ; Evertsen v. National Bank of Newport, 11 N. Y. S. C. (4 Hun), 694 ; 5 Robinson's Practice, 238 ; Spooner v. Holmes, 102 Mass., 503 ; Commonwealth V. Emigrant Industrial Assn., 98 Mass., 12; National Exch. Bank v. Hartford R.R. Co., 8 R. I., 375 ; Langston v. S. C. R.R., 2 S. C, 249. " Arents v. Commonwealth, 18 Grat., 773. ' Evertsen v. Nat. Bank, 11 N. Y. S. C. (4 Hun), 569. 490 COUPON BONDS. § 1490^. It is obvious from their nature and purpose that they are not intended for indefinite circulation like bank notes. They are made to facilitate the prompt payment of interest, and by no means designed to become a part of the currency of the country, although sometimes made use of as a sub- stitute for money. Therefore, even when drawn in the form of checks upon banks, they are regarded as due on the very day fixed for payment, and not as payable on demand like bank notes.-^ Nor are they like checks, which must be presented to the bank before the drawer can be sued, even when worded like them. They are the primary engagements of their payor, and if payable at a bank, they are simply like notes so pay- able ; if sued upon without previous presentment at the bank, the defendant may show that there were funds to meet them, but otherwise must stand suit.^ § i\goa. Differences between cotipo7is and bills. Not en- titled to grace. — Coupons are unlike bills of exchange, from which they differ in several distinctive respects : (i) They are not intended for acceptance when drawn upon a bank or banking house. (2) They are not entitled to grace.^ (3) In short, they are simply in effect promissory notes payable on the very day of their maturity without grace. It has, however, been recently held in New York, that coupons are entitled to grace like other commercial paper, in a case directly presenting that question ; so that judicial views of that point are now contradictory.* As ' Arents v. Commonwealth, i8 Grat., 750. " Virginia & Tenn. R.R. Co. v. Clay, MSS. Special Court of Appeal of Va. * Arents v. Commonwealth, 18 Grat.. 773. Contra, Evertsen v. Nat. Bank, 66 N. Y. (22 Sickels), 18 ; 11 N. Y. S. C. (4 Hun), 692. See §§ 1505, 1506. * Evertsen v. Nat. Bank, 66 N. Y. (22 Sickels), 22 (1876), Allen, J. : "It is probably true that they are regarded and treated, as well by promisor as prom- isee, as payable at the day, and paid as if in terms payable without grace ; but this can not destroy the character or change the legal effect of the instruments, the interpretation of which is for the courts. It is only as negotiable commer- cial paper that the plaintiff, as a bona fide purchaser, could acquire a good title to the coupons from one having no title thereto; and he can only acquire such title by a purchase under the same circumstances that would give him a title tq § l^gia. DEFINITION AND NATURE OF COUPON BONDS. 49 1 the coupons are mere separable fragments of the bond, we think the text contains the better view. And it is evident from the very nature of coupons, and of the bonds to which they are attached, that the reasons out of which the allowance of grace is made upon mercantile paper do not apply to them. They are instruments of investment and traffic, and not ordinarily used like bills and notes to effect exchanges. § 1 49 1. Bonds and coupons are not bills of credit. — Bonds and coupons, though designed to circulate as market- able commodities, are not bills of credit within the meaning of the United States Constitution.^ § 1491^. Bonds and cotipons seciired by mortgage. — A coupon is part of the debt covered by the mortgage which secures its bond, and the security of the mortgage inures to the assignee of the coupon.^ Interest on the coupon is also covered by the mortgage.^ All of the same series of bonds secured by a mortgage share ratably in the proceeds, and their holders should be paid pari passu, without regard to the amounts they paid for the bonds.* In New York it has been held, that the interest coupons upon the bonds of a railroad corporation, received by one who has advanced other commercial paper ; and if there were no days of grace for the payment ot these coupons, they could not be transferred so as to give a good title." See Cooper V. Town of Thompson, 13 Blatchf., 434, and Jones on R.R. Securi- ties, § 323. ' McCoy V. Washington County, 3 Wall. Jr., 386. '^ Miller v. Rutland, etc., R.R., 4 Vt., 399 ; County of Beaver v. Armstrong, 44 Penn., 63 ; Haven v. Grand Junction R.R. Co., 109 Mass., 88 ; Union Trust Co. V. Monticello, etc., R.R., 63 N. Y., 314. ' Gibert v. W. C. V. M., etc., R.R., 33 Grat., 599. * In re. Regent's Canal Iron Works Co., 3 Chancery Div., 43 (1876); Stanton V. A. & C. R.R., 2 Woods C. C, 523; Hodge's Appeal, 84 Penn. St., 359 (1877), in which case it was also held that if the holder of the bond was entitled to share in proceeds, other holders would not set up any informality in the manner of its acquisition. In Ketchum v. Duncan, 96 U. S. (6 Otto), 671, it was held that coupons had no superior equity to that of the bonds from which they were taken, or the subsequently maturing coupons. Strong, J., said : " The mortgage in this case secures no priority to the coupons past due, nor to those first due. It places all bondholders or coupon holders on the same level." See also Pen- nock V. Coe, 23 How., 130. 492 COUPON BONDS. § 1491^. the money with which they are taken up, under an agree- ment with him that they were to be dehvered to him un- cancelled, as security for the advances, were valid securities in the hands of the holder ; and that the smortgage upon the corporate property given to secure the bonds might be enforced for his benefit ; but as between him and the bondholders who received the amount of their coupons in ignorance of the transaction, and supposing their coupons to have been paid, that the latter had the prior equities, and if, upon foreclosure and sale of the mortgaged property, the sum realized w^ere insufficient to pay the face of the bonds, the holder of the coupons would not be entitled to share in the proceeds.-' § i49i<5. Wheti consideration paid corporation for invalid bond may be recovered. — When the transaction is not malum in se, and the parties are not particeps criminis in a viola- tion of law, money received by a corporation, as well as by a person, for a security issued, may be recovered by the party paying it, if such security be void by reason of some technical defect or illegality.^ And if a county should re- pudiate a bond given in payment of an antecedent debt, the original consideration would revive.^ Where a city issued bonds falsely dated, and w^hich were invalidated by a registry act in force at time of their issue, and received the money for them, a purchaser for value without notice, al- though not entitled to enforce the bond, it has been held ' Union Trust Co. v. Monticello & P. J. R. R. Co., 63 N. Y., 31 1, Earl, J., saying : "Equity will keep the securities in life, in such cases, to promote the ends of justice ; but not against any person having a superior equity." Harbeck v. Vanderbilt, 20 N. Y„ 398; Robinson v. Leavitt, 7 N. H., 100; Miller v. Rut- land, etc., R.R., 40 Vt., 399 ; James v. Johnson, 6 J. Ch., 423 ; Haven v. Grand Junction R.R. Co., 109 Mass., 88. ^ Thomas v. City of Richmond, 12 Wall., 354 ; Oneida Bank v. Ontario Bank, 21 N. Y., 496; Draper v, Springport, U. S. S. C, Januar}', 1882, Morrison's Transcript, vol. 3, No. 3, 432. Bradley, J. : " If valid, a recovery may be had on it ; if invalid, a recovery may be had upon the original consideration." * Jackson Co. v. Hall, 55 111., 444. § 1492^. FORMAL PARTS OF BONDS AND COUPONS. 493 may recover the amount he paid with interest from time the obligation of the city to pay was denied.^ § 1 49 If. The bonds of a county are debts as fully as any other of its liabilities, and though issued in pursuance of a law which authorizes a lev7 of a special tax to pay them, " not to exceed one-twentieth of one per cent, upon the assessed value of taxable property for each year," but con- tained no provision that only the funds so derived should be applied to their payment — in such a case any balance re- maining due after applying the proceeds of the special tax to payment of the bonds, should be paid out of the gen- eral funds of the county. '^ SECTION 11. THE FORMAL PARTS OF NEGOTIABLE BONDS AND COUPONS. § 1492. The bond, with its coupons annexed, is usually printed upon a sheet of paper resembling in texture and style that used in the issue of currency. And the engraver's art is taxed, as a general thing, to invest the instrument with as much attraction to the eyes of capitalists as possi- ble, and, as well, for the purpose of fortifying it against the ingenious imitations of the forger. The bond is usually large and showy in its lettering and its devices, while the cou- pons are usually small (as they must needs be on account of their number) and less ostentatious. They are generally arranged so as to be easily severable in the order of their maturity. § 1492^. The sigjiatiire to the bonds and coupons is gen- erally written by the president of the corporation, or the ' Louisiana v. Wood, 102 U. S. (12 Otto), 294, affirming s. C, 5 Dillon C. C, 122. « United States v. County of Clark, 96 U. S. (6 Otto), 211. 494 COUPON BONDS. § 1493- chief executive of the municipality issuing them ; and there is generally a counter signature by the secretary, or treas- urer, 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 ; ^ and if the bonds be properly executed, it is no valid objection to the coupons that they are signed by only one of the officers who signed the bonds." § 1493. Wording of coupons, and variotis forms. — It is entirely immaterial in what words the coupons are ex- pressed, provided they indicate by whom they are due, and the amount and time of payment. Sometimes they contain words of promise, making them substantially promissory notes in themselves. Thus, in Thomson v. Lee County, 3 Wall., 327, the form was : " Promise to pay to the bearer, at the Continental Bank, in the city of New York, forty dollars interest on bond No. ." Sometimes they are in the form of a bill of exchange, or draft upon the treasury of the corporation issuing them. Thus, in Moran V. Commissioners of Miami County, 2 Black, 722, the form was : "The treasurer of said county will pay the legal holder hereof one hundred dollars on the first day of Sep- tember, 1857, on presentation thereof, being for interest due on the obligation of said county. No. 16, given to the Peru & Indianapolis Railroad Company." Sometimes they are in the form of a mere ticket, or token or " Interest War- rant," as it is called. Thus, in Woods v. Lawrence County, I Black, U. S. R., 360, the coupon is in this form : " County of Lawrence— Warrant No. , for thirty dollars, being for six months' interest on bond No. , payable on the (Jay of at the office of the Pennsylvania Rail- ' Pennington v. Baehr (Supreme Court California), Cent. Law Jour, of St. Louis, vol. 2, No. 6, p. 92, February 5, 1875 ; Lynde v. County, 16 Wall., 6; McKee v. Vernon Co., 3 Dillon C. C, 210; Dillon on Municipal Bonds, p. 12, note. * Thayer v. Montgomery Co., 3 Dillon C. C, 389. § 1494- FORMAL PARTS OF BONDS AND COUPONS. 495 road Company, in the city of Philadelphia." Sometimes they are in the form of a check upon a banking house, as in Arents v. Commonwealth, i8 Grat, 753, where the form was: "Duncan, Sherman & Co., of New York, will pay the bearer thirty dollars, the half-yearly interest on the Wheeling bond due i January, 1867."^ Sometimes they are in the form of drafts or bills, but name no drawee, as in Mercer County v. Hubbard, 45 III, 140, where the form was: " Six per cent, stock, Mercer County, State of Illi- nois, Railroad Bond No. 20. Pay the bearer sixty dollars on first day of July, 1863, interest to that date. John Cowden, Chairman of Board of Supervisors of Mercer County." However the forms may vary, the intent and legal effect are the same. In all of the cases the coupon is furnished as evidence of a sum due on the bond for in- terest at a particular time and place, and as authority to the holder to receive it. And whether the coupon be assimi- lated to a note, bill, or check, or be a mere ticket or warrant of amount, and place of payment, the holder may sue on it without producing the bond ; but in all cases he re- ceives a sum due and payable according to the terms of the bond. § 1494. Payee. — The fact that no payee is mentioned in the coupon — an omission which would vitiate an ordinary promissory note — will make no difference, for it is suffi- ciently evident from the general character of the instrument that it was issued as the binding obligation of the payor to the purchaser of the bond, and was designed to be paid to him or to the bearer.^ Nor will it matter that it contains no words of promise. For while they may be necessary to constitute an ordinary promissory note, which without them may be a mere memorandum, the very form of the coupon clearly evinces an intention that it shall be an obligation to 'See also Mayor, etc., v. Potomac Ins. Co., 58 Tenn., 298. * Woods V. Lawrence County, i Black, 360; Virginia & Tenn. R.R. Co. v. Clay (Special Court of Appeals of Va., unreported). See §§ 1496, 1499. 496 COUPON BONDS. § 1495- pay the amount designated, and the intention of the payor is what the law at all times seeks to enforce.^ We have thus stated what seems to us the true theory as to coupons ; but in a New York case, reported since the first edition of this work was in the press, variant views have been ex- pressed.^ The requisite certainty in designating the payee of negotiable instruments in general has been discussed in another portion of this work.^ § 1495. The bond not izecessarily sealed. — In common parlance the term bond is generally understood to signify a sealed instrument, in contradistinction to bills and notes of hand, which are unsealed, and need only the party's signature to their completion. And as a general rule a bond is a sealed instrument. But it does not follow that it always is . or must be. It is certainly usual for the coupon bonds of States and corporations to be authenticated by the State or corporate seal ; and it has been said by high authority that it is necessary they should be so authenticated, for the rea- son that they are executed by States and corporations."* But the old idea that States and corporations can only bind themselves under seal is utterly obsolete.^ Their bills and notes are as binding as their sealed obligations. And it is now pretty well settled by authority, as indeed it is clear in reason, that it is not necessary to constitute a corporate oblio-ation a bond that it should bear its seal. And the term " bond," as now applied to State and corporate obli- gations, is simply intended to signify a permanent invest- ment security in contradistinction to those of an ordinary and current nature, such as bills of exchange and promissory notes. In New York, where the legislature authorized the town of Genoa to issue " bonds," and instruments were is- * See p. 495, note 2. ■'Evertsen v. National Bank, 66 N. Y. (22 Sick.), 19. 20 ; st& post, % 1497. '^Anie,% 99. * Mercer County v. Hackett, i Wall., 83. ' Dinsmore v. Duncan, 57 N. Y., 577 ; Connecticut Mut. Life Ins. Co. v. Cleve- land, etc. R.R. Co., 41 Barb., 22 ; see § 381, vol. i. § 1495^' FORMAL PARTS OF BONDS AND COUPONS. 497 sued with coupons attached, and formal in all respects except that they bore no seals, it was held that they were valid bonds notwithstanding.^ The like view has also pre- vailed in Maine.^ And in Virginia, where no seals were discoverable in a certain number of the instruments issued by the Virginia and Tennessee Railroad Company styled bonds, and having coupons attached, while on others in the same suit the seals appeared, being distinctly impressed by an instrument on the paper, it was held that those with- out were as valid as those with seals, there being nothing in the act of Assembly which required that seals should be used.^ § 1495^. Decisions of U. S. Szipreme Court as to seals. — In a case before the U. S. Supreme Court, it was said by Swayne, J. : "The principal securities delivered to the com- pany were not bonds, because they were unsealed ; but this is immaterial. The twelfth section, under which they were issued, expressly declared that those charged with the duty of subscribing may issue bonds bearing interest, or other- wise pledge the faith of the city." * But we do not think these remarks necessarily conflict with the views of the text. In another and recent case before the U. S. Supreme Court, it appeared that the Town of Springport, N. Y., was authorized to subscribe to a railroad, and issue bonds to pay for such subscription ; and that the subscription was to be made by commissioners, who were to execute the 'The People v. Mead, 24 N. Y., 124 (1861). The act provided that they should be executed under official sigriatures of supervisors and commissioners. Denio, J., said : " Whatever force there may generally be in the words ' bond or bonds,' which were used in the act, it is overcome by the explicit direction as to their execution which has been mentioned." The case shows in what sense the legislature of New York used the word " bond." So in Conn. Mut. Life Ins. Co. V. Cleveland, etc., R.R. Co., 41 Barb., 22, the bonds had no seals ; see Phelps v. Yates, 16 Blatchford, C. C, 192. ^ Augusta V. Augusta Bank, 56 Me., 176. 'Virginia & Tenn. R.R. Co. v. Clay, Va. Spec. Ct. of App. (1873), unre- ported. * San Antonio v. Meharty, 96 U. S. (6 Otto), 315. Vol. II. — 32 498 COUPON BONDS. § I496. bonds under their hand and seal. The bonds were duly executed with the exception that seals were omitted ; and it was held that the requirement as to seals was merely directory and formal, and their omission immaterial.^ § 1496. To whom payable. — Coupon bonds^are generally made payable to the party to whom they are issued, or bearer ; and in such cases are transferable by delivery.^ By the Supreme Court of Illinois it has been said : " It is the well-settled doctrine that bonds of this character are to be treated as commercial paper ; and this court has held coupons attached to them to be negotiable by delivery only without indorsement." ^ Sometimes they are payable to order, and then they pass by indorsement,^ Sometimes they are payable to the holder, which term is regarded as equivalent to bearer. Any other equivalent expression manifesting an intention to make the instrument negotia- ble will suffice for that purpose.^ Sometimes they are pay- able to a certain party, " or his assign"; and in that case the party's assignment is necessary to pass title. But if he make an assignment in blank, the title then passes by de- livery.^ A bond or coupon payable to "A. B. or bearer," is in legal effect payable to bearer, and passes by delivery.' Sometimes the place for the payee's name is left blank, in which case any holder may fill the space with his name, ' Draper v. Springport, U. S. S. C, Januar)', 1882, Morrison's Transcript, vol. 3, No. 3, p. 429. "^ Morris Banking & Canal Co. v. Lewis, i Beas., 323 ; Brookman v. Metcalf, 32 N. Y., 591 ; Eaton & H. R.R. Co. v. Hunt, 20 Incl., 457 ; Conn. Insurance Co. V. C. C. & C. R.R., 41 Barb., 9; Carr v. Le Fevre, 27 Penn. St., 413 ; City of Kenosha v. Lamson, 9 Wall., 478 ; Mercer County v. Hackett, i Wall., 83 ; Roberts v. Bolles, loi U. S. (11 Otto), 122; Johnson v. County of Stark, 24 111., 75 ; Supervisors of Mercer County v. Hubbard, 45 111., 139. 'Town of Eagle v. Kohn, 84 III, 292 ; Roberts v. Bolles, loi U. S. (11 Otto), 122. *■ City of Lexington v. Butler, 15 Wall., 295. See § 14993. "Ante, vol. i, §99; County of Wilson v. National Bank, 103 U. S. (13 Otto), 776 ; Porter V. City of Janesville, 3 Fed. R., 619. "Brainard v. New York, etc., R.R. Co., 25 N. Y., 496 ; 10 Bosw., 832. ' See vol. I, § 633. It is different in Illinois by statute. See Garvin v. Wiswellj 83 111., 218, and vol. i, § 633, note ; § 105, note. § 1496^. FORMAL PARTS OF BONDS AND COUPONS. 499 and thus make the instrument payable to himself; but until filled up it circulates by delivery as if payable to bearer.* § 1496^. In Virginia, where the act of Assembly made certain bonds " payable to the holder," it was held a sufficient indication that they were designed to be nego- tiable and payable to bearer. Joynes, J., said :^ "The act of March 29th, 1857, in terms makes the coupons 'trans- ferable by delivery,' but does not in terms make the bonds themselves transferable by delivery. This, however, is im- plied in the provision that ' they shall be payable to the holder,' the obvious intent being that they shall be payable to such persons as may, from time to time, be the holder. These bonds, therefore, as well as the coupons, pass from hand to hand by delivery." But if the bond contained no negotiable words, it would not be deemed negotiable,^ nor would the coupons without negotiable words, if detached from the bonds, be negotiable, as has been held in New York, where it was said of a coupon without such words, by Allen, J. : " In this, as in other contracts, its negotiability depends upon its terms ; and the rule is, with certain ex- ceptions not applicable to this case, that in instruments for the payment of money, if no one be designed as payee, either by name or as bearer, the instrument is not a promissory note. If these warrants are not promissory notes they arc not negotiable There is no usage or custom proved that would give these warrants a negotiable character, even if custom and usage so recent as one appli- cable to these instruments would be, could change their legal effect.^ 'White V. Vermont, etc., R.R. Co., 21 Howard, 575; Preston v. Hull, 23 Grat., 613. See § 1499. * Arents v. Commonwealth, 18 Grat., 750. ' City of Atchison v. Butcher, 3 Kans., 104. * Evertsen v. Nat. Bank, 66 N. Y. (22 Sick.), 20, 22. See Jones on Railroad Securities, § 323. 500 COUPON BONDS. § I497* § 1496(5. Amou7it payable. — The amount payable must be certain in order to render the bond or coupon negotia- ble, the same rule in this respect applying to them as to other negotiable instruments.^ This doctrine was well illustrated in a case before the United States Supreme Court, in which it appeared that a railroad company in Louisiana prepared certain bonds, promising to pay the bearer either ^^225 sterling in London, or $1,000 in New York or Louisiana, and declaring that the president of the company was authorized by his indorsement to fix the place of payment — a blank being left for insertion of such place. This blank was never filled ; and the bonds were seized and carried off during the Confederate war, and sold, with past due coupons, for a small consideration, in New York. The court held, that in the absence of the required indorsement, the uncertainty in the amount payable de- prived the bonds of negotiability ; and the defect being patent, the purchaser could not be regarded as a bona fide holder without notice.^ § 1497. Place of payment — whether it may be outside of the State. — It is not unusual for the bonds of municipal and other corporations to specify a particular banking house as a place of payment, and still more frequently is it the case that such a place of payment is specified in the coupons. The city of New York, as the great monetary and commercial centre of the country, is often selected for purposes of convenience as the place of payment, and a particular banking house designated. But the Supreme Court of Illinois has held that, unless specially authorized so to do by the legislature of the State, a municipal corporation can not bind itself to pay its in- debtedness at any other place than its treasury.^ The Su- ' Vol. I. § 53. "^ Parsons v. Jackson, 99 U. S. (9 Otto), 434. See Jackson v. Vicksburg, etc.^ R.R. Co., 2 Woods C. C, 141 ; § 1501. ''Prettyman v. Tazewell County, 19 III., 406 ; Pekin v. Reynolds, 31 111., 530; People ex rel., etc., v. Tazewell County, 22 111., 151, Walker, J., saying ; " It is § 1497. FORMAL PARTS OF BONDS AND COUPONS. 5OI preme Court of the United States has, however, taken a different view ; and where bonds of the city of Muscatine were made payable in New York City, and objection was made that it was unauthorized, Swayne, J., said : " It was according to general usage to make such bonds and cou- pons payable in the city of New York. It added to the value of the bonds, and was beneficial to all parties. No legal principle forbids it. The power of a municipal cor- poration to make any contract does not depend upon the place of performance, but upon its scope and object."* This case, which seems to us correct, has been followed in subsequent ones by the same tribunal, in which it has en- forced coupons payable beyond State limits. And the like course has been pursued by some of the State courts in suits on the coupons of railroad companies.^ In Illinois, objected that the county had no right to issue bonds or other obligations, pay- able at any other place than at the county treasury. This court held, in the case of Prettyman v. The Board of Supervisors of Tazewell County, 19 111. R.. 406, that it was only by virtue of the act of February, 1857, authorizing the county courts of each county which had subscribed to the Tonica and Petersburg road to make the interest of their bonds payable at any place they might choose. That act only applied to subscriptions to that particular road, and can have no application to any other. And it was tliere held that the county court had no power to issue bonds payable in the city of New York, for want of express au- thority by legislative enactment. States, counties, and corporations, created for public convenience only, are not required to seek their creditors to discharge their indebtedness, but when payment is desired the demand should be made at their treasury. That is the only place at which payment can be legally insisted upon, and it is the onlv place where the treasurer can legally have the public funds with which he is intrusted. To authorize the auditor to draw his warrants on the treasurer, payable in a sister Stale or in a foreign countr\', necessarily imposes an obligation on the creditor to provide funds at that place to meet them. And his duties requiring him at the treasury, would require the employ- ment of agents, the transmission of the funds at a risk of loss and at a consid- erable expense in charges, insurance, and discounts, which are not incident to its payment at the treasury. And the same reasons apply with equal lorce to cities, counties, and public corporations of a similar character. The legislature has conferred no such general power upon such bodies, and in its absence they have no power to make their indebtedness payable at any other place than at their treasury." ' Thompson v. Lee Countv, 3 Wall., 338 (coupons of Lee County, Iowa, pay- able at the Continental Bank, New York); Gclpcke v. Dubuque, I Wall., 178 (coupons of the city of Dubuque, payable at the Metropolitan Bank, New York); Citv of Kenosha v. Lamson, 8 Wall., 478 ; Lynde v. County of Wmnebago, i6 Wall., 13; City of Lexington v, Butler, 14 Wall., 289 (coupons of Lexmgton, Ky., payable in New York). ^ Conn. Mut. Life Ins. Co. v. Cleveland, etc., R.R. Co., 41 Barb.. 9. The cou- pons were issued by the Columbus, P.qua and Indiana R.R. Co. ot Ohio, and were payable at the office of the Life and Trust Co. in New York City. 502 COUPON BONDS. §§ I498, I499 where the corporation exceeds its authority by making its securities payable outside of the State, it has been held that, although that particular provision would be invalid, nevertheless the security would be binding and payable at its treasury, in like manner as if it had been so expressed upon its face. Walker, J., said : " If this coupon had not contained the language, ' at the city of New York,' it would have been a legal instrument, strictly conforming to all the requirements of the law authorizing counties to issue evi- dences of indebtedness. If, then, this unauthorized portion of the coupon were rejected, it would be in conformity to the law, and for the purpose of upholding it the law will reject that portion as surplusage."^ § 1498. Delivery. — Delivery is essential to the validity of a coupon bond, as it is to every contract for the paym.ent of money. If an incomplete bond be stolen, without any delivery preceding, it has been held that it would be void in all hands.^ But if completed, it is conceived that the law would be different.^ The name of the ■ payee may be left blank for the purpose of having the blank filled by the name of the holder.'* If the coupons refer to the bonds to which they were attached, and purport to be for interest thereon, the purchaser of them is chargeable with notice of all that the bonds contain.^ § 1499. Bonds blank as to payee, and right of holder to sue in Federal courts. — In the United States Supreme Court, where suit was brought upon coupon bonds of a railroad company payable in blank, no payee being named, and it appeared that they were issued in Massachusetts to a citizen of that State, and passed through several inter- ' Johnson v. County of Stark, 24 111., 91. » Ledwick v. McKim, 53 N. Y., 31 5 ; see Redlick v. Doll, 54 N. Y., 236 ; and chapter xxvi, §§ 841, 842, vol. i; i Parsons N. & B., 114; § 840, note I, vol. I. ' Chapter xxvi, § i, 630, vol. i. * See chapter v, § 145, note 3, vol. i ; and chapter XXVI, §§ 843, 844, vol. I. ' McClure v. Township of Oxford, 94 U. S. (4 Otto), 429 ; Silliraan v. Fred ericksburg, etc., R.R., 27 Grat., 119. § I499'^- FORMAL PARTS OF BONDS AND COUPONS. 503 vening holders to the plaintiff, a citizen of New Hamp- shire, who inserted his name as payee, and brought suit on the bonds in the Circuit Court of the United States, it was objected that, as the bonds were issued to a citizen of Mas- sachusetts, and as they were not negotiable, or, if negotia- ble, were not payable to bearer, the plaintiff could not sue in the Federal court. But the United States Supreme Court held, that " it was the intention of the company, by issuing the bonds in blank, to make them negotiable and payable to the holder as bearer, and that the holder might fill up the blank with his own name, or make them payable to himself or bearer, or to order. In other words, the company intended by the blank to leave the holder his op- tion as to the form or character of negotiability without restriction Until the plaintiff chose to fill up the blank, he is to be regarded as holding the bonds as bearer, and he held them in this character until made payable to himself or order. At that time he was a citizen of New Hampshire, and therefore competent to bring the suit in the court below." ^ § 1499(2. Figures denoting fiumber of bond arc no part of it. — Frequently the bond and its coupons are marked by the party, with figures denoting their number in the par- ticular series to which they belong. The number is put upon them for the convenience and protection of the maker, but it does not enter into, or in anywise affect, the agreement embodied in them. The purchaser of the bond or coupon has nothing to do with it, and need give it no heed. Therefore, an alteration or erasure of the number is immaterial, and will not affect the rights of the holder of the instrument.* ' White V. Vermont, etc., R.R. Co., 21 How., 575 ; quoted and approved in Preston v. Hull, 23 Grat., 613. See §§ 1494. HQ^- » Citv of Elizabeth v. Force, 29 N. J. Eq., 591, overruling 28 N. J. Eq., 587; Berdsell V. Russell, 29 N. Y., 220; Commonwealth v. Industrial Emigration Savings Bank, 98 Mass., 12. See ante, § 86. 504 COUPON BONDS. §§ i499<5, 1499^. § 1499(5. Transfer by indorsement a7id by delivery. Sales of bonds. — We have seen already that negotiable bonds may be transferred by indorsement, or by delivery, as the case may be.^ It has been held that a railroad com- pany, which has transferred by indorsement a negotiable bond issued by a mmiicipal corporation, is bound as an in- dorser of negotiable paper, if its liability be fixed by a proper demand and notice. It has been suggested tha*- such a liability is not fairly within the contemplation of the parties to an indorsement of a bond which may have twenty or even forty years to run ; but the reply is made that "whatever force this view might have in case of an in- dorsement of such an instrument by an individual, it has none in case of a corporation which does not die."^ The transferrer by delivery of a negotiable bond engages that it is the genuine article it purports to be ; and if it turn out to be forged, the transferee may recover the purchase money from the transferrer, without any offer to return the bond.^ The sale of bonds is elsewhere considered.^ § 1499^. Where bonds of a corporation, as prepared for issue and sale, promise payment in lawful money, and as such are guaranteed by a State, a stipulation that they shall be paid in coin subsequently indorsed upon them by the corporation in accordance with the requirement of pur- chasers from it is supplementary and subsidiary, and binds only the corporation.^ ' Ante, § 1496. "^ Jones on Railroad Securities, § 348 ; Bonner v. City of New Orleans, 2 Woods, 135. ' Smith V. McNair, 19 Kansas, 330; First Nat. Bank v. Peck, 8 Kansas, 660. See §§731 et seq. * §§ 1533. 1534- •* Wallace v. Loomis, 97 U. S. (7 Otto), 147. § 1500. THE NEGOTIABILITY OF COUPON BONDS. 505 SECTION III. THE NEGOTIABILITY OF COUPON BONDS, AND THE RIGHTS AND DUTIES OF THE HOLDER OR PURCHASER. § 1500. As to the negotiability of coupon bonds. — There no longer remains a shadow of doubt that the coupon bonds of the United States, of the several States, and of municipal and other corporations, when expressed in negotiable words, are as negotiable to all intents and purposes as bills of ex- change or promissory notes. They have been so declared by the courts of highest resort in many of the States,^ and by a series of decisions of the Supreme Court of the United States.^ A solitary decision here or there to the contrary may be found,^ but as authority it would doubtless weigh as lightly before any State tribunal which has not yet de- ' Arents v. Commonwealth, 18 Grat., 773; Virginia and Tenn. R.R. Co. v. Clay (Special Court of Appeals of Va., 1873, not reported) ; Railway v. Cleneay, 13 Ind., 161 ; Clark v. Janesville, 10 Wise, 136 ; Mills v. Jefferson, 20 Wise, 50; Clapp V. County of Cedar, 5 Clarke, 15 ; Barrett v. County Court, 44 Mo., 197; Ringling- v. Kohn, 4 Mo. Ap., 63 ; Lafayette Sav. Bank v. Stoneware Co., 4 Mo. Ap., 276; see Johnson v. County of Stark, 24 III., 75; Crai^ v. City of Vicks- burg, 31 Miss., 216 ; Chapin v. Vt. & Mass. R.R., 8 Gray, 575 ; Society for Sav- ings V. Citv of New London, 29 Conn., 174; National Exchange Bank v. Hart- ford, etc., R.R. Co., 8 R. L, 379 ; Virginia v. Ches. & Ohio Canal Co., 32 Md., 501; Conn. Mutual Life Ins. Co. v. Cleveland, etc., R.R. Co., 41 Barb., 9; Spooner v. Holmes, 102 Mass., 503 ; Hinckley v. Union Pacific R.R., 129 Mass., 52; Morris Canal, etc., Co. v. Fisher, i Stock., 667; Langston v. S. C. R.R. Co., 2 So. Car. N. S., 248 ; Weith v. City of Wilmington, 68 N. C, 341 ; San Antonio V. Lane, 32 Tex., 405 ; Bank of Rome v. Village of Rome, 19 N. Y.. 24; Seybel V. National Currency Bank, 54 N. Y., 288 ; Evertsen v. Nat. Bank of Newport, 4 Hun (II N. Y. S. C. R.), 695; 66 N. Y., 15; Consolidated Association v. Avegno, 28 La., 552 ; City of Elizabeth v. Force, 29 N. J. Eq., 587 ; Durant v. Iowa County, i Woolworth C, C, 72 ; State ex rel. Flock v. Cobb, 64 Ala., 128 ; Blackman v. Lehman, 63 Ala., 519 ; First N. B. v. Mount Tabor, 52 Vt., 87. " White V. Vermont & Mass. -R.R. Co., 21 How., 575 ; Moran v. Commission- ers of Miami County, 2 Black, 722 ; Mercer County v. Hackett, i Wall., 83 ; Gelpcke v. City of Dubuque, i Wall., 175; Meyer v. Muscatine, i Wall., 382; Murray v. Lardner, 2 Wall., no; Thompson v. Lee County, 3 Wall., 227; Supervisors v. Schenck, 5 Wall., 772 ; Aurora City v. West, 7 Wall., 82 ; Com- missioners of Manor v. Clark, 94 U. S. (4 Otto), 279 ; and many other cases. See next chapter. 'Diamond v. Lawrence County, 37 Penn. St., 353. " We will not treat these bonds as negotiable securities. On this ground we stand alone. All the courts. American and English, are against us." 506 COUPON BONDS. § I5OI. termined the question as a decision of Lord Holt against the negotiabihty of a promissory note would now weigh in Westminster Hall. If the bond contain no negotiable words, it is not negotiable.^ § 1 50 1. In the United States Supreme Cour^,^ a case was heard from Pennsylvania, in which the obligatory part of the bonds ran : " Know all men by these presents, that the county of Mercer, in the Commonwealth of Pennsylvania, is indebted to the Pittsburgh & Erie Railroad Company, in the full and just sum of $i,ooo, which sum of money said county agrees and promises to pay twenty years after the date hereof to the said Pittsburgh & Erie Railroad Company, or bearer, with interest at the rate of six per centum per annum, payable semi-annually, etc.," and was signed under the corporate seal of the county. The court sustained their negotiability, and said Grier, J. : "This species of bond is a modern invention, intended to pass by manual delivery ; and their value depends mainly upon this character. Being issued by States and corpora- tions, they are necessarily under seal.^ But there is nothing immoral or contrary to good policy in making them nego- tiable, if the necessities of commerce require that they should be so. A mere technical dogma of the courts or the com- mon law can not prohibit the commercial world from in- venting or using any species of security not known in the last century. Usages of trade and commerce are acknowl- edged by courts as part of the common law, although they may have been unknown to Bracton or Blackstone ; and this malleability to suit the necessities and usages of the mer- cantile and commercial world is one of the most valuable characteristics of the common law. When a corporation ' City of Atchison v. Butcher, 3 Kan., 104. ' Mercer County v. Racket, I Wall.. 83. 'This is not a correct statement of the law. The seal maybe omitted except where the corporation can only contract by its charter by a sealed instrument Afite, § 1485. § 1501^. THE NEGOTIABILITY OF COUPON BONDS. 507 covenants to pay to bearer, and gives a bond with negotia- ble qualities, and by this means obtains funds for the use- ful enterprises of the day, it can not be allowed to evade the payment by parading some obsolete judicial decision that a bond, for some technical reason, can not be made payable to bearer." Thus we see that the usages of trade, overriding the ancient doctrines of the common law, engrafted the quality of negotiability upon these instruments — exhibiting a lively illustration of the progressive spirit of commercial law which is continuously moulding itself to conform to the wants of society and the transactions of business men. Where the bonds are for an uncertain sum — as, for instance, for so many pounds sterling, if payable in London, or for so many dol- lars, if payable in New York or New Orleans, and the cou- pons are of like purport, — neither bonds nor coupons will be negotiable, the uncertain element depriving them of their otherwise negotiable character.^ § 1501^. Whether statutory tests of negotiability apply to bonds and coupons. — In some of the States there are peculiar requisites to the negotiability of notes, as in Virginia, for instance, where it is necessary that they be payable at a bank.* But coupons of bonds, and the bonds themselves, when issued by corporations with negotiable words, are there deemed negotiable instruments, although not conform- ing to the statutory test.^ In Alabama it is provided by statute that " all bonds, bills, or notes, except those issued to circulate as money, payable to anything or bearer, to any fictitious person or bearer, or to bearer only, must be con- strued as payable to the person from whom the considera- tion moved ; if payable to an existing person or bearer, must be construed as payable to such person or order."* This 1 Jackson v. Vicksburg-, etc., R.R. Co., 2 Woods C. C, 141. See ante, § 1496a. * See a7ite, §§ 90, 1497. ' Arents v. Commonwealth, 18 Grat., 750; ante, § 1496. *Code of Alabofma of 1876, § 2098. 5o8 COUPON BONDS. §§ i5oi^, 1502 statute has been there held to apply to municipal bondg payable to bearer, and it was adjudged that they were not neofotiable unless indorsed.^ § 1501^. Registered bonds. — The provision in a bond that it may be " registered and made payable by transfer only on the books of the company " issuing it, does not of itself make it non-negotiable by the customary methods of transfer. Such provisions are frequently inserted in bonds, and they entitle the holder to convert them into registered bonds, and to render them transferable only upon the books of the company.^ § 1502. The holder or purchaser of coupon bonds. — The rights of the purchaser or holder of a coupon bond are de- termined by the same principles which control those of the purchaser or holder of a bill or note. If a party proposes to purchase a bond from the State or corporation issuing it, he should inquire in the first place whether or not the State or corporation has legal power to issue it. For as the bill or note of an infant or lunatic is utterly void, so is any instrument issued by a State or corporation when it has no legal power to do so. In the second place, the negotiator should see that the person undertaking to represent the State or corporation is authorized to do so. For if the instrument be in fact a forgery, and never had any legal in- ception as an obligation, it can not be enforced, because the forgery was so skilfully performed as to deceive an inno- cent purchaser.^ In the third place, the competency of principal and agent being established, he should see that all the formalities of a public character required by law are pursued in the execution and issue of the instrument. And then in Xh^ fourth place, let him see that there is no usury in his purchase. ^Blackman v. Lehman, 63 Ala., 547. " Savannah & Memphis R.R. v. Lancaster, 63 Ala., 563. » Maas V. M. K. & T. R.R., 18 N. Y. S. C. (ii Hun), 13. § 1503- 'T^^^ NEGOTIABILITY OF COUPON BONDS. 5O9 § 1 503. Gross negligence does not vitiate holder s title. — ■ Where the holder has acquired the bond or the coupons under such circumstances as constitute him a bona fid& holder for value and without notice, he is entitled to full protection against all equities and frauds which would have affected the title of a previous holder. And it is well settled that gross negligence in the purchaser will not alone vitiate the holder's title.^ In a leading case decided by the Supreme Court of the United States, it appeared that Lardner owned Camden and Amboy Railroad coupon bonds, payable to bearer, which were deposited in an iron safe in Philadelphia. On the night of 23d of February, 1859, they were stolen, and on the morning of the next day, the 24th, they were negotiated to Murray, a broker, at his office on Wall Street, New York. Lardner sued Mur- ray in detinue for the bonds, but was cast in the suit before the Supreme Court of the United States. Mr. Justice Swayne, who delivered the opinion, disap- proved Gill V. Cubitt, 3 Barn. & Cres., 466, and quoted with approval Goodman v. Harvey, 4 Ad. & El, 870, in which Lord Denman said : " I believe we are all of opinion that gross negligence only would not be a sufficient answer, where the party has given a consideration for the bill. Gross negligence may be evidence of mala fides, but is not the same thing. We have shaken off the last remnant of the contrary doctrine. Where the bill has passed to the plaintiff, without any proof of bad faith in him, there is no objection to his title"; and considering that the good faith of Murray in the transaction had not been impeached, decided in his favor. He cited also Swift v. Tyson, 16 Pet., I ; Goodman v. Simonds, 20 How., 343 ; and Bank of Pittsburg V. Neal, 22 How., 96 ; and declared it to be the settled law of the court in respect to commercial papers — • See chapter xxiv, sec. i, p. 627, vol. I, 5IO COUPON BONDS. § I503 1. That possession and title are one and inseparable. 2. The party who takes it before due for a valuable con- sideration, without knowledge of any defect of title, and in good faith, holds it by a title valid against all the world. Suspicion of defect of title or the knowledge of circum- stances which would excite such suspicion in the mind of a prudent man, or gross negligence on the part of the taker, at the time of the transfer, will not defeat his title. That result can be produced only by bad faith on his part. 3. The burden of proof lies on the person who assails the right claimed by the party in possession.^ It should be ob- ' Murray v. Lardner, 2 Wall., no. In his opinion it was said by Mr. Justice Swayne : " What state of facts should be deemed inconsistent with the g-ood faith required, was not settled by the earlier cases. In Lawson v. Weston (4 Esp., 56), Lord Kenyon said : ' If there was any fraud in the transaction, or if a botta fide consideration had not been paid for the bill by the plaintiffs, to be sure they could not recover; but to adopt the principle of the defence to the full extent stated, would be at once to paralyze the circulation of all the paper in the coun- try, and with it all its commerce. The circumstance of the bill having- been lost might have been material, if they could bring knowledge of that fact home to the plaintiffs. The plaintiffs might or might not have seen the advertisement ; and it would be going a great length to say that a banker was bound to make inquiry concerning every bill brought to him to discount ; it would apply as well to a bill for £^\o as for ^10,000.' In the later case of Gill v. Cubitt (3 B. & C, 466), Abbott, C. J., upon the trial, instructed the jury, ' That there were two questions for their consideration: First, whether the plaintiff had given value for the bill, of which there could be no doubt ; and, second, whether he took it under circumstances which ought to have excited the suspicion of a prudent and careful man. If they thought he had taken the bill under such circumstances, then, notwithstanding he had given the full value for it, they ought to find a ver- dict for the defendant.' The jury found for the defendant, and a rule nisi for a new trial was granted. The question presented was fully argued. The instruc- tion given was unanimously approved by the court. The rule was discharged, and judgment was entered upon the verdict. This case clearly overruled the prior case of Lawson v. Weston, and it controlled a large series of later cases. In Cook v. Jadis (5 B. & Ad., 509), the action was brought by the indorsee of a bill against the drawer. It was held that it was ' no defence that the plaintiff took the bill under circumstances which ought to have excited the suspicion of a prudent man that it had not been fairly obtained ; the defendant must show that the plaintiff was guilty of gross negligence.' In Backhouse v. Harrison (5 B. & Ad., 1098), the same doctrine was affirmed, and Gill v. Cubitt was earnest- ly assailed by one of the judges. Patterson, J., said : ' I have no hesitation in saying that the doctrine laid down in Gill v. Cubitt, and acted upon in other cases, that a party who takes a bill under circumstances which ought to have excited the suspicion of a prudent man can not recover, has gone too far, and ought to be restricted. I can perfectly understand that a party who takes a bill fraudulently, or under such circumstances that he must know that the person offering it to him has no right to it, will acquire no title ; but I never could un- derstand that a party who takes a bill bona fide, but under the circumstances mentioned in Gill v. Cubitt, does not acquire a property in it. I think the fact §1503. THE NEGOTIABILITY OF COUPON BONDS. 5II served, and remembered in considering this subject, that the cases in which estoppels and waivers are held binding upon the corporation issuing coupon bonds, are those in which the found by the jury here, that the plaintiff took the bills bona fide, but under cir- cumstances that a reasonably cautious man would not have taken them, was no defence.' In Goodman v. Harvey (4 Ad. & El., 870), the subject again came under consideration. Lord Denman, speaking for the court, held this language : ' I believe we are all of opinion that gross negligence only would not be a sufficient answer where the party has given a consideration for the bill. Gross negligence may be evidence of viala fides, but it is not the same thing. We have shaken off the last remnant of the contrary doctrine. Where the bill has passed to the plaintiff, without any proof of bad faith in him, there is no objection to his title.' A final blow was thus given to the doctrine of Gill v. Cubitt. The rule estab- lished in this case has ever since obtained in the English courts, and may now be considered as fundamental in the commercial jurisprudence of that country. In this countr)' there has been the same contrariety of decisions as in the Eng- lish courts, but there is a large and constantly increasing preponderance on the side of the rule laid down in Goodman v. Harvey. The question first came be- fore this court in Swift v. Tyson. Goodman v. Harvey, and the class of cases to which it belongs, were followed. The court assumed the proposition, which they maintain to be too clear to require argument or authority to support it. The ruling in that case was followed in Goodman v. Simonds, and again in the Bank of Pittsburg v. Neal. In Goodman v. Simonds the subject was elaborate- ly and exhaustively examined both upon principle and authority. That case affirms the following propositions : The possession of such paper carries the title with it to the holder. ' The possession and title are one and inseparable.' The party who takes it before due for a valuable consideration, without knowledge of any defect of title, and in good faith, holds it by a title valid against all the world. Suspicion of defect of title or the knowledge of circumstances which would excite such suspicions in the mind of a prudent man, or gross negligence on the part of the taker, at a time of the transfer, will not defeat his title. That result can be produced only by bad faith on his part. The burden of proof lies on the person who assails the right claimed by the party in possession. Such is the settled law of this court, and we feel no disposition to depart from it. The rule may perhaps be said to resolve itself into a question of honesty or dishon- esty, for guilty knowledge and wilful ignorance alike involve the result of bad faith. They are the same in effect. Where there is no fraud there can be no question. The circumstances mentioned, and others of a kindred character, while inconclusive in themselves, are admissible in evidence ; and fraud estab- lished, whether by direct or circumstantial evidence, is fatal to the title of the holder. The rule laid down in the class of cases of which Gill v. Cubitt is the antetype, is hard to comprehend and difficult to apply. One innocent holder may be more or less suspicious under similar circumstances at one time than at another, and the same remark applies to prudent men. One prudent man may also suspect where another would not, and the standard of the jury may be higher or lower than that of other men equally prudent in the management of their affairs. The rule established by the other line of decisions has the advan- tage of greater clearness and directness. A careful judge may readily so sub- mit a case under it to the jury that they can hardly fail to reach the right con- clusion. We are well aware of the importance of the principle involved in this inquiry. These securities are found in the channels of commerce everywhere, and their volume is constantly increasing. They represent a large part of the wealth of the commercial world. The interest of the community at large in the subject is deep-rooted and wide-branching. It ramifies in every direction, and its fruits enter daily into the affairs of persons in all conditions of life. WHiile courts should be careful not so to shape or apply the rule as to invite aggression ^12 COUPON BONDS. § I504' bonds are in the hands of bona fide holders for value with- out notice of defects, and irregularities in their issue. Such defects and irregularities, if material, are available against a holder who paid nothing, or who had notice of them,^ un- less indeed he sustains himself through the perfected title of an antecedent holder.^ § 1 504. Views of the English courts as to the negotia- bility of investment securities. — In England there is a grow- ing disposition to favor the negotiabiUty of instruments similar to the coupon bonds of this country, but they are not yet placed upon so clear and stable a footing. In 181 1, the Court of King's Bench having expressed strong doubt whether a bona fide purchaser for value of bonds of the East India Company would be protected against a former owner, from whom they had been obtained by fraud or theft, upon the ground that being choses in action they were not assignable at law, and that the pur- chaser acquired no legal title,^ Parliament immediately enacted that such bonds should be assignable and transfer- able by delivery, and that the money secured by, and the property in, them should be absolutely vested in the assignee at law as well as in equity." Soon after, it was held that an exchequer bill passed by delivery, and that the property or ffive an easy triumph to fraud, they should not forget the considerations of equal importance which lie in the other direction. In Miller v. Race, Lord Mansfield placed his judgment mainly on the ground that there was no differ- ence in principle between bank notes and money. In Grant v. Vaughn, he held that there was no distinction between bank notes and any other commercial paper. At that early period his far-reaching sagacity saw the importance and the bearings of the subject. The instruction under consideration in the case before us i's in conflict with the settled adjudications of this court." See, also, Morris Canal & Banking Co. v. Fisher, i Stockt. Ch., 667; Mechanics Bank v. New York & New Haven R.R. Co., 3 Kern, 599 ; Moran v. Commissioners, 2 Black, 722 ; and ante, §§ 770 et seq., vol. I ; City of Elizabeth v. Force, 29 N. J. Eq.. 587. ' Chambers County v. Clews 21 Wall., 321. = See vol. I, §§ 803 et seq. ; Commissioners v. Balles, 94 U. S. (4 Otto), 109 Commissioners v. Clark, 94 U. S. (4 Otto), 279 ; McClure v. Township of Oxford 94 U. S. (4 Otto), 432. "^ Glyn v. Baker, i East., 510. * 5^ George III., ch. 64. § 15^5- '^'^^^ NEGOTIABILITY OI" COUPON BONDS. 513 vested in a bona fide holder.^ Subsequently, the same doc- trine was applied to Prussian bonds, payable to the holder,^ and, later still, it was left to a jury to determine whether Neapolitan bonds, with coupons, passed in like manner.^ More recently, in the House of Lords, it has been held (af- firming the judgment of the Court of Exchequer Chamber, which accorded with the previous judgment of the Court of Exchequer), that the scrip of a foreign government, issued by it on negotiating a loan (which scrip promised to give to the bearer, after all instalments should have been duly paid, a bond for the amount paid, with interest), is, by the custom of all the stock markets of Europe, a negotiable instrument, and passes by mere delivery to a bona fide holder for value ; that the English law follows this custom, and any person taking it in good faith obtains a title to it, independent of the title of the person from whom he took it.^ And the like views were taken as to scrip of a banking company, which certified that the bearer would be entitled to be registered as the holder of certain of its shares.^ § 1505. Overdue coupons.— h. coupon becomes due, as we have already seen, on the very day fixed for payment of interest on the bond (without grace), whether it be drawn in the form of a bill, note, check, or mere interest warrant.' And as soon as that day passes it is regarded as dishonor, like other commercial paper remaining unpaid at maturity ; and if thereafter transferred, the transferee takes it subject to all frauds and equities with which it was affected in the hands of his transferrer. In a case in Virginia, it appeared « Wookey v. Pole, 4 B. & Aid., i. ' Gorgier v. Melville, 3 B. & C, 45. ' Lang- V. Smith, 7 Bing., 284. * Goodwin v. Roberts, i Appeal Cases, 476 (1S76) ; 16 Moaks' Eng. Reports, 119 (affirming judgment of the Court of Exchequer Chamber), L. R., 10 Exch. R-. 337 (1^75) ; 14 Moaks' R., 591 ; and of the Court of Exchequer, L. R., 10 Exch., 76 (1875) ; 12 Moaks' R., 525. The same doctrine is held in Rumball v. Metropolitan Bank (1877), 2 Q. B. Div„ 194; 20 Moaks' E. R., 276. ' Rumball v. Metropolitan Bank, 2 Q. B. Div., 194 (1877)- • Arents v. Commonwealth, 18 Grat., 773; Bank of Louisiana v. City of New Orleans, 5 Am. Law. Reg. N. S., 555 ; ante, § 1490. Vol. II.— 33 514 COUPON BONDS. § I506 that the coupons of certain bonds of the city of Wheeling, which were guaranteed by the State of Virginia, became due and payable at different times from January ist, 1862, to January ist, 1864, inclusive. The plaintiff purchased them boiia fide from the Farmers' Bank in November, 1864. It did not appear by what title the bank held, and the coupons had been stolen from the second auditor of the State of Virginia, by whom they had been taken up soon after they became payable. They were held by the court as overdue after the ist of January, 1864, the day of payment, and that accord- ingly the plaintiff could not recover against the State. " No principle," said Joynes, J., "is better settled than that a party who takes a negotiable instrument by indorsement or delivery, after it has become due, gets no better title than the party had from whom he received it. These cou- pons were overdue when they came into the hands of the plaintiff, and the transfer to him was subject to the rules applicable to the transfer of overdue paper." ^ § 1506. A different view from that above stated was taken in a recent New York case, where it appeared that coupons due April ist, 1871, w^ere stolen from an express company on April 3d, 1871, and sold to the plaintiff, a banker, on the same day. The court, in its opinion, made no reference to the fact that the coupons were overdue — which, it seems to us, was sufficient to defeat the plaintiff — and held that he was entitled to recover.^ No authority was quoted in support of the particular point decided, and the decision seems to be at direct variance with the settled doctrine that after maturity negotiable instruments are > Arents v. Commonwealth, 18 Grat., 773 (citing- Ashurst v. Bank of Aus- tralia, 37 Eng. L. & Eq., 195) ; First Nat, Bank v. County Commissioners, 14 Minn., 79. 2 Evertsen v. National Bank of Newport, 11 N. Y. S. C. R. (4 Hun), 694 (1875). The opinion may have been based on the view that the coupons were entitled to grace, and consequently were not to be regarded as overdue when stolen ; but no allusion is made to that argument of counsel, and the better opinion is that no grace attaches to coupons. Ante, §§ 1490, 1505. § 1506^. THE NEGOTIABILITY OF COUPON BONDS. 515 Stripped of that peculiar characteristic which enables the transferrer to convey a better title than the transferrer him- self possesses.^ [Since the foregoing was written, the opinion of the Court of Appeals of New York, in the case cited, has been published, and it will there be seen that the court held the coupons to be entitled to grace, and hence not overdue at the time they were acquired.]^ When a negotiable instrument is overdue, that fact is alone such a suspicious circumstance as makes it incumbent on the pur- chaser to look to his transferrer's title.^ It will always be presumed in favor of a holder of cou- pons, as of other negotiable instruments, that he acquired them bona fide before maturity, and for value, without no- tice of any defects.* § 1506^. Effect of non-payment of coupons 07i bonds. — The simple fact that an instalment of interest is overdue and unpaid, disconnected from other facts, is not sufficient to affect the position of one taking the bonds and subse- quent coupons before their maturity for value as a bona fide holder. To hold otherwise would throw discredit upon a large class of securities issued by municipal and private cor- porations, having years to run, with interest payable annu- ally or semi-annually. Temporary financial pressure, the ^ See chapter XXI, on Transfer by Indorsement, § 724, vol. i ; chapter xxiv, on Bona Fide Holder, §§ 782, 788 ; chapter XLix, on Checks, section ix, vol. 2. See also Ashurst v. Bank of Australia, 37 E. L. & Eq., 195 ; Brown v. Davies, 3 T. R., 80. In Arents v. Commonwealth, 18 Grat., -JT], Joynes, J., said : " The point of the objection as to the theft is simply that the coupons had been stolen, not that they had been stolen from the State (the gUc^rantor). The objection to the plaintiff's title on this ground would be the same, no matter from whom they were stolen A person who takes a negotiable instrument after it has become due, can not recover upon it if it has been previously stolen, unless it was stolen before maturity and passed afterward into the hands of a bona fide holder, from whom the plaintiff derived his title." 2 Parsons N. & B., 279; Chitty on Bills (13 Am. ed.) [*2I7], 247. * Evertsen v. National Bank, 66 N. Y. (22 Sick.), 22, 23 (1876), Allen, J. Sec ante, § 1490. ' Brown v. Davies, 3 T. R., 80 ; Rothschild v. Comey, 9 B. & C, 391 ; Hinck ley v. Union Pacific R.R., 129 Mass., 52. *City of Lexington v. Butler, 141 Wall., 295 ; chapter XXI, § 728, vol. i, p, 583 ; chapter xxiv, §§ 769, 784, vol. i. 5l6 COUPON BONDS. § I506(5. fallino- off of expected revenues or income, and many other causes having no connection with the original vaHdity of such instruments, have heretofore, in many instances, pre- vented a punctual payment of every instalment of interest as it matured .; and similar causes may be expected to pre- vent a punctual payment of interest in many instances here- after. To hold that a failure to meet the interest as it ma- tures, renders them, though they may have years to run, and all other coupons dishonored paper, subject to all defences good against the original holders, would greatly impair the currency and credit of such securities, and correspondingly diminish their value.^ But the presence of overdue and un- paid coupons on bonds may be a circumstance which, when coupled with other significant indications of invalidity, prove sufficient to put a purchaser on inquiry.^ Where it is provided in the bonds themselves, that if default be made as to any interest coupon, the bonds shall be due and payable, they so become on default of payment of any coupon.^ § i5o6(5. Lis pendens. — The doctrine of lis pendens, which is elsewhere considered, in reference to negotiable instruments, does not extend to any security of their class before maturity ; and, therefore, the title of a purchaser of negotiable coupon bonds before their maturity is not affected by a pending suit impeaching their validity, and of which he has no actual notice.* 'Railway Co. v. Sprague, 103 U. S. (13 Otto), 762, distinguishing the case of Parsons v. Jackson, 99 U. S. (9 Otto), 434 ; Cromwell v. County of Sac, 6 Otto (96 U. S.), 58, Field, J., saying : " All that we now decide is, that the simple fact that an instalment of interest is overdue and unpaid, disconnected from other facts, is not sufficient to affect the position of one taking the bonds and subsequent coupons before their maturity for value, as a (^tf/z^r/^/d' purchaser." See also, to same effect, Indiana, etc., R.R. v. Sprague, Albany L. J., May, 1881, p. 434 ; National Bank v. Kirby, 108 Mass., 497 ; Boss v. Hewitt, 15 Wis., 260; Gilbough v. Norfolk, etc., Co., i Hughes, 410 ; State ex rel. Block v. Cobb, 64 Ala., 158 ; see ante, 787 ; contra. First N. B. v. County Com'rs, 14 Minn., 77. ' Parsons v. Jackson, 99 U. S. (9 Otto), 434, explained in Railway Co. v. Sprague, 103 U. S. (13 Otto), 762. ' Mayor, etc., of Griffin v. City Bank, 58 Ga., 584 ; see also Walnut v. Wade, 103 U. S. (13 Otto), 695. * See ante, § 2,ooa ; County of Warren v. Marcy, 97 U. S. (7 Otto), 96. § 1508. THE NEGOTIABILITY OF COUPON BONDS. 517 § 1507. The p7'esent77tent of coupons for payment. — The degree of diligence to be exercised by the holder of a coupon in presenting it for payment is to be ascertained by reference to the relations of the parties liable upon it. It is due and payable on the very day fixed for payment of in- terest on the bond. And like a promissory note, payable on a day certain, it need not be demanded, as against the maker, on that day to preserve his liability,* and though in the form of a draft on a bank, neither demand nor notice are necessary to charge the drawer.^ § 1508. Presentine7it as to guarantors and iudorsers. — If there be a guarantor, the coupon must be presented within a reasonable time to charge him.^ And if there were an indorser, it should be, no doubt, presented at ma- turity, or else he would be discharged.^ It was argued in Virginia, in a case in which the coupons ran, " Duncan, Sherman & Co., of New York, will pay the bearer thirty dollars, the half-yearly interest on the Wheeling bond, 269, due I St January, 1867," that they must be regarded as pay- able on demand on or after the day specified, and not on that day, because the bond provides that the interest shall be paid by Duncan, Sherman & Co. " on presenting " to them the proper coupons. But the Court of Appeals held otherwise, and Joynes, J., said : " Sometimes the form of expression in such bonds is that the coupons shall be ' sur- rendered ' or ' delivered.' But the meaning is the same, whether the coupon is to be ' presented,' or ' surrendered,' or 'delivered.' The coupon passes by delivery, and is evi- dence of the title of the holder to demand the interest. This evidence of title must be produced before the money it calls for can be demanded, and it must be surrendered ' Arents v. Commonwealth, i8 Grat., 773; City of Jeffersonville v. Patterson. 26 Ind., i6 ; Langston v. S. C. R.R. Co., 2 S. Car. N. S., 248. ' Mayji, etc., v. Potomac Ins. Co., 58 Tenn., 296. ' Arents v. Commonwealth, 18 Grat., 773. * Bonner v. New Orleans, 2 Woods C. C, 135 ; antCy %% 1496, 1499^. 5l8 COUPON BONDS. § I509 when the money is paid. This is just what the law requires of every holder of a negotiable security, and no more. But can it be said that a bill of exchange or promissory note, payable on a specified day, or so many days after date, is not payable on a day certain, because paym~ent can not be maintained without a presentment or surrender of the note ? I conclude, therefore, that these coupons are negotiable in- struments, payable at a day certain, namely, the day men- tioned in each as the day the interest called for by the coupon is payable, though the holder was not bound to present them for payment on that day, so as to save the lia- bility of the city (the principal obligor), or of the State (the guarantor)," § 1508^. In Alabama, it is provided by statute that county commissioners must audit all claims, and no suit can be brought upon a claim against a county until pre- sentment of the claim and the statutory provisions have been complied with. But where, pursuant to legal author- ity, the county commissioners had subscribed to a rail- road company, and issued coupon bonds, the statute above referred to, it has been held, would not require presentment of either the bonds or coupons to the commissioners before bringing suit upon them.-^ SECTION IV. ACTION ON NEGOTIABLE BONDS AND COUPONS. § 1 509. There is no doubt that the holder of a corpora- tion or State bond, payable to the holder or to bearer, may sue upon it in his own name ; ^ and so also may the holder of coupons payable in like manner.^ 'County of Greene v. Daniel, and County of Pickens v. Daniel, 102 U. S. (12 Otto), 187. "Carr v. Le Fevre, 27 Penn. St., 413 ; Society for Savings v. New London, 29 Conn., 175. "Johnson v. County of Stark, 22 111., ^5. § 15 lO. ACTION ON NEGOTIABLE BONDS AND COUPONS. 519 § i509<^. Interest not recoverable on bond without pro- ducing cotipon. — Where a suit is brought for the collection of interest upon coupon bonds, the court will not allow the holder of the bond to take judgment for the interest, with- out producing the coupons, as they might be outstanding and valid in the hands of other parties.^ § 1509^. Suit maintaitiable on severed coupon without producing bond. — From what has been already said it might be inferred, and it is now well established, that suit may be sustained upon a severed coupon, without produc- ing the bond, for the coupon was intended for the very purpose of being disconnected from the bond. In the United States Supreme Court, on the point being raised that suit could not be maintained on the coupons without producing the bond to which they had been attached. Nelson, J., said: "The answer is, that the coupons or warrants for the interest were drawn and executed in a form and mode for the very purpose of separating them from the bond, and thereby dispensing with the necessity of its production at the time of the accruing of each in- stalment of interest, and at the same time to furnish com- plete evidence of the payment of the interest to the makers of the obligation."^ § 1 5 10. Paymejit of bonds does not affect coupons. — The fact that the bonds from which the coupons sued on have been detached, have been paid and surrendered, does not affect the right of recovery upon them. They thereby ' City of Kenosha v. Lamson, 9 Wall., 482 ; Redfield on Railways, 605 ; U. S. Circuit Court, Williamson v. New Albany & Salem R.R., 9 American Railway Times, No. 37. *Comm'rs of Knox Co. v. Aspinwall, 21 How., 54. To same effect, see Na- tional Exchange Bank v. Hartford, etc., R.R. Co., 8 R. I., 375 ; County of Beaver v. Armstrong, 44 Penn. St., 63 ; Thomson v. Lee Co., 3 Wall., 327; Kennard v. Cass Co., U. S. C. C, Cent. Law Jour., Jan. 15th, 1874; Mayor, etc., V. Potomac Ins. Co., 58 Tenn., 296; Town of Cicero v. Clifford, 53 Ind., 191 ; Kennard v. Cass Co., 3 Dillon C. C., 147 ; Walnut v. Wade, 103 U. S. (13 Otto) 695 ; First N. B. v. Mount Tabor, 52 Vt., 87; Welch v. First Division St. Paul & P. R.R., 25 Minn., 320. 520 COUPON BONDS. § I5IO. lose their character as incidents of the bond, but are stil) independent and self-sustaining instruments.* It has been held that in declaring on coupons the instruments in suit should be identified on the face of the declaration by the number of the bond, date, sum, and time of -payment.^ § 151 1. Decision in Maine criticised. — It has been held in Maine that the holder of a detached coupon running, " The York & Cumberland Railroad Company will pay nine dollars on this coupon in Portland," could not main- tain an action upon it as a distinct and independent security, as the language did not imply any negotiable or indepen- dent character.^ But the opinion of Goodenow, J., who dissented, and sustained his views in an elaborate and able argument, has received general commendation, and the whole tendency of recent decisions is to concurrence with him. The fact that the coupon contains no word of promise is immaterial, as it clearly evinces an intention to constitute in itself an obligation to pay, and could have been designed for no other purpose.'* § 151 2. Decision in Connecticut criticised. — It has been also held in Connecticut,^ that suit could not be maintained on a coupon alone, unless it contained a distinct promise to pay the amount represented. The following case was be- fore the court : The railroad company's bonds acknowledged indebtedness in certain amounts to certain trustees, pay- able to bearer, with semi-annual interest thereon, pay- able to bearer, at the office of the company, on delivery of certain interest warrants annexed. An interest war- rant annexed was as follows : " Interest warrant for • National Exchange Bank v. Hartford, etc., R.R. Co., 8 R. I., 375. '^ Kennard v. Cass Co., 3 Dillon, 147. ' Jackson v. Y. & C. R.R. Co., i Amer. Law Reg. N. S., 585. * See Judge Redfield's note in 2 Amer. Law Reg. N. S., p. 585 ; Virg. & Tenn. R.R. Co. V. Clay (Va. Special Court of Appeals, unreported) ; Mercer County v. Hubbard, 45 111., 142 ; Johnson v. Stark Co., 24 Id., 75 ; ante, § 1483. ' Crosby v. New London, etc., R.R. Co., 26 Conn., 121. § 151 T. ACTION ON NEGOTIABLE BONDS AND COUPONS. 52I $30, being half-yearly interest on bond No. 30 of the N. L. W. & P. R.R. Co., payable on the first day of February, 1856 — J. D., Treasurer." An action of debt being brought on the warrant, the Supreme Court of the State held that it could not be made a ground of action, as it was a mere acknowledgment of interest on the bond itself, and did not import a promise ; and that the bond should have been declared on, as it alone contained a promise to pay the interest. But Judge Redfield, com- menting on this decision in a contribution to " The Ameri- can Law Register," ^ observes : " We apprehend no such distinction as this is maintained in practice ; but that the coupons are regarded as equally negotiable with the bonds , and that they pass currently as money, the same as the bonds themselves. And the fact that they do not contain the name of any payor, or purport to be made payable to bearer, does not seem to us of any practical importance, if, in fact, among business men they have acquired the charac- ter of negotiable securities, and of this we think there can be no question." And this language expresses the true view of the law as we conceive it. The design of the in- strument is unmistakable. What further inquiry can be necessary ? ^ § 1512^. Coupons, being notes or drafts not sealed, are admissible in evidence, and may be recovered upon under the common money counts.^ A judgment that a party is a bona fide owner of certain coupons does not establish that he is a bona fide owner of the bonds.'* The aggregate amount of coupons sued upon in one of the Federal courts of the United States determines its juris- diction of the suit.^ ' 2d Vol. New Series, 597. * Virg. & Tenn. R.R. Co. v. Clay (Va. Special Court of Appeals, unreported). » Mercer County v. Hubbard, 45 HI- U2 ; Johnson v. Stark County, 24 Id., 75 * Steward v. Lansing, 4 Morrison's Transcript, No. i, p. 85. » Smith V. Clark County, 54 Mo., 58. 522 COUPON BONDS. § 15^3* S 1 5 1 3. Interest and exchange are recoverable on coupons. Xhe coupons being in themselves promissory notes, de- sio-ned to secure the prompt payment of interest on an investment, it is but just and right that if not paid when due, they should themselves bear interest until paid. As has been said by the Supreme Court of the United States : " Being written contracts for the payment of money, and negotiable because payable to bearer, and passing from hand to hand like other negotiable instru- ments, it is quite apparent on general principles that they should draw interest after it is unjustly neglected or re- fused."* And this view is concurred in by numerous authorities.^ For like reasons, exchange should be recover- able upon coupons under circumstances which would war- rant its recovery on any other species of commercial paper. The Supreme Court of the United States has expressed its opinion to the effect that : " Municipal bonds with coupons payable to bearer, having by universal usage and consent all the qualities of commercial paper, a party recoverino- on the coupons is entitled to the amount of them with interest and exchange at the place where by their terms they were made payable." ^ Interest on the coupons is covered by a mortgage securing the principal of the debt." ' Aurora City v. West, 7 Wall., 105 ; Town of Genoa v. Woodruff, 92 U. S. (2 Otto), 502 ; Amy v. Dubuque, 98 U. S. (8 Otto), 471 ; Koshkonong v. Burton, U. S. S. C, March, 1882, Albany L. J. for May 6, 1882, vol. 25, No. 18, p. 350; Walnut V. Wade, 103 U. S. (13 Otto), 695. ^ Arents v. Commonwealth, 18 Grat., lid; Gibert v. W. C. V. M., etc., R.R. Co 33 Grat., 599 ; Gelpcke v. Dubuque, i Wall., 206 ; Thomson v. Lee County, 3 Wall, 332 ; Hollingsvvorth v. City of Detroit, 3 McLean, 472 ; Mills v. lown of Jefferson, 20 Wis., 50 ; North Penn. R.R. Co. v. Adams, 54 Penn., 94 ; San Antonio v. Lane, 32 Tex., 405 ; Virginia v. Ches. & O. Canal Co., 32 Md.. 501 ; Nat. Exchange Barjk v. Hartford P. & F. R.R., 8 R. L, 375 ; Langston v. b. C. R R Co., 2 So. Car. N. S., 248 ; Beaver County v. Armstrong, 6 Wright. 63 ; Conn. Mut. Ins. Co. v. Cleveland, etc., R.R., 41 Barb., 9 ; Welsh v. First Divis- ion St. Paul & P. R.R., 25 Minn., 320. ' Gelpcke v. Dubuque, i Wall., 20 ; City of Jeffersonville v. Patterson, 26 Ind., 16 (1866) ; Koshkonong v. Burton, U. S. S. C, March, 1882. ^ Gibert v. W. C. V. M., etc., R.R. Co., 33 Grat., 599. § 1514- ACTION ON NEGOTIABLE BONDS AND COUPONS. 523 § 15 14. Prior demand of pay7nent not necessary to re- covery of interest on coupons. — In Illinois it has been held that coupons do not bear interest ; and in a case where suit was brought on coupons from bonds of the city of Pekin, it was held that at any rate a demand was necessary. The court said : " There was no averment of a demand upon the city treasurer for payment of these coupons. If such instruments could in any event draw interest without an express agreement, it could only be after an express demand of payment. Until a demand is made, such a body (a municipal corporation) is not in default. They are not like individuals, bound to seek their creditors to make payment of their indebtedness. It was held in the case of the People ex rel. v. Tazewell County, 22 111., 147, that munic- ipal corporations could not even bind themselves to pay their indebtedness at any other place than their treasury, unless specially authorized by legislative enactment." ^ But the Supreme Court of the United States has in several cases given judgment for interest on municipal coupons payable at particular banks named in another State, and without any evidence of a demand of payment at such places ; ^ and it has been distinctly held that no demand is necessary to be alleged or proved as a foundation of claim for interest by the tribunals of some of the States.^ And • City of Pekin v, Reynolds, 31 111., 531 (1863); Chicago v. People, 56 111., 327 ; Johnson v. Stark County, 24 111., 75. "^ Gelpcke v. Dubuque, i Wall., 175 ; Thomson v. Lee County, 3 Wall., 327. See also Aurora City v. West, 7 Wall., 82 ; Clark v. Iowa City, 20 Wall., 583 ; Genoa v. Woodruff, 92 U. S. (12 Otto), 502. ' North Penn. R.R. Co. v. Adams, 54 Penn. St., 97 (railroad coupons) ; Lang- ston V. S. C. R.R. Co., 2 So. Car. N. S., 248 (railroad coupons) ; Va. & Tenn. R.R. Co. V. Clay (Virginia Special Court of Appeals, unreported). See also Mills V. Jefferson, 20 Wise, 50 ; San Antonio v. Lane, 32 Texas, 405 ; Jefferson- ville V. Patterson, 26 Ind., 16 ; Virginia v. Chesapeake, etc.. Canal Co., 32 Md., 501 ; contra, W^hittaker v. Hartford, etc., R.R. Co., 8 R. I., 47, Ames, C. J., say- ing : " Until presented, the defendant (a railroad company) could have been in no default for non-payment ; but after it, the coupons being due, the refusal to pay was a clear breach of the contract, and interest from the time of demand and refusal is recoverable by way of damages. Railroad bonds, with interest coupons attached, are purchased for investment and income, and when the latter is not paid at the time promised, no well-considered authority, properly under- 524 COUPON BONDS. §§ I515, I516. SO the Supreme Court of the U. S. has recently directly decided.^ § 15 15. Readiness of maker to pay at time and place of payment, abates interest on coupons. — But should the defendant corporation show a continued readiness to pay, at the time and place of payment, the interest would then be abated.^ This is all that is necessary to protect the de- fendant, and it is no more than justice to the plaintiff. § 15 16. In respect to the statute of li7nitations, the negotiable bond and its coupons so far constitute an integral instrument, that the statute applicable to the bond will ap- ply also to the coupons. Thus it has been held by the United States Supreme Court, that coupons of a bond of the city of Kenosha were not barred in less time than twenty years from their maturity, because that was the period applicable to the bond as a sealed instrument. Nelson, J., said : " These coupons are, substantially, but copies from the body of the bond in respect to the interest There was but one contract, and that evidenced by the bond, which covenanted to pay the bearer five hundred dollars in twenty years, with semi-annual interest, at the rate of ten per cent, per annum. The bearer has the same security for the interest that he has for the principal. The coupon is simply a mode agreed on between the parties for the con- venience of the holder in collecting the interest as it be- comes due. Their great convenience and use in the interests of business and commerce should commend them to the most favorable view of the court ; but, even without this consideration, looking at their terms, and in connection stood, forbids what principle requires, that the damages from delay of payment should be compensated by interest on the amount due, computed from the day of demand and refusal." 'Walnut V. Wade, 103 U. S. (13 Otto), 683; Ohio v. Frank, 103 U. S. (13 Otto), 697. ■' North Penn. R.R. Co. v. Adams, 54 Penn. St., 97 ; Walnut v. Wade, 103 U.S. (13 Otto), 683. §1517- ACTION ON NEGOTIABLE BONDS AND COUPONS. 525 with the bond, of which they are a part, and which is re- ferred to on their face, in our judgment it would be a de- parture from the purpose for which they were issued, and from the intent of the parties, to hold, when they arc cut off from the bond for collection, that the nature and character of the security changes, and becomes a simple contract debt, instead of partaking of the nature of the higher security of the bond, which exists for the same in- debtedness. Our conclusion is, that the cause of action is not barred by lapse of time short of twenty years."* But while the coupons and the bond constitute an integral con- tract, and the statute of limitations applying to the latter, applies also to the coupons, nevertheless it commences to run against the coupons from their respective periods of maturity, although not as against the bond until it also matures.^ § 1517. Use of bonds as collateral security. — When ne- gotiable coupon bonds of counties, corporations, or States are pledged as collateral security for a debt, and there is a failure to pay such debt according to contract, the fair pre- sumption is that they were designed to be held as a pledge, and were expected to be sold after due demand and notice. Such a deposit differs essentially from a deposit of ordinary bonds, mortgages, promissory notes, and like choses in action, which, in the absence of any agreement to that effect, the creditor can not expose to sale, because they have no market value, and it can not be presumed it was the intention of the parties thus to deal with them.^ The ' City of Kenosha v. Lamson, 9 Wall., 483, 484 ; followed in City of Lexing- ton V. Butler, 1 5 Wall., 296. " Clark V. Iowa City, 20 Wall., 586, explaining previous cases ; Amy v. Dubuque, 98 U.S., 471 ; Koshkonong v. Burton, Morrison's Transcript, vol. 4, No. I, p. 152. » Alexandria, Loudoun, etc., R.R. Co. v. Burke, 22 Grat., 261 ; Morris Canal, etc., Co. V. Lewis, i Beas. (N. J.), 329 (1858) ; see § 833, vol. i. 526 COUPON BONDS. § IS^?^' debtor is entitled to notice of the time and place of sale ; ■ but if he has knowledge, formal notice is unnecessary.^ § 1517^. Amount of recovery. — When negotiable bonds have been wrongfully put in circulation, it has been held that the purchaser may recover the full amount although he paid less.^ > Ibid. 2 Alexandria, Loudoun, etc., R.R. Co. v. Burke, 22 Grat., 263, 264. « Grand Rapids, etc., R.R. v. Sanders, 16 Hun, 552 ; see vol. i, § 754. CHAPTER XLVIII. THE VALIDITY OF MUNICIPAL BONDS. § 1 518. Municipal bonds constitute a vast portion of the wealth of the country, and the questions daily arising re- specting their validity are of the utmost nicety, and of the highest importance to the communities bound for their pay- ment, as well as to the capitalists and business men trading in them as mercantile commodities. We shall endeavor to discuss their nature and properties thoroughly, dividing the subject under the following heads : I. Nature of municipal corporations, and what powers may be conferred upon them. II. Express and implied powers of municipal cor- porations. When they may issue negotiable bonds. III. Power of the officer to bind the municipality. Views of the United States Supreme Court. IV. How invalidity of the bond is cured by acquiescence or ratification of the municipality. V. Review of the foregoing doctrines. Views which seem sustained by reason and authority. VI. Legislative control over municipal obligations. SECTION I. NATURE OF MUNICIPAL CORPORATIONS, AND WHAT POWERS MAY BE CONFERRED UPON THEM. § 1 5 19. A municipal corporation is an involuntary organ- ization of the inhabitants within certain local confines, of all ages, sexes, and conditions, under the will and direction of the legislative branch of the government, by which they (527) 528 THE VALIDITY OF MUNICIPAL BONDS. § 1519^. are clothed with a corporate character, for the purposes of local government. A private corporation is a voluntary association of per- sons capable of contracting, who enter a joint enterprise of private business, and are clothed by the legislature with a corporate character, for the purpose of carrying on such private business. § 1 5 1 9^. Differences betzveen a municipal and a private corporation. — These definitions exhibit the fundamental, substantial, and numerous differences between the two in- corporations. (i) A municipal corporation is involuntary. The inhab- itants within its limits need not accept, nay, may unani- mously protest against its charter. But they are clay in the hands of the potter, and the legislature, at its sovereign will, may mould them into a municipal corporation, and then may dissolve or change it at pleasure/ It may "erect, divide, and abolish at pleasure."^ But a pri- vate corporation can only be formed by the voluntary act of each member. (2) A municipal corporation is composed of all the in- habitants within its limits : men, infants, lunatics, and mar- ried women. A private corporation can only be formed of those whom the law designates, and who are capable of contracting. (3) A municipal corporation involves no contract be- tween its members. A private corporation involves a con- tract by its members inter sese, whereby, as against each other, they acquire vested rights and privileges, for the agreed consideration. (4) A municipal corporation involves no contract be- tween the State and itself, and none between the State and its members. A private corporation must accept its 'Soperv. Henry County, 26 Iowa, 264. *I Dillon on Municipal Corporations (2d ed.), p. 139, § 30. §1520. NATURE OF MUNICIPAL CORPORATIONS. 529 charter. And when accepted, it is a contract between the State and the artificial person constituted by it ; and also between the State and the members composing it, subject only to such control as the State may reserve, or be entitled in its sovereign character to exercise over it. (5) In a municipal corporation the members are not shareholders. They need hav^e no property interest in it ; and if any, their voice in the corporation is not proportioned to that interest. " The whole interests and franchises are the exclusive domain of the government."^ In a private corporation the members are (as a general rule) share- holders, and their influence is proportioned to their inter- ests.^ (6) A municipal corporation is formed purely for the purposes of local government. As said by the United States Supreme Court, " it is a representative not only of the State, but is a portion of its governmental power. It is one of its creatures, made for a specific purpose, to exer- cise within a limited sphere the powers of the State. "^ A private corporation is formed for the purpose of private business. § 1520. As to what powers may be co7if erred upon iniuiic- ipal corporations. — Remembering that the powers of a cor- poration are only such as are conferred " either expressly or as incidental to its very existence," and that the latter are such as " are best calculated to effect the object for w^hich it * Dartmouth College v. Woodward, 4 Wheat. , 636. ^East Hartford v. Hartford Co., 10 How., 531. Woodward, J.: "The mem- bers (of a municipal corporation) are not shareholders or joint partners in any corporate estate, which they can sell or devise to others, or which can be attached or levied on for their debts. Hence, generally, the doings between them and the legislature are in the nature of legislation rather than compact." There are some private corporations to which this remark does not apply, such as schools and charities, which are quasi ptcblic, and of course the legislature may provide by charter such rules as it may see fit. 'United States V.Baltimore & Ohio R.R. Co., 17 Wall., 322 ; i Dillon on Mun, Corps. (2d ed.), 139, note ; Jones on Railroad Securities, § 222. In Hodges V. City of Buffalo, 2 Den., 1 10, it was held that the common council had no author- ity to furnish an entertainment at public expense, and the party providing it could not recover against the citv. Vol. II.— 34 530 THE VALIDITY OF MUNICIPAL BONDS. § 1 520.' is created," ^ we come to consider what powers are incidental to the existence of municipal corporations, and what powers are or may be expressly conferred. Quite certain it is, we think, that there is no incidental power in a municipal cor- poration to borrow money,^ and none to execute negotiable or other securities for debt,^ though there is upon these, as upon almost every question as to the powers of such bodies, a perplexing conflict of authority.* " A municipal corporation," says the United States Supreme Court, " can not issue bonds in aid of extraneous objects (a railroad in the present case), without legislative authority, of which all persons dealing with the bonds must take notice."^ But equally certain it is, that the legislature may expressly or impliedly authorize a municipal corporation to borrow money, and to issue its securities therefor, negotiable or non- negotiable, provided it be done for a pubhc purpose.® And that it can not authorize it to pledge its credit, or ap- propriate its means to a private purpose ; for such a pur- pose is contrary to the very nature of the institution, and any diversion of the people's property to it, without their unanimous consent, would be taking one private citizen's substance for the benefit of another, and would operate a virtual confiscation.''' ' Dartmouth College v. Woodward, 4 Wheat., 636. "Miller v. Ray, 19 Wall., 468; Thomson v. Lee County, 3 Wall., 327 ; Starin V. Town of Genoa, 23 N. Y., 447-449 ; Hitchcock v. City of Galveston, U. S. Dist. Ct., Cent. L. J., May 21, 1875, p. 331 ; Jones on Railroad Securities, § 222. But it has been held that municipal corporations have all the powers of natural persons respecting their debts. Kelley v. Mayor, 4 Hill, 263. 'Thomson v. Lee County, 3 Wall., 327; Starin v. Town of Genoa, 23 N. Y., 447-449; Dively v. Cedar Falls, 21 Iowa, 566; Clark v. Des Moines, 19 Id., 200. * Kelley v. Mayor, 4 Hill, 263. ° Town of South Ottawa v. Perkins, 94 U. S. (4 Otto), 262. See also Pendle- ton Co. V. Amy, 13 Wall., 297; Kennicott v. Supervisors, 16 Wall., 452; St. Joseph Township v. Rogers, 16 Wall., 644 ; Town of Coloma v. Eaves, 92 U. S. (2 Otto), 484. *See infra, § 1522, 2LXiA post, sec. vi. ' National Bank v. City of lola, 9 Kans., 700 ; Loan Ass'n v. Topeka, 20 Wall., 655. § 15-2. NATURE OF MUNICIPAL CORPORATIONS. 53 1 § 152 1. Municipal corporations, by aiitJiority, 7nay make donations for public purposes. — But, provided the purpose be a public one, the legislature may empower the corpora- tion not only to subscribe to it for a consideration, but also to devote to it its means or its credit.^ Thus it has been recently decided by the United States Supreme Court, that where the legislature of Nebraska authorized the County of Otoe to aid the Burlington and Missouri River R.R.Co. by issuing its bonds to it as a donation, such bonds were valid, ^ and that decision has been followed and reaffirmed in other cases.^ § 1522, As to zvhat purposes are public. — The construc- tion and grading of streets;** the construction of water works ;^ of a bridge;® of a town hall;''' gas works ; ^ mar- kets;^ the providing of fire engines ;^° the laying out of cemeteries,^^ are proper objects of municipal care, and un- doubtedly the legislature may authorize the municipality to contract with reference to them, to borrow money for the purpose of effecting those objects, and to issue its negotia- ble securities therefor.^^ But the loaning of money to en- ' Davidson v. Ramsey County, 1 8 Minn., 482 (1872); see i Dillon on Alun. Corps. (2d ed.), 220, § 104, and notes. ^ Railroad Company v. County of Otoe, 16 Wall., 667 (1872). ' Olcott V. Supervisors, 16 Wall., 678 (1872) ; Town of Oueensbur>' v. Culver, 19 Wall., 91 (1873) ; Township of Pine Grove v. Talcott, 19 Wall., 667 ; Harter V. Kernochan, 103 U. S. (13 Otto), 568 ; Clemens on Corporate Securities, p. 39- " Sturtevant v. City of Alton, 3 McLean, 393 ; Rogers v. Burlington, 3 Wall., 362. " Rome v. Cabat, 28 Ga., 50 ; Hale v. Houghton, 8 Mich., 458 ; Stein v. Mo- bile, 24 Ala., 591. ' County Commissioners v. Chandler, 96 U. S. (6 Otto), 205, Bradley, J. : " Railroads, turnpikes, bridges, ferries, are all things of public concern, and the right to erect them is a public right In our judgment, the bridge in ques- tion is a public bridge, and a work of internal improvement within the meaning of the statute." Bonds issued in aid of the bridge were held valid. See also Township of Burlington v. Beasley, 94 U. S, (4 Otto), 314. ' Greeley v. People, 60 111., 19. ' City of Aurora v. West, 9 Ind., 74, • State V. Madison, 7 Wise, 688. " Mills V. Gleason, 11 Wise, 470; Robinson v. St. Louis, 28 Mo., 488. " Ibid. " I Dillon on Mun. Corps., § 66. 532 THE VALIDITY OF MUNICIPAL BONDS. § 1^22a. able citizens to rebuild their burned houses,^ to equip and furnish manufacturing establishment of individuals,^ to construct saw or grist mills ^ (unless such mills be made public institutions, in which case it would be different),* to improve a water privilege and manufacture lumber,^ to es- tablish a citizen in business,^ to provide destitute citizens with provisions and grain for seed and feed,' would not be within the scope of public purposes, and the legislature could confer no authority to subscribe to such objects, § 1522^. Injunction lies to resti^-ain sub scrip tio7i for pri- vate purposes. — If the municipal authorities undertake to subscribe on behalf of the municipality to a private object the citizens have their remedy ; and it is well settled that resident tax-payers may invoke the interposition of the courts to prevent illegal disposition of municipal funds, or the illegal creation of a debt.^ § 1523. The promotion of railroads and highways is a public purpose. — Whether or not the construction of a railroad, or other highway, is a public purpose to which a municipal corporation may be authorized to contribute is a much-debated question. The United States Supreme Court has affirmed that it is in numerous decisions,'' and so likewise ' Lowell V. Boston, iii Mass., 454 (1873), * Loan Association v. Topeka, 20 Wall., 655 ; Commercial N. Bank v. lola, 2 Dill. C. C. R., 353 ; 9 Kans., 700. ' Allen V. Inhabitants of Jay, 60 Me., 124 (1871) ; 12 Am. Law Reg. N. S., 481. * Township of Burlington v. Beasley, 94 U. S. (4 Otto), 314. ^ Weismer v. Village of Douglass, 11 N. Y. S. C. (4 Hun), 21 r. * Cooley's Const'al Lim., 494. ^ The State ex rel. Griffith v. Osawkee Township, 14 Kans., 418. " Crampton v. Zabriskie, loi U. S. (11 Otto), 601. * Knox County V. Aspinwall, 21 How., 539; Gelpcke v. City of Dubuque, i Wall, 175 (1863) ; Seybert v. City of Pittsburg, Id., 272 ; Meyer v. City of Mus- catine, 390 ; Sheboygan Co. v. Parker, 3 Wall., 96 ; Havemeyerv. Iowa County, 3 Id., 294 ; Thomson v. Lee County, 3 Id., 330 ; Rogers v. Burlington, 3 Id., 362 ; Mitchell V. Burlington, 4 Wall., 274 ; Campbell v. Kenosha, 5 Id., 196, 200 ; Su- pervisors V. Schenck, 5 Id., 776 ; The City v. Lamson^ 9 Id., 479 ; Bath Co. v. Amy, 13 Id., 244; Pendleton Co. v. Amj', 13 Id., 298; Kennicott v. Supervisors, 16 Id., 452 ; St. Joseph Township v. Rogers, 16 Id., 644 ; Olcott v. Supervisors, 16 Id., 678 ; Township of Pine Grove v. Talcott, 19 Wall., 666. §> 1523- NATURE OF MUNICIPAL CORPORATIONS. 533 have many of the State courts of last resort.^ And it has been held that a municipal corporation might, under legisla- tive authority, donate its bonds to a railroad company,^ and even though it was outside of the State, but looking to a connection with it.^ And also that it might subscribe under competent authority to a " Railroad and Banking Compa- ny ";■* or to a railroad company whose charter vested it with power to carry on the business of a coal, mining, furnace, or manufacturing company.^ But these decisions are com- bated with great power of reasoning in a few of the States,^ and the disastrous frauds that have resulted from judicial recognition of their doctrines, reinforcing logic with great considerations of public policy, would doubtless now overthrow them, were they not so solidly imbedded in our jurisprudence, with vested rights of property resting upon them. Constitutional inhibitions are now coming to the relief of the people ;^ and it is probable that in a few years the constitutions of the States will, without excep- tion, stand between the people and the repetition of such * Goddin v. Crump, 8 Leigh, 120(1837) (navigation company) ; City of Bridge- port V. Housatonic R.R. Co., 15 Conn., 475 (1843) ; Nichol v. Mayor of Nash- ville, 9 Humph., 252 (1848) ; Talbot v. Dent, 9 B. Mon., 526 (1849) ; Slack v. Maysville R.R. Co., 13 Id., i (1852) ; Commonwealth v. McWilliams, 11 Penn. St., 61 (1S49) ; Sharpies v. Mayor, 21 Id., 147 ; Moers v. City of Reading, 21 Id., 188; Davis V. Ramsey Co., 18 Minn., 482; Hallenbeck \-. Hahn, 2 Neb., 377; Strickland v. Railroad Co., 27 Miss., 209 ; City v. Alexander, 23 Mo., 483 ; Leav- enworth Co. v. Miller, 7 Kan., 479 ; Aurora v. West, 9 Ind., 74 ; Gibbons v. R.R. Co., 36 Ala., 410; Prettyman v. Supervisors, 19 111., 406; Butler v. Dun- ham, 27 111., 474 ; Augusta Bank v. Augusta, 49 Me., 507 ; Stein v. Mobile, 24 Ala., 591 ; Starin v. Genoa, 23 N. Y., 439; Gould v. Sterling, Id., 439; Benson V. Mayor, 24 Barb., 248 ; Duanesburg v. Jenkins, 40 Barb., 579 ; San Antonio V. Lane, 32 Tex., 405. ' Town of Queensbury v. Culver, 19 Wall., 84. * Railroad Co. v. County of Otoe, 16 Wall., 667. See also Quincy, etc., R.R. Co. V. .Morris, 84 111., 410. * Winn v. City of Macon, 21 Ga., 275. ' County of Randolph v. Post, 93 U. S. (3 Otto), 502. * People V. Township Board of Salem, 20 Mich., 452, against the power; so also Thomai v. Port Huron, 27 Mich., 320. In Iowa the decisions have vacil- lated. At hrst the power was affirmed, Dubuque Co. v. R.R. Co., 4 G. Greene, i; then denied. State v. Wapello Co., 13 Iowa, 388; Hanson v. Vernon, 27 Iowa, 28. '' In Ohio, Illinois, and Pennsylvania such subscriptions are prohibited by the constitution. 534 THE VALIDITY OF MUNICIPAL BONDS. § 1523*3!. abuses as have disgraced the municipal history of this country, and overburdened its citizens with taxation. § 1523^. Co7isolidatioii of railroads. — When a munici- pal corporation has lawful authority to subscribe to a rail- road company, which becomes afterward consolidated under constitutional enactments with other companies un- der another name, and the consolidated company succeeds to the rights and privileges of the company to which the subscription was authorized, the Supreme Court of the United States has held, that the municipal corporation may execute its power to subscribe to the consolidated company;^ but that authority given to a county court by a township election to subscribe to a certain railroad com- pany would not extend to authorize subscription by such court on behalf of the township to another company which had absorbed the original by consolidation, the distinction being taken that the county court in the latter case was the mere agent of the township, having no discretion to act beyond the power given, while the authorities of the county invested with discretion, as it5 official representatives would have a more extended power.^ § 1524. Constitutional restrictions tipon public subscrip- tions. — In those cases where it appeared there were consti- tutional restrictions upon the legislatures of States, forbid- ding the contracting of debts, or subscriptions to internal improvements by them, it has been held that such restric- tions did not apply to the municipal divisions of a State.' * County of Scotland v. Thomas, 94 U. S. (4 Otto), 692 ; County of Schuyler V. Thomas, 98 U. S. (8 Otto), 169; Pompton v. Cooper Union, loi U. S. (11 Otto), 202. See also The State v. Greene County, 54 Mo., 540 ; County of Ray V. Vansyckle, 95 U. S. (5 Otto), 675. = Harshman v. Bates County, 92 U. S. (2 Otto), 569. See also County of Bates V. Winters, 97 U. S., 83 (7 Otto). As to consolidation of corporations and ef- fect on subscriptions, see County of Tipton v. Locomotive Works, 103 U. S. (13 Otto), 523 ; Harter v. Kernochan, Id., 562 ; Menaska v. Hazard, 102 U. S. (12 Otto), 81. ' Township of Pine Grove v. Talcott, 19 Wall., 674 ; Gelpcke v. City of Du- buque, I Wall., 204; Clark v. Janesville, 10 Wis., 136; Clapp v. Cedar Co., 5 Iowa, 15 ; Thompson v. City of Peru, 29 Ind., 305 ; Cass v. Dillon, 2 Ohio St. § 1524- NATURE OF MUNICIPAL CORPORATIONS. 535 And conversely, that restrictions upon the powers of mu- nicipal corporations do not apply to the State,^ But if a constitution forbid the General Assembly to "authorize any county, city, or town, to become a stockholder in, or loan its credit to, any company, association, or corporation,'' unless two-thirds of the qualified voters assent, townships will be comprehended in the interdict, as they are mere tracts of territory, having no more existence as corpora- tions than the wards of a city.'^ Where such provisions are incorporated into the consti- tutions of the States, if they appear on their face, by fair and reasonable intendment, to apply only to future acts conferring authority by the legislature, they will not abro- gate and annul existing acts by which authority is conferred upon municipal bodies to make particular subscriptions, althoucrh those bodies have not carried them out. And bonds issued in pursuance of such pre-existing acts will be valid.* In Minnesota, where the constitution forbade the legislature to authorize the issue of municipal bonds in ex- cess of ten per cent, of taxable property, it was construed to be applicable to future legislation, and not to laws in ex- istence.* The United States Supreme Court, speaking of a prohibitory clause of the constitution of Missouri, says : " This prohibition, it will be observed, is against the legis- lature's authorizing municipal subscriptions or aid to private 607 ; Slack v. Railroad Co., 13 B. Mon., 16; Prettyman v. Supervisors, 19 III, 406; Pattison v. Supervisors, 13 Cal., 175 ; Johnson v. Stark Co , 24 111., 75; Butler v. Dunham, 27 111., 474 ; Robertson v. City of Rockford, 21 111., 452. * Cooley Const. Lim., 218, 219 ; i Dillon on Mun. Corp., § 90, p. 208. ^ Harshman v. Bates County, 2 Otto (92 U. S.), 569. "County of Cass v. Gillett, 100 U. S. (10 Otto), 585; County of Henry v. Nicolay, 95 U. S. (5 Otto), 619; County of Schuyler v. Thomas, 98 U. S. (8 Otto), 173 ; County of Scotland v. Thomas, 94 U. S., 682 ; Smith v. County of Clark, 54 Mo., 58 ; Smead v. Trustees of Union Township, 8 Ohio St., 394 ; Cass V. Dillon, 2 Ohio St., 398 ; Commissioners of Knox County v. Nichols, 14 Ohio St., 260 ; Woodward v. Supervisors of Calhoun County, U. S. District Court of Mississippi, Cent. L. J., June 18, 1875, p. 396. The State v. Sullivan Co., 51 Mo., 522; The State v. Greene Co., 54 Mo., 540; County of Callaway v. Foster 93 U. S. (3 Otto), 567. * State V. Town of Clark, 23 Minn., 423. 536 THE VALIDITY OF MUNICIPAL BONDS. § I 5 25. corporations ; it does not purport to take away any au- thority already granted. It only limits the power of the leo-islature in granting such authority for the time to come." ^ § 1525. Federal decisions as to the validity of municipat bonds. — It is a general principle of the jurisprudence of the United States that the construction given to a statute of a State by the highest court thereof, is a part of the statute itself, and is as binding upon the Federal courts of the United States as the text of the statute.^ And if the highest court of a State adopt new views as to the proper construction of such a statute, and reverse its former de- cision, the Federal courts will follow the latest settled ad- judications.^ But still they will not follow every oscilla- tion of opinion. And, therefore, where it appeared that at the time when the city of Dubuque issued certain coupon bonds, their legality had been determined by a series of de- cisions of the highest court of Iowa, the Supreme Court of the United States refused to follow subsequent decisions of the same tribunal holding such bonds invalid, Swayne, J., saying: " We shall never immolate truth, justice, and the law, because a State tribunal has erected the altar and decreed the sacrifice." And approved as the sound and true rule that "if the contract, when made, was vaUd by the laws of the State as then expounded by all the departments of the government, and administered in its courts of jus- tice, its validity and obligations can not be impaired by any subsequent action of legislature or decision of its courts alterinor the construction of the law."* ■ County of Scotland v. Thomas, 94 U. S. (4 Otto), 688. See Moultrie Co. v. Fairtield, vo-1. 4 Morrison's Transcript, No. i, p. 140. 2U. S. V. Morrison, 4 Pet., 124; Green v. Neal, 6 Pet., 291 ; Township of Elmwood V. Many, 2 Otto (92 U. S.), 287. ^ Leffingwell v. Warren, 2 Black, 599. « Gelpcke v. Dubuque, i Wall., 202. [See Ohio Life and Trust Co. v. Debolt, 16 How., 432]. To same effect," see also Havemeyer v. Iowa Co., 3 Wall., 294 ; Lamed v. Burlington, 5 Wall., 275 ; Mitchell v. Burlington, 5 Wall, 274 ; Thom- son V. Lee County, 3 Wall, 327 ; Lee v, Rogers, 7 Wall., 181 ; City of Kenosha § 1527. EXPRESS AND IMPLIED POWERS. S37 § 1526. More recently the United States Supreme Court has taken a step farther, and held that questions relating to bonds issued in a negotiable form invoh'e questions re- lating to commercial securities ; and that whether under the constitution of the State such securities are valid or void belongs to the domain of general jurisprudence. And, accordingly, that the decisions of the highest court of the State relating to such bonds will not be respected by that tribunal, when not satisfactory to its judges, and the ques- tion arises upon a bond in the hands of a bona fide holder who is the citizen of another State or a foreigner.^ SECTION II. EXPRESS AND IMPLIED PO\VERS OF MUNICIPAL CORPORATIONS. — WHEN THEY MAY ISSUE NEGOTIABLE BONDS. § 1527. The powders of corporations have been divided judiciously into three classes : (i) Those granted in express words. (2) Those necessarily implied or necessarily inci- dent to the powders expressly granted. (3) Those abso- lutely essential to the declared purposes and objects of the corporation not simply convenient, but indispensable.^ Whatever powder is implied is as effectual as what is ex- pressed.^ § 1527^;. General doctrines as to municipal powers. — In the United States the following propositions are sus- tained by weight of authority : V. Lamson, 9 Wall., 486 ; Campbell v. Kenosha, 5 Wall., 194 ; Clemens on Cor- porate Securities, 32, 33; Township of Elmwood v. Many, 92 U. S. (2 Otto), 298 ; Douglass v. County of Pike, loi U. S. (11 Otto), 679. * Township of Pine Grove v. Talcott, 19 Wall., 667. See ante, § 10, vol. i. 'Dillon on Municipal Corporations (2d ed.), 173, § 55 ; Merriam v. Moody's Ex'rs, 25 Iowa, 163; Tucker v. City of Virginia, 4 Nev., 20. 'United States v. Babbitt, i Black., 61 ; Gelpcke v. Dubuque, i Wall., 221 Lynde v. County of Winnebago, 16 Wall., 13. 538 THE VALIDITY OF MUNICIPAL BONDS. § I528. 1. That whenever a municipal corporation has power conferred to contract a debt, borrow money, or issue a ne- gotiable security, it is to be regarded quoad hoc as a private corporation.* 2. That a municipal corporation has implied power to contract a debt whenever necessary to carry out any power conferred upon it.^ 3. That whenever it may contract a debt, it may borrow money to pay it.^ 4. That whenever it may contract a debt or borrow money, it may issue its negotiable coupon bonds for its payment* § 1528. The yfri-/ proposition can not be sustained, in our judgment. The differences between the public and the pri- vate corporation, indicated in the beginning of this chap- ter, show that their natures have little if anything in com- mon. A municipal corporation, indeed, can not be em- powered to act for private purposes. Its character as a gov- ernment can not be divested. And in no sense can it be looked upon as anything else than as a local arm of the sovereign power.^ § 1529. ThQ second proposition is undoubtedly correct, but the authorities differ as to the facts which justify its ap- 1 De Voss V. City of Richmond, 18 Grat., 338, 345. quoting Moodalay v. East India Co., i Brown C. C, 469 ; Touchard v. Touchard, 5 Cal., 307 ; City of Ga- lena v. Corwith, 48 111., 424. '^Lynde v. County, 16 Wall., 12. » Lynde v. County, 16 Wall, 12 ; City of Galena v. Corwith, 48 HI., 424. *De Voss V. City of Richmond, 18 Grat., 338 ; Railroad Co. v. Evansville, 15 Ind 3QS; Commonwealth v. Pittsburg, 34 Penn. St., 496 ; Middleton v, Alle- ghany Co., 37 Penn. St., 241 ; Reinbath v. Pittsburgh, 41 Id., 278 ; Galena v. Corwith, 48 111., 423. ^Roosevelt v. Draper, 23 N. Y., 318, 325; Darlington v. Mayor, 31 N Y., 164. Tudge Dillon says in his Treatise on Municipal Corporations (2d. ed., p. 152, riote) that " the private character ascribed to it (a municipality) is difficult ex- actly to comprehend," and pertinently inquires, " Are not all powers conferred upon municipalities, whether many or few, given, and given only, for their better regulation and government, and to promote their welfare as parts of the State at large ? " He evidently discountenances the idea of a municipality being re- garded as private in any regard. § I530- EXPRESS AND IMPLIED POWERS. 539 plication. If a municipal corporation be empowered to erect public buildings, court-houses, markets, etc., it must necessarily contract debts for the material furnished, and services rendered. And it has been held that it may exe- cute its negotiable bonds for the amounts agreed to be paid to the contractors.^ But if the statute law be such as to indicate that taxation, and not the contraction of debts, was contemplated by the legislature as the method of raising money to accomplish the proposed objects, that method alone can be relied on ; for authority to issue obligations must be conveyed in express terms, or by necessary implication.* § 1530. The third proposition, that, whenever the mu- nicipality may contract a debt, it may borrow money to pay it, has been illustrated in numerous cases. Thus it has been held that, where the town of Chilicothe was em- powered to purchase real estate, and erect public buildings, its power to borrow money for these purposes was implied, and its bonds for money borrowed valid.^ The like decis- ion has been rendered where money was borrowed to carry out authority to a municipal corporation to build markets ; the court saying, that " corporations may resort to the usual and convenient means of carrying out powers granted," and that "no means is more usual for the execu- tion of such objects than that of borrowing money." * So where a county w^as authorized to construct a court-house, and levy a tax for that purpose, it was held that the county judge (the officer designated) had authority to borrow monev, and issue negotiable county bonds therefor ; and to sell the bonds outside of the State to raise money for the purpose indicated.^ 'Lynde v. County, 16 Wall., 12; Mills v. Gleason, n Wis., 470; Bank v, Chilicothe, 7 Ohio, Part II, 31. "Wells V. Supervisors, 102 U. S. (2 Otto), 625. 'Bank v. Chilicothe. 7 Ohio, Part II, 31 (1836). * Mills V. Gleason, 1 1 Wis., 470 ; State v. Madison, 7 Wis., 688. 'Lvnde v. County of Winnebago, 16 Wall., 12 (1872), Chief-Justice Chase, and Field and Miller, JJ., dissenting. See Wells v. Supervisors, 102 U. S (12 Otto) 625. " 540 THE VALIDITY OF MUNICIPAL BONDS. ^ ^530* But there is a fundamental difference between contract- ing a debt to one person, and borrowing money from another to pay it. It may be convenient to do so, but it can not be necessary. And the power to contract a debt to A. can not, by any reasonable intendment, be construed into a power to borrow money from B. In the one case the application of the credit is secured to the advancement of the authorized object, while money borrowed is liable to be lost, to be squandered, or to be diverted to illegitimate purposes. And the logic of the cases which impress this view seems to us unanswerable.^ Recognizing the fact that corporation officers are special agents, and that municipal corporations are themselves but special agents of govern- ment, it is difficult to see how the power of the corporation or of its officers (who are agents of agents) can be so broadly extended by implication, as some of the cases main- tain. If the corporation be authorized to contract with A. to build a court-house, its bonds given for the amount due him would be good. But enlarging the power to authorize the borrowing of money, and, under color of building one court-house, municipal officers might flood the markets with millions of negotiable bonds for money borrowed from different persons, which they might put in their pockets, and leave the building still unpaid for. In other words, a county officer, authorized, as in the case cited below,^ to provide a single county edifice, may dissolve the whole property of the county in the twinkling of an eye, and by the magic of a negotiable bond, into his pocket. Courts which tolerate such doctrines, and support them by the narrow technicalities of estoppel, seem to us not exempt from that "epidemic insanity" which has induced extrava- gant corporate subscriptions to public works, and which has been so much deprecated.^ In Louisiana the charter of ' Ketchum v. City of Buffalo, 14 N. Y., 256. * Lynde v. County of Winnebago, 16 Wall., 12. •See Mercer County v. Racket, i Wall., 96, and J>osi, § 1541. § 1532- EXPRESS AND IMPLIED POWERS. 54I a municipal corporation granted authority to it to give such bonds as might be necessary, to conduct its litigation, or on the current administration of its affairs. It was held that this did not authorize the issue of bonds for raising money ; and that bonds issued for such a purpose were void, even in the hands of a bona fide holder.^ § 1 53 1. As to the fourth proposition, when the power to borrow the money is clear, it necessarily involves in its ex- ercise the execution of a security for its repayment ; and negotiable coupon bonds, being the common and most acceptable form of municipal securities, when given for money legitimately borrowed, would undoubtedly be valid, as has been stated.^ And it is generally considered that when the municipality has authority to contract a debt it has the power to evidence the same by a bill, note, bond, or other instrument.^ § 1532. Decisions of U. S. Supreme Court. — The United States Supreme Court has held that authority to a city to subscribe to stock in a railway company " as fully as an in- dividual," imported power to subscribe to the stock on credit, and issue its negotiable bonds in payment.* So that authority to a city " to borrow money for any object in its discretion," authorized it to subscribe to a railroad cor- poration, and to borrow money upon its negotiable bonds to pay for it.^ It has carried its doctrines on this subject to great lengths, and has held that authority to " borrow ' Wilson V. City of Shreveport, 29 La., 678 (1877), Marr, J. : "The cred'.' r of a coqjoration is bound to see that the contract or obligation of which he claims the benefit is within the power which the corporation may lawfully exercise. The fact that the obligation is in the shape of a negotiable instrument, or that it was acquired in good faith, for a valuable consideration, before maturity, in no man- ner enlarges the power of the corporation, or gives any additional force or valid- ity to its unauthorized acts." ^ See ante, § 1527. ^ City of Williamsport v. Commonwealth, 84 Penn. St., 500. * Seybert v. City of Pittsburg, i Wall., 372 ; Commonwealth ex rel. Reinbatb V. Pittsburg, 41 Penn. St., 278. •Meyer v. Muscatine, i Wall., 387. 542 THE VALIDITY OF MUNICIPAL BONDS. § 1533- money for any public purpose," authorized the city of Bur- lington to subscribe to railroad stock, and to issue its nego- tiable bonds to the company to be sold by it, the proceeds realized by the company to be appropriated to pay for the stock/ But borrowing money to pay for ^stock is one thing, and hypothecating credit in the shape of bonds to be sold to pay for it is another and very different thing ; and this decision stretches implication to the last attenuation. More in conformity with principle we think is the decision to the contrary in New York, where it was held that authority to a town to borrow money at seven per cent, and to pay it out for railroad stock at par, did not warrant it to exchange the town bonds for an equal nominal amount of stock, leaving it in the power of the railroad company to sell the bonds at a discount.^ § 1533- ^^ ^^ ^^^^ ^^^^ ^f ^^''^''^^'^^P^^ bonds. — When they have been once issued into the market as valid subsisting securities, they may be sold for any amount by the holder, like any other chattels.^ But in the hands of the munici- pality they are not, unless so made by statute, the subject of 1 Rogers v Burlington, 3 Wall., 654. Field, J. (with whom concurred Chase, C T and Miller and Grier, JJ.), dissented, in an opinion of rare ability. " Here " he said, " the authority is to borrow money, yet no money was bor- rowed,' but the bonds of the city were lent. Borrowing money and lendmg credit are not convertible terms.'' "- Starin v. Town of Genoa, 23 N. Y., 454. Lott, J., saying: " It was evidently the intention of the act that money should be raised and paid over to aid in the construction of a railroad, and no color is given to the idea or the position that the credit merely of any town should be given, through and by which money mi"-ht be raised. A town might be willing to incur a debt to a limited sum, witli the knowledge that the whole amount for which it was incurred was actu- allv to be appropriated to the construction of a railroad that might be deemed conducive to its interests, but would absolutely retuse to issue their bonds, for the purpose of sale, from which much less than the amount for which they were eiven might be realized. If it had been intended to authorize bonds to be given for stock? there is no reason why that intention should not have been declared, as was done in the law in relation to the village of Rome, above referred to See also Gould v. Town of Sterling, 23 N. Y., 458, and opinion of Selden, J., quoted by Field, J., dissenting, in above-quoted case Judge Cooley, m his ad- mirable work on Constitutional Limitations, p. 218, note, approves the New York view. -nt n =» Town of Danville v. Sutherlin, 20 Gratt., 555 : City of Lynchburg v. Norvell 20 Gratt., 601 ; Griffith v. Burden, 35 Iowa, 138. See § 750. vol. i. § 1534- EXPRESS AND IMPLIED POWERS. 543 sale. Legislative authority to issue bonds for the stock of a railroad corporation, or other public improvement, does not imply authority to sell them and apply the proceeds to pay for the stock, especially if the sale be below par.* And authority to issue bonds for a loan of money does not imply authority to sell the bonds below par ; and such a sale would be usurious if the discount were greater than allowed by law, and render the bonds absolutely void.^ Any one who purchases bonds, knowing that they were negotiated in a manner not authorized by law, is not a bona fide holder, but takes them subject to any defence existing against them ; ^ and if they w^ere usurious in their inception, even a bona fide holder for value and without notice, it seems, can not recover against the corporation.* But a third party, selling them to him, w^arrants their validity, and he may recover from him the consideration paid.^ § 1 534. When sale is affected with usury. — The fact that the bonds acquired from a city are issued in the form of a sale, and are paid for in a depreciated medium, nominally greatly in excess of their face value, it has been held, does not relieve the transaction from the taint of usury, if in reality the real value of such depreciated medium bore to the face value of the bond a proportion which would amount to usury ;^ and it has been also held that the taint would not be removed by the fact that the bonds might be paid ' City of Atchison v. Butcher, 3 Kans., 104 ; Daviess County Court v. Howard, 13 Bush (Ky.), 102, III. "" Town of Danville v. Sutherlin, 20 Grat., 555 ; City of Lynchburg v. Norvell. 20 Grat., 601. In the first named of the above cases, p. 580, Staples, J., said ; " In every sale there must be, not only parties, but a thing to be sold. A man can not sell his own promises to pay, because such an obligation is not the sub- ject of sale. So long as it remains in his own possession it is payable to no one, and binds no one." See Com'rs of Craven Co. v. A. & N. C. R.R., "Jl N. C, 295 ' Starin v. Town of Genoa, 23 N. Y., 440 ; City of Atchison v. Butcher, 3 Kans., 104. " See City of Lynchburg v. Norvell, 20 Grat., 601. " See chapter xxil, on Transfer by Assignment, §§ 732 et scq., vol. I ; Young v. Cole, 3 Bing. N. C, 724. See as to when amount paid may be recovered of the Corporation, § 1491^. • Town of Danville v. Sutherlin, 20 Grat., 555 ; Staples, J., with w^hom Chris- tian, J., concurred ; Moncure, P., dissented ; Anderson and Joynes, JJ., not sit- ting. See also City of Lynchburg v. Norvell, 20 Grat., 601. 544 THE VALIDITY OF MUNICIPAL BONDS. § 1 535- at maturity in the carrency receivable for taxes by the State wherein they were issued.* But there is to our mind great force in the view that if the currency of payment be not gold, but such as may be in circulation at time of payment, there is no usury in the transaction, as there is no certainty that the payee will receive back his principal amount.^ § 1535. Submission to popular vote. — In submitting to popular vote the question of subscription to a public im- provement, the corporate authorities must proceed in con- formity with the statute authorizing such vote to be taken, and not in such a manner as to confuse or confound the question presented with another.^ If the statute requires the subscription vote to " specify the amount," it will not suffice to submit the question to the people calling on them to vote for or against an amount " not exceeding " a sum named.* And if it require the grand jury to specify the amount, it will not suffice for them to simply limit the amount.^ But all such irregularities may be cured by legis- lative ratification.^ And mere informalities — as, for instance, making the bonds payable " to the railroad company or bearer," where the statute provided they should be payable " to the president and directors of the railroad company, and their successors and assigns" — would be immaterial.''^ ' City of Lynchburg v. Norvell, 20 Grat., 601 ; Staples, J., with whom Chris- tian, J., concurred ; Moncure, P., dissented. ^ See Bracken v. Griffin, 3 Call, 433 ; and Boulware v. Newton, 18 Grat., 708, where this view is illustrated. = Peoria & O. R.R. Co. v. County of Tazewell, 22 111., 156. Walker, J., " In the case of Fulton County v. The Wabash and Mississippi Railroad Co., 21 III., 338, this court held, that the law did not authorize the submission of a proposi- tion for subscription of a gross sum to two roads, in the same submission, in such a manner that the voter had no option to vote for the one and against the other. This submission was made in that manner. It is proposed to sub- scribe one hundred thousand dollars, one-fourth to this and three-fourths to another road, and the voter, however much in favor of subscription to one, and opposed to the other, was compelled to vote either for or against the entire sub- scription." * State V. Saline County, 45 Mo., 242. ^ Mercer County v. Pittsburgh, etc., R.R., 27 Penn. St., 389. * McMillen v. County Judge, 6 Iowa, 393. '' Woodward v. Supervisors of Calhoun County, U S. Dist. Ct., Cent. L. J„ June 18, 1875, p. 396. § 1535^- EXPRESS AND IMPLIED POWERS. 545 If bonds be issued by corporate authorities before the law authorizing their issue is pubhshed and takes effect, they will be void,^ though subject to subsequent ratification. § 1535^' Cases 171 zvhicJi a majoi'ity of legal or qualified votes is necessary. — Sometimes the constitution of a State, or the act of the legislature, requires as a condition prece- dent to subscriptions, and the consequent issue of bonds by counties, cities, or towns, that " a majority (or two-thirds or some other proportion) of the legal (or qualified) voters " shall have given their assent thereto at an election. " It is insisted," said Clifford, J., in a case before the U. S. Su- preme Court, "that the legislature, in adopting the phrase ' a majority of the legal voters of the township,' intended to require only a majority of the legal voters of the town- ship voting at an election, notified and held to ascertain whether the proposition to subscribe for the stock of the company should be accepted or rejected ; and the court is of opinion that such is the true meaning of the enactment, as the question would necessarily be ascertained by a count of the ballot."^ "All qualified voters," says Chief-Justice Waite in another case, "who absent themselves from an election duly called, are presumed to assent to the expressed will of the majority of those voting, unless the law pro- viding for the election otherwise declares. Any other rule would be productive of the greatest inconvenience, and ought not to be adopted, unless the legislative will to that effect is clearly expressed."^ These views have not pre- vailed without dissent in the U. S. Supreme Court ; ^ and ■ Phelps V. Alfred Bank, 13 Wise, 432; Berliner v. Town of Waterloo, 14 Wise, 378. ^ St. Joseph Township v. Rogers, 16 Wall., 644. ' County of Cass v. Johnston, 95 U. S. (5 Otto), 369, citing Louisville, etc., R.R. V. County Court of Davidson, i Sneed, 638 ; Taylor v. Taylor, 10 Minn., 107 ; People v. Warfield, 20 111., 159; People v. Garner, 47 111., 246; People v. Weant, 48 111., 263. See also County of Cass v. Jordan, 95 U. S. (5 Otto), 372 ; Douglass V, County of Pike (11 Otto), loi U. S., 685. * See Harshman v. Bates County, 92 U. S. (2 Otto), 569, and opinion of Brad- ley, J., in County of Cass v. Johnson, 95 U. S. (5 Otto), 370. Vol. IL— 35 546 THE VALIDITY OF MUNICIPAL BONDS. § ^53^- the opposing views have much to commend them to favor.* In our judgment they are more consistent with popular rio-ht which should be the touchstone of construction in all matters touching the purse of the people. It has been well said : " The people who are to pay the taxes and ought not to be subjected to that burden unless the requisite majority of the class named, that is, the qualified voters, can be in- duced to give their assent to it. In the one case, as in the other, absence and failure to vote is equivalent to a dis- sent." 2 § 1535(5. A constitutional prohibition, contained also in legislative enactment, forbidding municipal officers to loan municipal credit, or donate or subscribe stock to railroad or other corporations without previous assent of two-thirds of the qualified voters, is merely prohibitory, and confers no authority when such assent is given.^ § 1536. It has been held that, if a majority of the electors of a municipal corporation vote in favor of a proposition for the corporation to subscribe to the capital stock of a railroad company, under a law directing such subscription to be made if such majority's vote is obtained, the munici- pal authorities, on proceedings to compel them to make such subscription, have a right to allege and show that the election was not fairly conducted, but was influenced by bribery and corruption, practiced and perpetrated by the railroad company and its employes.* It has been held by the U. S. Supreme Court that under an Illinois statute au- thorizing a township subscription to a railroad company not exceeding $250,000, provided the ^people so voted, the power of the township was not exhausted by a subscription ' See State v. Wenkelmeier, 35 Mo., 103 ; State v. Sutterfield, 45 Mo., 391. ' Dissenting opinion of Bradley, J., in County of Cass v. Johnson, 95 U. S. (5 Otto), 371. = Jarrolt v. Moberly, 103 U. S. (13 Otto), 581. * People V. Supervisors, 27 Cal., 655. § 1537- POWER OF A MUNICIPAL OFFICER TO BIND. 547 of a portion of the sum limited/ and that a consoHdation of the railroad company with another, and assumption of a different name prior to the subscription, did not vitiate it.^ § 1536^. Right of tax-payers to injunction. — The tax- payers of the municipality may also enjoin the proceedings of the corporate authorities to carry out the subscription on the ground of fraud, bribery, non-fulfilment of pre-ex- isting conditions, or other sufficient cause ; but they must do so, if at all, in apt time, and before the rights of bona fide third parties have accrued.* SECTION III. POWER OF A MUNICIPAL OFFICER OR AGENT TO BIND THE MUNICIPALITY; VIEWS OF THE UNITED STATES SUPREME COURT. § 1537- The Supreme Court of the United States has enunciated the following doctrines on this subject as appli- cable to corporations, private and public, w^hich we shall divide into two series. The first series are as foUow^ s : First : Where a party deals with a corporation in good faith, the transaction is not ultra vires, and he is unaware of any defect of authority, or other irregularity on the part of those acting for the corporation, and there is nothing to excite suspicion of such defect or irregularity, the corpora- tion is bound by the contract, although such defect or irreg- ularity in fact exists.^ Second : When a corporation has power, under any cir- * Empire v. Darlington, loi U. S. (11 Otto), 87; see People v. Wajnesville, 88 III, 469. ' Empire v. Darlington, loi U. S. (11 Otto), 87 ; see ante, § 1523(7. ' Butler V. Dunham, 27 111., 477, 478; Prettyman v. Supervisors, 19 111., 406 Steines v. Franklin County, 48 Mo., 176 ; see § 1522^;. * Merchants' Bank v. State Bank, 10 Wall, 644. 548 THE VALIDITY OF MUNICIPAL BONDS. §1537- cumstances, to issue negotiable securities, the bojia fide holder has a right to presume they were issued under the circumstances which give the requisite authority, and they are no more liable to be impeached for any infirmity in the hands of such a holder than any other commercial paper.^ Third: That, where negotiable bonds or securities on their face import by recitals a compliance with the law under which they were issued, the purchaser is not bound to look further for evidence of compliance with the condi- tions annexed to the grant of power to issue them.^ Fourth : That, if it appears to have been the sole prov- ince of the officers who execute and issue the bonds or se- curities to decide whether or not there has been antecedent compliance with the regulation, condition, or qualification prescribed to their authority, their determination that there has been such compliance and declaration to that effect is sufficient, and can not be impugned as against a bona fide holder.^ ' Gelpcke v. City of Dubuque, i Wall., 203 ; Moran v. Miami County, 2 Black, 725 ; Supervisors v. Schenck, 5 Wall., 784 ; The Mayor v. Lord, 9 Wall., 414 ; City of Lexington v. Butler, 14 Wall., 296. See also San Antonio v. Lane, 32 Tex., 414 ; County of Henry v. Nicolay, 95 U. S. (5 Otto), 626. ■^ Mercer County v. Hacket, i Wall, 93 ; Commissioners of Knox County v. Aspinwall, 21 How., 545 ; St. Joseph Township v. Rog-ers, 16 Wall., 659; Pen- dleton County V. Amy, 13 Wall., 305 ; Bissell v. Jeffersonville, 24 How., 287 ; Moran v. Miami County, 2 Black, 722 ; Grand Chute v. Winegar, 15 Wall., 372 ; Larned v. Burlington, 4 Wall., 276, 277 ; Lynde v. County, 16 Wall., 6 ; Kenni- cott V. Supervisors, 16 Wall., 464; County of Warren v. Marcy, 97 U. S. (7 Otto), 96 ; Menasha V. Hazard, 102 U. S. (12 Otto), 81 ; San Antonio v. M'eharty, 96 U. S. (6 Otto), 313 ; Township of Rock Creek v. Strong, 96 U. S. (6 Otto), 227 ; Commissioners v. BoUes, 94 U. S., 202 ; Commissioners v. January, 94 U. S. (4 Otto), 202 ; Pompton v. Cooper Union, loi U. S. (11 Otto), 204 ; Clay Co. V. Society for Savings, Morrison's Transcript, vol. 3, No. 3, p. 654. = Town of Coloma v. Eaves, 92 U. S. (2 Otto), 491 ; Town of Venice v. Mur- dock, 2 Otto (92 U. S.), 496; Town of Genoa v. Woodruff, 2 Otto (92 U. S.), 502 ; County of Moultrie v. Savings Bank, 92 U. S. (2 Otto), 631 ; Marcy v. Township of Oswego, 92 U. S. (2 Otto), 637 ; Walnut v. Wade, 103 U. S. (13 Otto), 683 ; Commissioners v. Bolles, 4 Otto (94 U. S.), 104 ; Buchanan v. Litchfield, 102 U. S. (12 Otto), 291 ; Bonham v. Needles, 103 U. S. (13 Otto), 648 ; Orleans v. Pratt, 99 U. S. (9 Otto), 676 ; Lincoln v. Iron Co., 103 U. S. (13 Otto), 413 ; Moultrie Co. V. Fairfield, Morrison's Transcript, vol. 4, No. i, p. 152 ; Commis- sioners V. Januar)-, 94 U. S. (4 Otto), 202 ; St. Joseph Township v. Rogers, 16 Wall., 659, Clifford, J. ; Kennicott v. Supervisors, 16 Wall., 464, Hunt, J. ; Lynde V. County, 16 Wall., 13, Swayne, J. : " It is a settled rule of law that, where _a particular functionary is clothed with the duty of deciding such a question, his § 153^. POWER OF A MUNICIPAL OFFICER TO BIND. 549 Fifth : That, from the mere fact that the bonds or se- curities are issued and subscribed to the object of their issue, the purchaser has a right to assume that the condi- tions precedent to the right to issue have been fulfilled,^ and in an action on the bonds or coupons the plaintiff need not aver the performance of such conditions.^ Sixth: That, if the legal authority be sufficiently com- prehensive, a bona fide holder for value has a right to pre- sume that all precedent requirements have been complied with.^ Seventh : That, if there be lawful authority for the cor- poration to issue the bonds, the omission of formalities and ceremonies, or the existence of fraud on the part of the agents of the corporation issuing the bonds, can not be urged against a bona fide holder seeking to enforce them.'* § 1538. Qnalifications of doetrines stated. — But the effect of its decisions is to qualify these doctrines by a second series of propositions, as follows : decision, in the absence of fraud or collusion, is final." See also Bank of Rome V. Villag^e of Rome, 19 N. Y., 20; Commissioners of Knox County v. Nichols, 14 Ohio St.. 271. In Town of Coloma v. Eaves, 2 Otto (92 U. S.), 491. Strong, J., quoting Dillon on Municipal Corporations, § 419, says : " After a review of the decisions of this court, the author remarks, ' If upon a true construction of the legislative enactment conferring the authority (viz., to issue municipal bonds upon certain conditions), the corporation, or certain officers, or a given body or tribunal, are invested with power to decide whether the condition precedent has been complied with, then it may well be that their determination of a matter in pais, which they are authorized to decide, will, in favor of a bondholder for value, bind the corporation.' This is a very cautious statement of the doctrine. It may be restated in a slightly different form. When legislative authority has been given to a municipality, or to its officers, to subscribe for the stock of a railroad company, and to issue municipal bonds in payment, but only on some precedent condition, such as a popular vote favoring the subscription, and where it may be gathered from the legislative enactment that the officers of the munici- pality were invested with power to decide whether the condition precedent has been complied with, their recital that it has been, made in the bonds issued by them, and held by a band Jide purchaser, is conclusive of the fact, and binding upon the rnunicipality, for the recital is itself a decision of the fact by the ap- pointed tribunal." 1 Commissioners of Knox County v. Aspinwall, 21 How., 544 ; Meyer v. Mus- catine, I Wall., 393 ; Lincoln v. Iron County, 103 U. S. (13 Otto), 412. "" Lincoln v. Iron County, 103 U. S. (13 Otto), 413. " Meyer V. Muscatine, i Wall.', 393; Grand Chute v. Winegar, 15 Wall, 373. *Kennicott v. Supervisors, 16 Wall., 465 ; Town of East Lincoln v. Daven- port, 94 U. S. (4 Otto), 801. 550 THE VALIDITY OF MUNICIPAL BONDS. § I 539- First: That where the power on the part of the corpora- tion officers to make the contract for the corporation never existed, negotiable securities issued by them are invalid in the hands of all persons, even innocent purchasers.^ And such power must appear to exist in express terms, or by necessary implication.^ Second : That there can be no ratification, save by those who are capable to contract, nor of contracts, save of those which it is competent for them to perform.^ § 1539. Illustrations of the doctrines of the U. S. Su- preme Court. Leading case of Conwtissioners of Kjiox County V. Aspinwall. — Manifesting a stern resolution to sustain the rights of bona fide holders of corporate securi- ties, that tribunal has applied the first series of propositions in numerous cases. In one of them which is generally quoted as a leading case,* suit was brought by a bona fide holder for value of coupons, attached to bonds of Knox County, Indiana, which had been given in subscription to stock of a railroad company. The board of county com- missioners had been authorized by act of Assembly to take stock in the railroad, payable in county bonds, " provided a majority of the qualified voters of said county, at any annual election, shall vote for the same." The bonds recited on their face, that they were issued by order of the commissioners in pursuance of the act of Assembly provid- ing for their issue ; and the county resisted payment on the ground, that though a vote had been cast in favor of their ^ Anthony v. County of Jasper, loi U. S. (i i Otto), 693 ; Wells v. Supervisors, 102 U. S. (12 Otto), 625 ; Town of South Ottawa v. Perkins, 94 U. S. (4 Otto), 260 ; McClure v. Township of Oxford, 94 U. S. (4 Otto), 432 ; Marsh v. Fulton County, 10 Wall., 683, See also Wilson v. City of Shreveport, 29 La., 673 ; Tcvvn of Middleport v. yEtna Life Ins. Co., 82 111., 562 ; Township of East Oak- land V. Skinner, 94 U. S. (4 Otto), 257 ; Williamson v. City of Keokuk, 44 Iowa, 88, ^ Wells V. Supervisors, 102 U. S. (12 Otto), 625. ^ Marsh v, Fulton County, 10 Wall., 683 ; Boom v. City of Utica, 2 Barb., 103. * Commissioners of Knox County v. Aspinwall, 21 How., 539; approved in De Voss V. City of Richmond, 18 Grat., 356, 357 ; Steines v. Franklin County 48 Mo., 179 ; Town of South Ottawa v. Perkins, 94 U. S. (4 Otto), 260. §1539- POWER OF A MUNICIPAL OFFICER TO BIND. 55I issue, at a popular election, the bonds were invalid, because the preliminary notices for the election prescribed by statute had not been properly given. But the court declared them valid, on two grounds, and Nelson, J., said : (i) "This view would seem to be decisive against the authority, on the part of the board, to issue the bonds, were it not for a question that underlies it, and that is, who is to determine whether or not the election has been properly held ? The right of the board to act in execution of the authority is placed upon the fact, that a majority of the votes had been cast in favor of the subscription ; and to have acted without first ascertaining it would have been a clear violation of duty ; and the ascertainment of the fact was necessarily left to the inquiry and judgment of the board itself, as no other tribunal was provided for the pur- pose. The board was one, from its organization and gen- eral duties, fit and competent to be the depository of the trust thus confided to it." (2) "Another answer," says the court, " to this ground of defence, is that the purchaser of the bonds had a right to assume that the vote of the county, which was made a condition to the grant of the power, had been obtained, from the fact of the subscription by the board to the stock of the railroad company, and the issuing of the bonds. The bonds on their face import a compliance with the law under which they were issued. .... The purchaser v/as not bound to look further for evidence of a compliance with the conditions to the grant of the power." Again, where bonds issued by county commissioners recited that they were issued by virtue of, and in accordance with, the act of the legislature, and in pursuance of, and in accordance with, the vote of a majority of the qualified electors, the court said : " Behind such a recital, as we have seen, a bona fide holder for value paid is bound to look for nothing except legislative authority given for the issue of municipal bonds to railroad companies."* ' Commissioners v. Bolles, 94 U. S. (4 Otto), 109. See also Commissioners v. January, 94 U. S. (4 Otto), 202. 552 THE VALIDITY OF MUNICIPAL BONDS. § I54O. § 1540. Olhcr cases wherein recitals in bonds were deemed concliLsive. — So where the common council of Jeffersonville City were authorized to issue bonds 'for stock in a railroad company on the petition of three-fourths of the legal voters of the city, it was held that the city was precluded by the recital in bonds issued by the council, that such petition had been made, from showing the o.o'ix- trsiry against do7ia Jide holders for value.-^ The like view was taken where authority was conferred on the council of Muscatine to borrow money upon a two-thirds majority in favor of the loan being cast at an election — but in this case it appears that such majority was cast.^ So where a statute required the grand jury of a county to fix the amount of a county subscription to railroad stock, and on their report being filed empowered commissioners to make the sub- scription in the name of the county, it was held that where bonds issued by such com.missioners were sued on by a bona fide holder, it was not necessary for him to show that the grand jury had fixed the manner and terms of paying for the stock, and that it would be no available defence to the county to show that the grand jury had omitted to do so.^ § 1541. In another case where the action was on coupons payable to bearer, belonging to bonds issued by commis- sioners of Mercer county, it appeared that commissioners were empowered to subscribe stock to a railroad company, and issue the bonds upon the following "restrictions, limi- tations, and conditions, and in no other manner or way whatever." " i. After and not before the amount of such subscription shall have been designated, advised, and recom- mended by a grand jury of the county. 2. Said bonds ' Bissell V. Jeffersonville, 24 How., 287 (i860). Similar view taken in Van Hostrup V. Madison City, i Wall, 297 (1863). ^ Meyer v. City of Muscatine, i Wall, 393 (1863). ^ Woods V. Lawrence County, i Black, 386; approved in Grand Chute v. Win- egar, 15 Wall., 372 (1872). See to like effect Commissioners of Knox Co. v Nichols, 14 Ohio St., 260. § 1542. POWER OF A MUNICIPAL OFFICER TO BIND. 553 shall in no case be sold by the railroad company at less than pai. 3. Acceptance of the act should be deemed accept- ance of another fixing the gauges of railroads in the county of Erie." The county resisted payment on the ground that although the grand jury had made a certain recommen- dation, it was not such a recommendation as the law re- quired, and that they had been sold below par. The bonds recited on their face that they were issued under authority of the act, and the court sustained their validity, Grier, J., saying: "We have decided that where the bonds on their face import a compliance with the law under which they were issued, the purchaser is not bound to look further. The decision of the board of commissioners may not be conclusive in a direct proceeding to inquire into the facts before the rights and interests of other parties had attached ; but after the authority has been executed, the stock sub- scribed, and the bonds issued, and in the hands of innocent holders, it would be too late, even in a direct proceeding, to call it in question." And he added, " x\lthough we doubt not the facts stated as to the atrocious frauds which have been practiced in some counties, in issuing and obtain- ing these bonds, we can not agree to overrule our own de- cisions, and change the law to suit hard cases. The epi- demic insanity of the people, the folly of county officers, the knavery of railroad ' speculators,' are pleas which might have just weight in an application to restrain the issue or negotiation of these bonds, but can not prevail to authorize their repudiation after they have been negotiated and have come into the possession of bona fide holders."^ § 1542. Again, upon a mandamus against the city of Davenport to compel a tax levy to pay a judgment on ne- gotiable bonds, the court held the judgment conclusive as to their validity; but, in answer to the argument of counsel that they were issued without the prerequisite popular vote, ' Mercer County v. Racket t, i Wall., 96 (1863) ; approved in Grand Chute v Winegar, 15 Wall., 372 (1872). 554 THE VALIDITY OF MUNICIPAL BONDS. § 1542. the court declared that, as against an innocent purchaser, the city was estopped to deny compliance with the statute.^ In another case, where the city of Lexington, Kentucky, was authorized to subscribe to a railroad on the condition of a majority vote, it appeared that the vote had "been cast, but the city had embodied the condition in the proposition sub- mitted that $1,000,000 should be first subscribed by other parties before its officers should subscribe to the stock or execute the bonds. The city refused to subscribe, but was directed by mandamtts from an inferior court to do so. It then appealed, and the Court of Appeals of Kentucky re- versed the decision ; but meanwhile the bonds were issued, signed by the mayor and clerk, reciting due compliance with the act of Assembly, and came into the hands of a bona fide holder. And the court sustained their validity on the like grounds, as in the preceding case cited.^ In an-, other case, in an action brought on certain coupons of bonds of the town of Coloma, there was a recital on the bonds that they were issued in accordance with a vote of the elect- ors of said township of Coloma, signed by a supervisor and town clerk, and recovery was resisted mainly upon the alleged ground of a want of power in the officers of the town to issue the bonds, because the legal voters of the town had not been notified to vote upon the question of the subscription for which the bonds were issued. It was held that the recital estopped the town from the defence offered to be made.^ Again, where the law under consid * Mayor v. Lord, 9 Wall., 414 (1869). • City of Lexing-ton v. Butler, 14 Wall, 296 (1871). Judge Dillon says in his Treatise on Municipal Corporations, vol. i, § i,\ia, p. 518 (2d ed.) : " The sub- stance of the decision of the United States Supreme Court in this case would seem to be that a bona fide purchaser of the bonds had a right to presume that the condition annexed by the city as to the $1,000,000 of other subscriptions had been complied with, and thus viewed, the judgment of the court rests upon grounds whose soundness can not admit of question. It is not an authority upon its essential facts in favor of the proposition that, if the bonds had been issued without any vote, or attempt at a vote, they would have been binding in the absence of estoppel other than by recitals or other ground of liability." ^ Town of Coloma v. Eaves, 2 Otto (92 U. S.), 484. See ante, § 1537 and note. § 1543- POWER OF A MUNICIPAL OFFICER TO BIND. 555 eration provided that the amount of bonds sold by any township should not be above such a sum as would require a levy of more than one per cent, per annum on the taxable property of the township to pay the interest, and objection was made that the issue of the bonds in controversy was in excess of this amount, the court said that the extrinsic facts were referred to the inquiry and determination of the Board of County Commissioners, and were determined before the bonds came into the plaintiff's hands ; and that " he was therefore not bound when he purchased, to look beyond the act of the legislature, and the recitals which the bonds contained." ^ § 1543. So it has been held that it was no defence against bona fide holders of railroad bonds that the mortgage given to secure them was executed out of the State, instead of in it, as should have been the case.^ So that, wdiere there had been a popular vote in favor of a county subscription, the county could not resist payment of bonds issued in pursu- ance thereof, on the ground that the election had been ordered by the county court instead of by the board of supervisors, as provided by law.^ So that, where the town of Grand Chute had been authorized to subscribe not ex- ceeding $10,000 to a plank-road company, in such amounts " as may be declared by the board of directors of said com- pany necessary to the completion of said road at the time of such subscription," it could not resist payment of bonds issued by the supervisors, on the ground that the directors had not declared the amounts necessary, the bonds import- ing on their face compliance with the act."* So that bonds signed by a de facto judicial officer with the seal of the court could not be impeached in the hands of an innocent I Marcy v. Township of Oswego, 2 Otto (92 U. S.), 641. See also Humboldt Township v. Long, 2 Otto (92 U. S.), 645. But see Mosher v. Ind. School Dis- trict, 44 Iowa, 122. » Galveston R.R. v. Cowdrey, 11 Wall, 47S (1870). ' Supervisors v. Schenck, 5 Wall., 773. * Grand Chute v. Winegar, 15 Wall., 356 (1872). 556 THE VALIDITY OF MUNICIPAL BONDS. § 1 544. holder by showing that the officer did not have title de ju7'-e to his office at the time he officiated ; nor could it be shown against such holder that the company to whose stock the bonds were subscribed was not organized within the time specified in its charter.-^ § 1544. Cases in U. S. Supreme Court qualifying the general doctrines before stated. — Illustrating the seco7id series of propositions : It appeared that the legislature of Illinois had authorized a county subscription to be made to any railroad corporation of the State, provided that a ma- jority of the qualified voters of the county should vote for the same, and required that the notices calling for the elec- tion should specify the company in which stock was pro- posed to be subscribed. The powers of the county were only to be exercised by the board of supervisors, or by reso- lution by them adopted. The voters of the county author- ized a subscription to the " Mississippi and Wabash R.R. Company," and to the " Petersburgh and Springfield Com- pany," and the supervisors authorized their clerk to issue the bonds to the first-named corporation. The clerk of the county court, acting as their clerk, issued bonds to " The Central Division of the Mississippi and Wabash R.R. Com- pany," which was a different corporation from the original company. By various acts the supervisors recognized the validity of these bonds by allowing interest on them, levy- ing a tax to meet it, and appointing agents to represent the stock received by the county for the bonds in the corporate meetings, and also paid two of the bonds in full. The Su- preme Court held the bonds invalid on the ground that the supervisors, having had no authority to issue the bonds to the corporation, because the condition precedent of a popular vote had not been fulfilled, could not, therefore, by any act ratify the subscription when made by their clerk.^ In another case where the Missouri statute declared ' Ralls Co. V. Douglass, 4 Morrison's Transcript, No. i, p. 102, ' Marsh v. Fulton County, 10 Wall.. 683 (1870), Field, J., delivering the unani- mous opinion, saying : " But it is earnestly contended that the plaintiff was an § 1544- POWER OF A MUNICIPAL OFFICER TO BIND. 557 that before a municipal bond thereafter issued should ob- tain validity or be negotiated, it should be presented to the State Auditor, who should register it, and certify by in- dorsement that all the conditions of the laws and of the contract under which it was authorized to be issued have innocent purchaser of the bonds without notice of their invalidity. If such were the fact, we do not perceive how it could affect the liability of the county of Ful- ton. This is not a case where the party executing the instruments possessed a general capacity to contract, and where the instruments might, for such reason, be taken without special inquiry into their validity. It is a case where the power to contract never existed — where the instruments might, with equal authority, have been issued by any other citizen of the county. It is a case, too, where the holder was bound to look to the action of the officers of the county and ascertain whether the law had been so far followed by them as to justify the issue of the bonds. The authority to contract must exist before any protection as an inno- cent purchaser can be claimed by the holder. This is the law even as respects commercial paper, alleged to have been issued under a delegated authority, and is stated in the case of Floyd Acceptances. In speaking of notes and bills issued or accepted by an agent, acting under a general or special power, the court says : • In each case the person dealing with the agent, knowing that he acts only by virtue of a delegated power, must, at his peril, see that the paper on which he relies comes within the power under which the agent acts. And this applies to ever>' person who takes the paper afterward ; for it is to be kept in mind that the protection w^hich commercial usage throws around negotiable paper can not be used to establish the authority by which it was originally issued.' It is also contended that if the bonds in suit were issued without authority, their issue was subsequently ratified, and various acts of the supervisors of the county are cited in support of the supposed ratification. These acts fall very far short of showing any attempted ratification even by the supervisors. But the answer to them all is, that the power of ratification did not lie with the supervisors. A ratification is, in its effect upon the act of an agent, equivalent to the possession by him of a previous authority. It operates upon the act ratified in the same maTiner as though the authority of the agent to do the act existed originally. It follows that a ratification can only be made when the party ratifying possesses the power to perform the act ratified. The supennsors possessed no authority to make the subscription or issue the bonds in the first instance without the previous sanction of the qualified voters of the county. The supervisors, in that particular, were the mere agents of the county. They could not, therefore, ratify a subscription without a vote of the county, because they could not make a subscription in the first instance without such authorization. It would be absurd to say that they could, without such vote, by simple expressions of approval, or in some other indirect way, give validity to acts when they were directly, in terms, prohibited by statute from doing those acts until after such vote was had. That would be equivalent to saying that an agent, not having the power to do a particular act for his principal, could give validity to such act by its indirect recognition. We do not mean to intimate that liabilities may not be incurred by counties inde- pendent of the statute. Undoubtedly they may be. The obligation to do jus- tice rests upon all persons, natural and artificial, and if a county obtains the money or property of otiiers without authority, the law, independent of any statute, w-ill compel restitution or compensation. But this is a very difierent thing from enforcing an obligation attempted to be created in one way, when the statute declares that it shall onlv be created in another and ditferent way." See also Bissell v. City of Kankakee, 64 111., 249 ; McClure v. Township of Oxford, 94 U. S. (4 Otto), 432, 558 THE VALIDITY OF MUNICIPAL BONDS. § 1544^. been complied with, the Supreme Court of the United States held that unless the bonds were so indorsed, the holder could not maintain an action upon them ; and, further, that no antedating of the bonds, so as to give them the appearance of having been executed before the statu- tory requirement went into effect, could cure the infirmity.^ The fact that the act under which bonds are issued is erro- neously referred to in their recital, will not render them void.^ § 1544^. Power of townships. — A township has no inher- ent power to contract debts, and issue coupon bonds, and a statute declaring it " lawful for the agent of any corpo- rate body " to subscribe to a railroad will not create such a power in such a municipal organization. Such a provision, it has been held, manifestly referred to private corpora- tions.^ SECTION IV. HOW INVALIDITY OF THE BOND IS CURED BY ACQUIESCENCE OR RATIFICATION OF THE MUNICIPALITY. § 1545. There are four ways, according to the decisions of the United States Supreme Court and of some of the State courts, in which a municipal corporation may estop itself from objecting to the validity of corporate securities : (i) By its members failing to interfere and enjoin their issue when they are about to be executed, and thereby acquiescing.'* * Anthony v. County of Jasper, loi U. S. (11 Otto), 693. The case of Town of Weganwega v. Ayling, 99 U. S. (9 Otto), 112, is distinguished. "^ Commissioners, etc., v. January, 94 U. S. (4 Otto), 202. 3 Township of East Oakland v. Skinner, 94 U. S. (4 Otto), 257. ^Supervisors v. Schenck, 5 Wall., 581. In Kentucky it has been held that parties are estopped from denying the constitutionality of a statute by participat- ing in procuring its passage, acquiescing or approving of it, or by receiving bene- fit's under it ; although others may impeach its validity. Ferguson v. Landram, 5 Bush (Ky.), 231. § 1546- HOW INVALIDITY OF THE EOND IS CURED. 559 (2) By their submitting to taxation to pay them.* (3) By their voting for or submitting to the payment of principal or interest by the corporate officers.^ (4) By receiving and keeping the proceeds or benefits of thcm.^ § 1546. Where county bonds had been issued for rail- road stock, but their validity was objected to, because the election, at which the popular vote was in their favor, had been ordered by the wrong authority ; but taxes had been levied and interest paid on them for nine years, the court said, per Clifford, J. : " Preliminary proceedings looking to such a subscription by a municipal corporation may often be enjoined for de- fects or irregularities before the contract is perfected, in cases where the corporation will be held to be forever con- cluded, if they remain silent and suffer the shares to be pur- chased, the bonds to be issued, and the securities to be ex- changed. Nothing of this kind was attempted in this case, and the defendants have never rescinded, or attempted to rescind, the contract ; and have never returned, or offered to return, the evidences of their ownership of the shares m the stock of the company, but have annually acknowledged the validity of the bonds, by voting taxes for the payment of the accruing interest, and have actually paid the same to the amount of six thousand dollars." And the principle is stated to be, that " where the offi- cers of the corporation openly exercise powers affecting the interests of third persons, which presupposes a delegated 'State V. Van Home, 7 Ohio St., 331 ; Shoemaker v. Goshen Township, 14 Ohio St., 587. '^ Supervisors v. Schenck, 5 Wall., 581. To same effect, see Mercer County v. Hubbard, 45 111., 142; Keithsburg v. Frick, 34 111., 421, Breese, J. ; Shoemaker V. Goshen Township, 14 Ohio St., 587 ; Hannibal, etc., R.R. Co. v. Marion County, 36 Mo., 295 ; County of Ray v. Vansycle, 96 U. S. (6 Otto), 687 ; Clay County V. Society for Savings, Morrison's Transcript, vol. 3, No. 3, p. 654. ^Super\nsors v. Schenck, 5 Wall., 581; Pendleton County v. Amy, 13 Wall., 305. To same effect, see State v. Trustees of Union Township, 8 Ohio St., 403 ; State V. Van Home, 7 Ohio St., 331 ; Barrett v. County Court, 44 Mo., 199, See also County of Ray v. Vansycle, 96 U. S. (6 Otto), 687. 560 THE VALIDITY OF MUNICIPAL BONDS. §1547 authority for the purpose, and other corporate acts subse- quently performed show that the corporation must have contemplated the legal existence of such authority, the acts of such officers will be deemed rightful, and the delegated authority will be presumed."^ § 1547. So where a county received, and retained for seventeen years, stock in a railroad company, the court said, it thereby estopped itself from asserting that it was issued by officers in disregard of conditions precedent to their au- thority.^ And the doctrines here stated have been adopted 'Supervisors v. Schenck, 5 Wall, 781. ^ Pendleton County v. Amy, 14 Wall., 305, 306, Strong, J., saying : "Without leo-islative authority a municipal corporation, like a county, may not subscribe to th'e capital stock of a railroad company, and bind itself to pay its subscription, or issue its bonds in payment ; and if it does, the purchase of such bonds is affected by the want of authority to make them. But it does not follow from this that, when the legislature has given its sanction to the issue of bonds, pro- vided that before their issue certain things shall be done by the officers or the people of the county, the bonds can always be avoided in the hands of an inno- cent purchaser, by proof that the county officers or the people have not done, or have insufficiently done, the things which the legislature required to de done, before the authority to subscribe or to issue bonds should be exercised. A pur- chaser is not always bound to look further than to discover that the power has been conferred, even though it be coupled with conditions precedent. li the rio-ht to subscribe be made dependent upon the result of a popular vote, the offi- cers of the county must first determine whether the vote has been taken as directed by law, and what the vote was. When, therefore, they make a sub- scription, and issue county bonds in payment, it may fairly be presumed, in favor of an innocent purchaser of the bonds, that the condition which the law attached to the exercise of the power has been fulfilled. To issue the bonds without the fulfilment of the precedent conditions would be a misdemeanor ; and it is to be presumed that public officers act rightly. We do not say this is a conclusive presumption in all cases ; but it has more than once been decided that a county may be estopped against asserting that the conditions attached to a grant of power were not fulfilled. The estoppel in these cases was either by recitals in the bonds that the conditions precedent had been complied with, or by the fact that the county had subsequently levied taxes to pay interest on the bonds. In the present case, it does not appear in the pleadings whether or not the bonds con- tained any such recitals, nor whether the officers of the county have levied taxes to pay interest on them, or whether any interest has been paid. These grounds of estoppel do not exist. But if such acts and such recitals are sufficient to pro- tect bona fide purchasers against an attempt to set up non-compliance with the condition attached to the grant of power to issue the bonds, it is not easy to see why the pleadings do not show an estoppel m this case. The county re- ceived in exchange for the bonds a certificate for the stock of the railroad com- pany which it held about seventeen years before the present suit was brought, and which it still holds. Having exchanged the bonds for the stock, can it re- tain the proceeds of the exchange, and assert against a purchaser of the bonds for value, that though the legislature empowered it to make them, and put them upon the market, upon certain conditions, they were issued in disregard ot the conditions ? W^e think they can not, and, therefore, that the third plea can not be sustained." § I54S. HOW INVALIDITY OF THE BOND IS CURED. 56 1 in Other cases.* But these doctrines are subject to this gen- eral limitation, or qualification : that in order to be capable of ratification, the bonds must be such as come within the constitutionally conferred powers of the municipality issuing them ; and if the powers assumed to be conferred by the legislature were not such as it had the right to confer ; for instance, if they were to be exercised in aid of a private in- stead of a public object, the bonds given to carry them out would be totally void and incapable of ratification by payment of interest by the municipality participating in stockholders' meetings upon the stock acquired by them, or even by a vote of the majority of the suffragans.^ § 1548. In Ohio, where the tax-payers of a township made no objection to the validity of a subscription to a rail- road corporation until three or four years had elapsed there- after, and during that period submitted to taxation and the payment of interest on the bonds issued under it, it was held that they could not then object to the validity of the bonds which had passed into the hands of bona fide holders.^ So 'Rogers v. Burlington, 3 Wall., 667; r^Ieyer v. Muscatine, i Wall., 392; Commissioners v. January, 94 U. S. (4 Otto), 206. "^ Weismer v. Village of Douglas, ri N. Y. S. C. (4 Hun), 202. •State V. Van Home, 7 Ohio St., 331, Swan, J. : " If the location of the road should have been first made, any tax-payer of the township, for himself and all others interested, could, at any time before the issuing or negotiation of the bonds, have intervened and enjoined their issue as unauthorized, on account of the road not having been located. They, however, either intentionally or from neglect to assert their legal rights, and without protest or interference, suffered the election to take place, their public agents, the trustees, to subscribe for stock, to issue the bonds and receive the proceeds. They also afterward, and for the period of three or four years, paid the interest by taxation, and thus gave credit to the bonds of the township. They now desire to retain the money of the orig- inal bondholders, refuse to pay interest, deny their obligations to pay back the principal, disafiirm the acts of their public agents, who, under the forms of law and by their direct instigation through the ballot-box, issued and negotiated these bonds. They had an opportunity, before innocent third persons could be injured or committed to the acts of their public agents, to enjoin their proceed- ings, and protect themselves ; they did not seek that protection ; but now, when they have received all the fruits of the contracts of their agents from third per- sons who have acted upon their recognition of the authority of their agents, they ask the privilege of denying this recognition, and thus escape from their obliga- tions. It is too late for them to do so, as against innocent third persons. They are concluded, not simply by the acts of their public agents, but by their own. It is true, that when public officers exceed the powers vested in them by general Vol. II.— 36 562 THE VALIDITY OF MUNICIPAL BONDS. §1548. in Missouri, where a county voted for twelve years on stock subscribed for in a railroad company, it was held it could not object to the validity of bonds issued therefor.* So in Kansas, where the failure of a railroad company to com- plete a specified number of miles of its^ work, within a given time, was set up to defeat bonds issued in aid of it, by commissioners of a county who waived the matter of time, the bonds were held valid, the public having had notice and acquiescing, and interest having been paid for two years.^ Where a county in Illinois subscribed to stock in a railroad company, and agreed to extend the time for completing the road from that originally fixed, to a par- ticular date, and before that date, by its proper officers, de- clared the road completed to its satisfaction, delivered its laws, their acts are no longer official, but void ; and this principle would be ap- plicable to the case before us, if the trustees had derived their sole authority to make the contract under consideration from the law, without any interposition, sanction, or authority from the tax-payers of the township. But, in the case be- fore us, the trustees derived their authority to subscribe for the stock of the rail- road, and to issue the bonds, specifically, from their constituency, the tax-payers of the township. The trustees, unless authorized by the tax-payers, derived no authority to act from the laws under consideration. In fact, the whole transac- tion under the legislation was for the purpose of consummating an agreement, having all the substantial elements of a private contract, between the tax-payers as principals, who by vote made the trustees their agents to contract for them, on one side, and the railroad and bondholders on the other. The rules of law applied to individuals, and founded upon the clearest principles of justice and sound morals, should be equally applicable to these parties. The tax-payers, as principals, and by their votes, in the forms of law, set their agents in motion, professed to clothe them with special authority to make a special contract with third persons for their benefit ; by voting, instigated those agents to make the subscription and issue the bonds ; and thus induced, on the faith of this recog- nition, innocent third persons to part with their money and receive, in lieu thereof, these bonds. If the trustees of the township and the tax-payers sup- posed, until very recently, as they probably did, that the subsequent permanent establishment and location of the railroad through the township was sufficient to authorize the issuing of the bonds, whether that location was made before or after the election, it is equally just to presume that the bondholders, who parted with their money, entertained the same belief. The one were certainly as much bound to know as the other ; and if both were mistaken, no principle of law or justice would demand that the tax-payers should retain the fruits of the mistake, and, at the same time, repudiate those very acts of their own which misled the bondholders, and induced them to part with their money ; in truth, blowing hot to get the bondholders' money, and blowing cold to rid themselves of the obh- gation to refund it." ' Barrett v. County Court, 44 Mo., 201 ; Hannibal, etc., R.R. Co. v. Marion Co., 36 Id., 294; Steines v. Franklin County, 48 Id., 185. ^ Leavenworth, etc., R.R. v. Commissioners of Douglas Co., 18 Kansas, 170. § I550- LIABILITY OF MUNICIPAL CORPORATIONS. 563 bonds, and received the stock subscribed for, the Supreme Court of the United States held that its action consti- tuted a waiver and estoppel, which prevented it from raising the objection that the contract was not peformed in time.^ § 1549. An examination of the authorities which have been cited shows that the doctrines which they announce have met with very general acceptation, and that equi- table estoppel is applied very freely to the enforcement of municipal obligations. It would seem to us that it should appear in all cases where it is appealed to, to silence any citizen of the municipality in his plea that the security was illegally issued, that he had a faii; opportunity to know the facts, and had willingly neglected to assert his rights. In other words, his acquiescence or ratification should be made, under all the circumstances, essential to the validity of the ratification by a principal of the act of his agent, as elsewhere expounded.^ Clearly no ratification could vali- date an unconstitutional act.^ SECTION V. CORRECT PRINCIPLES AS TO THE LIABILITY OF MUNICIPAL CORPORATIONS UPON NEGOTIABLE BONDS. § 1550. The principles respecting the liability of mu- nicipal corporations, which seem to us to be sustained by precedent and by reason, are these : (i) That mere informalities or irregularities in the ful- filment of a condition precedent to a grant of power to * County of Randolph v. Post, 3 Otto (93 U. S.), 502. ' See chapter X, section v, pp. 259 et seq., vol. i. * Sherrard v. Lafayette Co., U. S. Dist. Ct., Dillon, J., Cent. L. J., May 28> 1875, p. 347. See ante, § 1547. 564 THE VALIDITY OF MUNICIPAL BONDS. § ^SSO* an agent or officer, or in the exercise of that power when granted by the agent or officer, are immaterial.^ (2) That if a person is only to become the agent or officer of a municipal corporation, to do certain acts when a condition precedent has been fulfilled, "such condition must be fulfilled in all substantial and material respects before such acts on his part will be binding on the cor- poration.^ (3) That no assumption or declaration by him that such condition has been fulfilled will have any effect when, in fact, it has not been fulfilled.^ (4) That if, however, the agent or officer is fully empowered to do certain acts by the corporation, but his instructions are not to exercise that power save in certain contingencies, the corporation will be bound, though he violate such instructions, unless the fact that the contin- gency has not transpired be a matter of public record.* (5) And (as it seems from the authorities) if it be the ' This principle is universally admitted, and upon it some of the decisions of the U. S. Supreme Court are maintainable. Mercer County v. Hubbard, 45 111., 142 • Smead v. Trustees Union Township, 8 Ohio St., 394 ; Steines v. Franklm County, 48 Mo., 179; Town of East Lincoln v. Davenport, 94 U. S. (4 Otto), 801. ^ Lewis V. Commissioners of Bourbon County, Kansas (1873), Cent. Law Jour., Jan. 8, 1874, Brewer, J.: "Issuing bonds without a vote is no more ultra vires than issuing them against a vote of the majority." In Cooley on Const. Ltm., 215, it is said : " While mere irregularities of action, not going to the essentials of the power, would prevent parties who had acted in reliance upon the securi- ties enforcing them, yet as the doings of these corporations are matters of pub- lic record, and they have no general power to issue negotiable securities, any one who becomes holder of such securities, even though they be negotia.ble in form, will take them with constructive notice of any want of power in the corporation to issue them, and can not enforce them when their issue was un- authorized." ' Gould V. Town of Sterling, 23 N. Y., 463; Clark v. Des Moines, 19 Iowa, 201 ; Treadwell v. Commissioners, 11 Ohio St., 183 ; Veeder v. Lima, 19 Wise., 298; Wallace v. Mayor of San Jose, 29 Cal., 188; Cooley Const. Lim., 196. But see Bank of Rome v. Rome, 19 N. Y., 24. " In such cases the officer stands on the footing of an agent who violates private instructions. The determination of a condition subsequent to an agency is very different from the determination of a condition precedent, for unless the condition precedent be fulfilled, the party is still a stranger, not an agent. City of Lexington v. Butler, 14 Wall., 296. See infra, § 1552 ; Cooley Const. Lini., 218, note. In De Voss v. City of Richmond, 18 Grat., 338, it appeared that the city council directed its officers to issue a bond to the receiver ot the Confederate States court, in lieu of one that had been confiscated, and provided in its reso- lution that in the books of its auditor it should be entered, and upon the face oi J 1550- LIABILITY OF MUNICIPAL CORPORATIONS. 565 sole province of the officer or agent to ascertain whether or not the condition precedent to his authority has been ful- filled, or power is vested in him to exercise his own discre- tion, his decision becomes sole arbiter of the act, and can not be reviewed or disputed.* (6) That if the instrument refers on its face to a stat- utory power, every holder is made chargeable thereby with notice of such statute and its limitations.^ (7) That if the right of the officer or agent to bind the corporation is a matter which may be ascertained by an in- spection of public records, the holc^er of any instrument issued by him is chargeable with notice of all facts which appear on such records,^ and those records can not be dis- puted as against a bona fide purchaser of bonds issued pursuant to their import.'* the bond it should be shown that it was issued instead of the confiscated bond. The auditor issued a new bond, which did not contain upon its face the required statement, and it was passed to a bona fide holder for value and without notice. It was held that the city was bound upon it, althoug-h the Confederacy having fallen, it was bound also to pay the original bond which had been confiscated to its true owner. Joynes, J., said : "There was nothing to excite the holder's suspicion, or to put him upon inquiry. All that can be said is, that he might have ascertained the facts, if he had gone to the auditor's office and traced the bond back to its source. But that is not enough to charge him with constructive notice of what he might have ascertained, in the absence of anything to put him on inquiry." It will be seen, on examining the text of the case, that the power of the city to borrow money was very broad. The gist of the particular case has been considered to be simply that the purchaser of the bond was not obliged to take notice of the entries in the auditor's books, because they were private records " to which the public had no access." [See article in Southern Law Review, vol. i, 23, Jan., 1872, by Chancellor Cooper, of Tennessee.] If they had been public records, the implication is that the purchaser would have been found to take notice of them. ' Commissioners of Knox County v. Nichols, 14 Ohio St., 260 ; Bank of Rome v. Rome, 19 N. Y., 24; Commissioners of Knox County v. Aspinwali, 21 How., 539, Nelson, J.; Lynde v. County, 16 Wall., 13 ; St. Joseph Township v. Rogers, 16 Wall., 659 ; Kennicott v. Supervisors, 16 Wall., 464; Pompton v. Cooper Union, loi U. S. (11 Otto), 204. "Fisk v. City of Kenosha, 26 Wis., 29 ; City of Aurora v. West, 22 Ind., 89; Louisiana State Bank v. Orleans Nav. Co., 3 La. An., 295 ; McClure v. Town- ship of Oxford, 94 U. S. (4 Otto), 429 ; Silliman v. Fredericksburg, etc., R.R., 27 Grat., 119. 'Bissell v. City of Kankakee, 64 III., 249; Clark v. Des Moines, 19 Iowa, 201 ; De Voss V. Richmond, 18 Grat., 338 ; Gould v. Sterling, 23 N. Y., 463 ; Duanes- burg v. Jenkins, 40 Barb., 579; Veeder v Lima, 19 Wis., 298; Backman v. Charlestown, 42 N. H., 125 ; Lewis v. Commissioners of Bourbon County, Kansas (Cent. Law Jour., 8 Jan., 1874) ; Cooley Const. Lim., 215. *Harter v. Kemochan, 103 U. S. (13 Otto), 563. 566 THE VALIDITY OF MUNICIPAL BONDS. § 1 55 1. (8) That the powers of municipal corporations, which are special governmental agencies, and of their officers, who are their special agents, are to be strictly construed.^ § 1 55 1. Illustrations. — Conforming to the doctrines of the text, it has been decided that where an election was made a condition precedent to the right of a county to issue bonds — and no election was held — the bonds issued were void.^ So where it was provided " that no subscrip- tion or purchase of stock should be made, or bonds issued by any county or city, unless a majority of the qualified voters of the county or city shall vote for the same," it was held that bonds issued without an election, or where the election was called by the wrong authority, were absolutely void in whosesoever hands they might fall, and were not validated by the levy of taxes, and the payment of interest thereon.^ So where the common council were empowered by the legislature to create a debt only when " there should be sufficient moneys to meet the same after paying the expenses of the government, and all other demands legally due," it was held that unless such conditions were actually fulfilled, the contract of the coun- cil to pay a certain amount in future was void.^ So where county commissioners were authorized to borrow money, *Veeder v. Lima, 19 Wis., 291; Treadwell v. Commissioners, etc., 11 Ohio St., 190. ■" Steines v. Franklin Co., 48 Mo., 167 ; Flagg v. Palmyra, 33 Mo., 40, is quali- fied and explained. ' Marshall Co. v. Cook, 38 111., 44. See Town of Eagle v. Kohn, 84 111., 292, where it is held that if conditions precedent be subsequently complied with^ bonds issued are valid. * Wallace v. Mayor of San Jose, 29 Cal., 188, the court saying: "The com- mon council were the agents of the corporation, and their authority was special and their power distinctly circumscribed. The corporation could iiol become bound by the contract unless it was made by the mayor and council in the ex- ercise of the power delegated by the act of incorporation, and within its limits. In dealing with these officers the plaintiff was bound to know the extent of their power, and to see that the condition, on which alone it could arise and subsist, had existence. The fact that these officers assumed to make the contract, and thus bind the corporation, did not create the presumption that they possessed the power which they attempted to exercise, for no officer can acquire power or jurisdiction by the mere assertion of it." § 1 55-- LIABILITY OF MUNICIPAL CORPORATIONS. 567 issue bonds, and to subscribe to a railroad company running through or in the county, it was held in an action on the bonds it was a valid defence to show that the railroad was so located as not to touch the county.^ So where a county had authority to issue bonds provided that sanction w^as given at a previous election upon thirty days' notice, it was held that although there was an election, the issue of the bonds might be enjoined because due notice was not giv^n."^ So if the election be held before the act of the legislature authorizing it takes effect, it has been held premature, and the bonds issued under the act void f and so if the vote be taken merely voluntarily, and not in conformity with the statute."* § 1552. A^ew York decisions. — In New York, where a town was authorized to borrow money to subscribe for stock in a railroad corporation, provided the written assent of the resident tax-payers were obtained, it was held that bonds issued without such condition being fulfilled would be void ; that it was incumbent on the holder to show that such condition was fulfilled ; and that the statement of the town officers that it was fulfilled, operated no estoppel against the town, their own authority being dependent on its fulfilment.** The two cases in which these views are ' Treadwell v. Commissioners, 11 Ohio St., 183. ' Harding v. Rockford, etc., R.R. Co, ; see Dillon on Corporations, § 108, p. 229, vol, I ; see also Portland, etc., R.R. Co. v. Hartford, 58 Me., 23. • State of Arkansas v. Little Rock, etc., R.R., 31 Ark., 701, Barnes v. Town of Lacon, 84 111., 461. * Starin v. Town of Genoa, 23 N. Y., 440 ; Gould v. Sterling, 23 N. Y., 456. In the latter case, p. 463, Selden, J., said : " The estoppel contended lor is sup- posed to result from that rule of the law of principal and agent in accordance with which it is held that, where a power is conferred, if the agent does an act which is apparently within the terms of the power, the principal is bound by the representation of the agent as to the existence of any extrinsic facts essential to the proner exercise of the power, where such facts from their nature rest pecul- iarly wi'thin the knowledge of the agent. This is the doctrine asserted in the case of Farmers' & Mechanics' Bank v. Butchers' & Drovers' Bank (16 N, Y., 125). No representation of the agent as to the fact of his agency, or as to the extent of his power, is of any force to charge the principal. But, it being shown by other evidence that the agency existed, and that the act done was within the general scope of the power, the principal is bound by the representation of the agent as to any essential facts known to the agent, but which the party dealing 568 THE VALIDITY OF MUNICIPAL BONDS. § 1553* expressed admirably expound the law of the subject, and have been quoted with deserved approval in other cases. "^ § 1553- When certificate of public officer is deemed con- clusive. — But if the certificate of the municipal ofiicers or with him had no certain means of ascertaining-." "The reason upon which this rule is founded is that given by Lord Holt, in Hern v. Nichols (i Salk., 289), viz., that, where one of two innocent parties must suffer through the misconduct of another, it is reasonable that he who has employed the delinquent party, and thus held him out to the world as worthy of confidence, should be the loser. This reason can, of course, only apply to a case where the principal has himself employed the agent, and voluntarily conferred upon him power to do the act. This clearly is not such a case. The agents here were designated, not by the town, but by the legislature ; and no power whatever was conferred by the town, unless the assent of the tax-payers was obtained. Any representation, therefore, by the supervisor and commissioners in respect to such assent would be a representation as to the very existence of their power. Such represen- tations, as we have seen, are never binding upon the principal. It is obvious, therefore, that the doctrine of the case of The Fanners' & Mechanics' Bank V. The Butchers' & Drovers' Bank has no application to the present case." "It is also inapplicable for another reason. Knowledge of the facts in regard to the assent of the tax-payers was in no manner peculiar to the supervisor and commissioners, but was equally accessible to the parties receiving the bonds. The statute, of which they were bound, of course, to take notice, apprised them that the bonds could not be legally issued until the requisite assent was ob- tained, and also that the assent, when obtained, would be placed upon the files of the county. The case is not, therefore, at all like that of the Butchers' & Drovers' Bank, where the extrinsic fact related to the state of the accounts of the bank with one of its customers, which could only be known to the teller and other officers of the bank. Here the parties who received the bonds had the means of ascertaining, and were bound to inquire as to the existence ol the facts upon which, as they knew, the validity of the bonds depended.". "The neo-otiability of the bonds in no manner aids the plaintiff. It is true they are negotiable, 'and have in this respect most, if not all, the attributes of commer- cial paper. But one who takes a negotiable promissory note or bill of exchange purporting to be made by an agent, is bound to inquire as to the power of the agent. Where the agent is appointed and the power conferred, but the right to exercise the power has been made to depend upon the existence of facts, of which the agent may naturally be supposed to be in an especial manner cognizant, the bona fide holder is protected, because he is presumed to have taken the paper upon the faith of the representation of the agent as to those facts. The mere act of executing the note or bill amounts, of itself, in such a case, to a represen- tation by the agent to every person who may take the paper that the requisite facts exist. But the holder has no such protection in regard to the existence of the power itself. In that respect the subsequent bona fide holder is in no better situation than the payee, except in so far as the latter would appear of necessity to have had cognizance of facts which the other can not be presumed to have known." The Supreme Court of the United States dissents from the views taken in New York. See Town of Venice v. Murdock, 2 Otto (92 U. S.), 496 ; Town of Genoa v. Woodruff, 2 Otto (92 U. S.), 502, and ajiie, § 1537 and note. But the U. S. Supreme Court recognizes the New York decisions as setthng the law of that State. Scipio v. Wright, loi U. S. (11 Otto), 665 ; Thompson v. Perrine, 103 U. S. (13 Otto), 806. ' Veeder v. Lima, 19 Wise, 280 ; Duanesburg v. Jenkins, 40 Barb., 579 ; The People V. Mead, 24 N. Y., 115 ; 36 N. Y., 229; Lewis v. Comm'rs of Bourbon Co. (Kan.), Cent. Law Jour., Jan. 8., 1874. § 1555- LIABILITY OF MUNICIPAL CORPORATIONS. 569 agents were made by statute conclusive evidence of the facts stated therein, and were required by statute to be filed, as a matter of public record, it seems that it would then operate as conclusive evidence, in any suit upon a bond or other security issued in conformity with it, as to the facts which it verifies. In such a case the municipality and all its citizens are given notice by the statute that such certifi- cate when filed will be taken as conclusive evidence against them. And it becomes accordingly their duty to watch for its appearance, and to take steps to prevent the issue of the securities based upon it. If they remain quiescent they are estopped, after the securities have been issued, and the rights of bona fide holders have accrued, from making objection.^ § 1554. Various cases as to the validity of bojids. — In Ohio, where it was provided that the county com.missioners should not deliver the bonds subscribed " until a sufficient sum shall be provided by other subscriptions or otherwise, to insure a continuous railroad connection from Mt. Vernon to Pittsburg," it was held that whether or not such sum was provided, was a matter left entirely to the judgment of the commissioners to determine ; and that having isfjued the bonds it was absurd to suppose that their legality could turn upon a subsequent inquiry into that question.^ § 1555. In Wisconsin it appeared that the supervisors of a town were authorized to subscribe to a railroad com- pany, but the question was first to be submitted to popular vote upon written application of ten or more electors, and after certain prescribed notice. The affidavit of the super- visors of the posting of notice was to be deposited and re- corded, with the application aforesard, in the office of the ' Bank of Rome v. Village of Rome, 19 N. Y., 23 (1S59) ; Veeder v. Lima, 19 Wise, 299; see Commissioners of Knox County v. Aspinwall, 21 How., 539; Hueciekoper v. Buchanan County (U. S. C. C), Cent. Law Jour., April 9, 1874, p. 177- "^ Commissioners of Knox County v. Nichols, 14 Ohio St., 271. 570 THE VALIDITY OF MUNICIPAL BONDS. § 1555^. town clerk, and they or certified copies were to be received in the courts of the State as conclusive evidence of the facts stated. In an action on bonds issued, which recited upon their face that the voters of the town had authorized the subscription, it further appeared that notice .was not given, nor the election held in conformity with law, nor was the application and the affidavit above mentioned on record as provided. It was held that the absence from the office of the town clerk of these evidences of the validity of the bonds, put all holders upon inquiry ; and that the town was not bound upon the bonds. And the principle was declared that "when the appointment and limitation of the agent's authority is duly recorded, a party dealing with him must be deemed to have constructive notice of such limitation."^ In Louisiana, where suit was brought against the city of New Orleans upon its indorsement of a negotiable bond, it was held that the words "in conformity with resolutions of the council of said municipality, bearing date the 29th July and 5th August last," written in the body of the bond, charged all parties with notice of the authority granted by such resolutions ; and as the bond was indorsed in excess of such authority, it was void.^ In New York a case arose in which it appeared that a railroad company issued bonds designated as " consolidated first mortgage gold bonds," referring to the mortgage which showed that they were in- tended for certain purposes, and it was held that the quoted words put a purchaser on inquiry as to the statements of the mortgage.^ § iSSS'^- Statutory course must be pursued. — Where a statute points out a particular course to be pursued, it must be followed ; and if the statute authorize levy of a special ' Veeder v. Town of Lima, 19 Wise, 291 ; Backman v. Charlestown, 42 N H., 125. * Louisiana State Bank v. Orleans Nav. Co., 3 La Ann., 297. « Cuylas V. N. Y. & S. R.R., 17 N. Y. S. C. (10 Hun), 295. § ISSS*^- LIABILITY OF MUNICIPAL CORPORATIONS. 57I tax to liquidate a debt, it will not be construed to authorize issue of interest-bearing obligations,^ But substantial com- pliance with the statute is all that is needful.^ If the legis- lature authorize a municipal corporation to borrow money and pay it over to a railroad company in subscription to its stock, it has been held, and, as we think, correctly, that this will not authorize the municipality to exchange its bonds with the railroad company for its stock,^ although such bonds would be valid in the hands of a bona fide holder without notice.** § 1555^. An interesting case arose in Illinois, where a municipal corporation, without express authority to do so, issued bonds simply as a donation to the Douglas Linen Company. They were sued on by a bona fide holder for value. The Supreme Court of that State held that the city of Kankakee, the defendant municipality, was not bound, Scott, J., saying : " The authority of a municipal corpora- tion to issue bonds is derived from public laws, and the avenues to information in regard to the law and ordinances of such corporations being open to public inspection, the holder of such securities will be presumed to have examined them, and to have known whether the corporation had the requisite power to issue the bonds. He has no such oppor- tunity in regard to private corporations. Their by-laws are not open to inspection by those who deal in securities issued by them, and hence the reason for the distinction that has been taken. The holder of the bonds involved in this action had every opportunity to know whether the city had any lawful right to issue them, for the reason that its authority, if any existed, was to be found in public statutes, and if they did not in fact examine, as it was their privilege ' County of Hardin v. McFarlan, 82 111., 138. * People V. Holden, 82 111., 93. * Starin v. Town of Genoa, 23 N. Y., 439 ; Gould v. Town of Sterlinc:^, 23 N. Y., 456 ; People v. Mead, 24 N, Y., 114. See Scipio v. Wright, loi U. S. (n Otto), 665 ; and ante, § 1552, and note. * People V. Mead, 24 N. Y., 114. 572 THE VALIDITY OF MUNICIPAL BONDS. § 155^. to do before buying, they will be presumed to have done so, and to have known that they v^ere issued without au- thority of law, and therefore void in the hands of any holder, either with or without notice." ^ SECTION VI. LEGISLATIVE CONTROL OVER MUNICIPAL OBLIGATIONS. § 1556. In the first place : may the legislature compel ct municipal corporation to discharge an ijidebtedness zvhich it did not contract? — The affirmative of this proposition is sus- tained by numerous cases which assert the legislative author- ity to exist in its right to apportion, assess, and levy taxes for the purposes of government. Their theory is this : tax- ation exacts money or services from individuals as and for their respective shares of contribution to any public burden. Private property taken for public use under the right of eminent domain, is not taken as the owner's contributive share of a public burden, but as so much beyond and above that share, and therefore can not be taken without just com- pensation. It belongs to the legislature to apportion the taxes necessary to defray a public expenditure, amongst those who derive benefit from it ; and if a public improve- ment benefit a particular locality, that locality, whether in- corporated or not, may be made to bear the burden of pay- mg for it.^ Thus, in Illinois, it has been held that the legis- lature may appoint a board of commissioners and authorize them to levy a tax upon all taxable property in a certain precinct, " for the purpose of maintaining the bridge across * Bissell V. City of Kankakee, 64 111., 249. ' Langhorne v. Robinson, 20 Grat., 661 ; People v. Lawrence, 41 N. Y., 137 ; 36 Barb., 177; Blanding v. Burr, 13 Cal., 343. See County Judge v. Shelby R.R. Co., 5 Bush, 225. 5 1556. LEGISLATIVE CONTROL. 573 Rock river, at Rockford, and to defray the debt incurred in its erection and repair." ^ Caton, J., said : " It will hard- ly be denied that the legislature has a right to impose a local tax upon a city or town, a precinct or county, for some local improvement, as the erection of a bridge or the repair of a road. In doing this, to be sure, it can not say that one man shall pay all and the others none, or that one shall pay one dollar and another ten, for the tax must still be uniform, and upon the value of the property which each one has, so that the burden presses alike upon the whole community. But the legislature must necessarily have the right to say how large that community thus subject to the tax shall be, whether a city or one of its wards, or a pre- cinct, a county, or the whole State. If the legislature had the right to impose this tax to build a bridge, it would be equally lawful to purchase one, or pay for one already con- structed for the public accommodation." So it has been held in New York, that where certain citizens of Utica had executed a bond to the State for $38,615, to defray the extra expenses of terminating the Chenango canal at that place, the legislature might impose a tax on the city of Utica to pay it.^ So in Pennsylvania, that the legislature may compel a municipal corporation to build a bridge over a stream, or may itself appoint agents of its own to build it, and to borrow money for that purpose, payable by the corporation.^ (But in a previous case, the right of the leg- islature to require a township to refund money voluntarily paid by a bounty association was denied.)* There are nu- merous other cases holding that the legislature may, under its taxing power, require municipalities to pay debts which ' Shaw V. Dennis, 5 Gilm. (Ill), 416. " Thomas v. Leland, 24 Wend., 65 (1840). Qudge Cooley thinks this case ex- treme. Cooley Const. Lim., 380, note) ; approved in Philadelphia v. Field, 58 Penn. St., 320. ' Philadelphia v. Field, 58 Penn. St., 320 (1868), Thompson, C. J., and Shars- wood, J., dissenting. * Tyson v. School Directors, 51 Penn. St., 21 (1865), Thompson, C, J. 574 THE VALIDITY OF MUNICIPAL BONDS. § 1557- in its judgment are morally chargeable upon them.^ But it has been held that the legislature can not compel a mu- nicipal corporation to make a contract, or to assume a con- tract already made.^ § 1557- -^'^ ^^^ second place : can the legislature author- ize the officers of a jnttnicipal corporation to contract a cor- porate debt without a popular vote in its favor ? — There are many cases which declare^ and determine^ that the leg- islature possesses this power. " The legislature of a State," says Davis, J., delivering the opinion of the United States Supreme Court, " unless restrained by the organic law, has the right to authorize a municipal corporation to take stock in a railroad or other work of internal improvement, to borrow money to pay for it, and to levy a tax to repay the loan. And this authority can be conferred in such a man- ner that the objects can be attained either with or without the sanction of the popular vote."^ It has also been held that the legislature may confer authority to levy a tax upon the people and property of a municipal corporation for a public purpose, without a popular vote, upon school or * Guilford v. Supervisors of Chenango Co., 3 Kern (13 N. Y.), 143; Blanding V. Burr, 13 Cal., 343 ; Brewster v. Syracuse, 19 N. Y., 116 ; Lycoming v. Union, 15 Penn. St., 166. - Hasbrouck v. Milwaukee, 13 Wise, 38, explained in Mills v. Charleston, 29 Wise, 37. In Town of Queensbury v. Culver, 19 Wall., 91, Strong, J., said " It may be that a mandatory statute requiring a municipal corporation to sub scribe for stock in a railroad company, or to contribute to the construction o. the railroad of such a company, is not a legitimate exercise of legislative power and that it is not even an act of legislation. This was decided by the Court o. Appeals of New York in the case of the People ex rel. v. Batchellor, 8 Albany Law Journal, 120." In People v. Batchellor, reported in 53 N. Y., 128 (1873), it was held that municipal corporations maybe compelled to enter into contracts for an exclusively public purpose, but not into those partially or wholly of a pri- vate nature. = Thomson v. Lee County, 3 Wall., 327-330 ; Aurora City v. West, 22 Ind., 89; St. Joseph Township v. Rogers, 16 Wall., 664. " First Municipality v. Orleans Theatre Co., 2 Rob. (La.), 209 ; Thompson v. Perrine, 103 U. S. (13 Otto), 812 ; People v. Mitchell, 35 N. Y., 551 ; Williams V. Duanesbaugh, 66 N. Y., 129; Keithsburg v. Frick, 34 111., 405. In Marshall V. Silliman, 64 III, 218, the Supreme Court of Illinois held that the legislature could confer the power on corporate authorities of a town, but that the supervisor and town clerk were not such authorities in the meaning of the constitution of thaf State. See Roberts v. Balles, loi U. S. (ir Otto), 126. ' Thomson v. Lee County, 3 Wall., 330 (1865). § 155^' LEGISLATIVE CONTROL. 575 Other commissioners appointed for that purpose ;* upon the county court, though it be not elected by the people ; ' upon a common council ; ^ -or upon any local authorities or individuals that the legislature may select.^ § 1558. The foregoing decisions rest upon the power of the legislature to distribute the burdens of taxation ' Bull V. Read, 13 Grat., 78; Shaw v. Dennis, 5 Gilm. (111.), 416; People v. Lawrence, 41 N. Y., 137 ; Langhorne v. Robinson, 20 Grat., 666. "Case of Levy, 5 Call, 139; Harrison County Justices v. Holland, 3 Grat., 247; Langhorne & Scott v. Robinson, 20 Grat., 661. See Foster v. Callaway County (LI, S. C. C), Cent. Law Journal, May 28, 1874, p. 263. 2 Langhorne v. Robinson, 20 Grat., 661. * Shaw V. Dennis, 5 Gilm. (111.), 416; Langhorne v. Robinson, 20 Grat., 664, Joynes, J., delivering the opinion of the court (in which Moncurc, P., Christian and Anderson, JJ., concurred ; Staples, J., dissenting), wherein he said : "The legislature is vested by the constitution with all legislative power, except so far as the exercise of any such power is prohibited or restrained h) that constitu- tion, or by the constitution of the United States. It may authorize the authori- ties of a county or city to impose a tax for a purpose of special interest to their people, though it is likewise of such general and public interest as to authorize a tax on the people of the whole State. Goddin v. Crump, 8 Leigh, 120. A power which it might thus delegate it might exercise itself. The whole power of taxa- tion belonged, under the constitution, to the legislature ; a city or county had none, except such as the legislature might choose to give it. From considera- tions of policy and convenience, the power of local taxation has usually been conferred upon those municipal bodies or their officers. Where the power of laying a tax has been delegated to such local authorities, they may, in strictness of language, be said to be ' representatives ' of the people, by whom the tax is imposed within the language of the bill of rights, provided they are eligible by the people. And yet, in a legal sense, the tax in any such case is imposed by the representatives of the people in the legislature, the power, which belongs to them alone under the constitution, being exercised pro hac vice by those to whom they have seen fit to delegate it. The tax being thus imposed by the power and authority of the legislature alone, it follows that it might as well be delegated to local authorities v^ho do not represent the people, as having been elected by them ; that it might be delegated to the county court, whose members, under the constitution of 1776 and 1830, were not elected by the people or re- sponsible to them in any way. Case of Levy, 5 Call, 139 ; Harrison Co. Justices V. Holland, 3 Grat., 247. So the power might be delegated to the school com- missioners of a particular district, who are not the general municipal authorities of the county. Bull et al. v. Read, etc., 13 Grat., 78. When the power to im- pose a tax is thus delegated to local authorities, they do not exercise their power under the authority which belongs to tliem as local oHicers. They exercise only the special authority delegated to them by the legislature in the particular case and for the particular purpose. On principle, I can imagine no reason why the power might not as well be delegated to any other person, in the discretion of the legislature. The members of the legislature are the representatives of the people referred to in the bill of rights, section 6. Otherwise the cases cited from 5 Call and 3 Grat. were not well decided. Such, too, is the plain meaning of the language. And it seems plain from the language that this provision of the bill of rights was not intended as a restraint upon the legislature in exercising the power of taxation, but was only intended to affirm, in general terms, a funda- mental principle of free government." 576 THE VALIDITY OF MUNICIPAL BONDS. § I559« amongst those to be, in its judgment, benefited by it. But it may be urged with great force, that while the legislature may exercise this power in apportioning taxes, to be col- lected and paid as taxes, it can not go further and authorize the officers or agents of a municipal corporation to bind it by negotiable bonds or other contracts without a popular vote. The legislature is the representative body of the State. It may contract for the State in its sovereign char- acter. But it does not follow that it may contract for a lesser portion of the people than the whole community, or confer that power upon others without the consent of a majority of the people of the lesser community. And if the question as to legislative power were opened de novo, this is the view wiiich it would seem to us should be adopted by the courts ; as it is that which we humbly think sound judgment and safe policy enjoins. If the legislature may authorize a commissioner or other person selected by it, to bind a community included in a mile square, or other geographical space, it follows that it might only in- clude the estate of a single individual as the subject of the burden, and fix upon the owner alone a contracted liability which he himself has no power to Hmit or prevent. And such an act, which may amount to actual confiscation, does not seem to us to come within the sphere of legisla- tion at all. Still, it 'is replied that the legislature is the representative of the people as a whole, and in all their con- stituent parts ; that the evil inherent in the injudicious ex- ercise of the legislative power is no argument against the existence of the power ; and the decided cases do not, as a general rule, observe or apply the distinction between the power to levy a tax, and the power to create a liability by contract, which is above made.^ § 1559. It will not be presumed that a legislature con- 'See opinion of Joynes, J„ in Langhorne v. Scott, 20 Grat., 661. See also opin- ion of King-man, C. J., in Commissioners of Shawnee County v. Carter, 2 Kans., 134, quoted infra, § 1563, note 4. § 1560. LEGISLATIVE CONTROL. 57/ ferring authority on a municipal corporation to subscribe to a public work, intended it to be exercised without a prece- dent popular vote, where it does not plainly appear ; and if the statute authorizing the subscription provide that the county court "may," for information, cause an election to be held to ascertain the sense of the tax-payers on the sub- ject, " may" will be construed as " shall," in so far as to re- quire a vote to be taken as a condition precedent to the validity of the subscription, and bonds issued in pursuance of it.i § 1560. In the third place : may the legislature validate miniicipal securities invalid when issued? — Many interest- ing cases have arisen involving the power of legislative bodies to pass curative acts confirming and declaring valid the securities of municipal corporations which were, when issued, not binding upon them, because of defect of authority, or irregularity in the steps taken. There is no doubt, we think, that it has been decided in a number of cases, that where there has been a popular vote in favor of subscriptions to public purposes, and bonds have been issued in order to effectuate the popular will, but were wanting in validity, because of non-compliance with statutory law, or defect of authority in the corporation to make the sub- scription, the legislature may ratify and confirm them. Its sanction to the subscription, or to the form of proceeding, being the only element lacking to its validity, it may be supplied retrospectively, and having all the effect of a ratification, it operates the same as a previous authority.^ ' Leavenworth, etc., R.R. Co. v. County Court, 42 Miss., 175 ; Steines v. Franklin County, 48 Id., 169. See also St. Louis v. Alexander, 23 Miss., 483. "" Knapp V. Grant, 27 Wise, 151 ; Bass v. Columbus, 30 Ga., 848; McMillen V. County Judge, 6 Iowa, 393; but see State of Iowa v. County of Wapello, 13 Iowa, 388; Steines V. Franklin County, 48 Miss., 187, 188; Barton County v. Walker, 47 Id., 202 ; Hannibal, etc., R.R. Co. v. Marion Co., 36 Id., 294 ; Camp- bell V. Kenosha, 5 Wall., 194; Citv v. Lamson, 9 Id., 477 ; Thomson v. Lee County, 3 Id., 331 ; Gelpcke v. Dubuque, i Id., 229; St. Joseph Township v. Rogers, 16 Id., 663. See also Schenley v. Commonwealth, 36 Penn. St., 29; Cooley on Const. Limitations, 370, 381. In Beloit v. Morgan, 7 Wall., 619, it appeared that the legislature of Wisconsin created the city of Beloit, carving it Vol. II. — zi 578 THE VALIDITY OF MUNICIPAL BONDS. § 1 56 1. § 1 56 1. In conformity with this doctrine it has been held in Wisconsin, that where a city bond was executed without legislative authority, merely because the act authorizing its issue had not been published at the time so as to take effect, but there had been a popular vote in favor .of the issue of the bond, the legislature might, with consent of the city au- thorities, ratify the issue, and give validity to the bond.^ On the same principle it was held in Illinois, that where a school tax had been voted by the people of a school district, but it was invalid under the law, because it was not certified tQ the county clerk on the day designated by law, the legislat- ure had power to pass an act remedying the defect and validating the tax, while it yet remained uncollected.^ So it has been held by the United States Supreme Court, that a legislature may pass a curative act validating bonds issued by a municipal corporation, where the defect consisted in the fact that the submission of the question as to whether or not they should be issued, was under the wrong act ; ^ and where the vote was taken upon the wrong day, and there were informalities in respect to keeping the records and filing the certificates of election ; * and where there were other circumstances of irregularity.^ § 1562. It has also been held that the legislature may vahdate securities issued without a popular vote. Thus, where the co.uncil of municipality No. i issued bonds to a theatre company, as a subscription thereto, without legisla- tive authority, and without a popular vote, an act validating out of territory formerly constituting the town of Beloit, and in the city charter provided that : " All principal and interest upon all bonds which have heretofore been issued by the town of Beloit for railroad stock and other purposes, when the same or any part thereof shall fall due, shall be paid by the city and town of Beloit, in the same proportion as if said town and city were not dissolved." This provision was held by the court to invalidate all bonds which had been irre^larly issued by the town of Beloit, and to cure all such irregularities. ' Knapp v. Grant, 27 Wise, 147. " Cowgill v. Long, 15 111., 203. ^ Campbell v. City of Kenosha, 5 Wall., 194. The court said : " This is not in terms a curative act, but it has that effect by fair implication." * St. Joseph Township v. Rogers, 16 Wall., 663. ' Thomson v, Lee County, 3 Wall., 327 ^ 1563. LEGISLATIVE CONTROL. 579 them was sustained.'' The United States Supreme Court has said, Fields, J., giving its unanimous opinion : " A law requiring a municipal corporation to pay a demand which is without legal obligation, but which is equitable and just in itself, being founded upon a valuable consideration re- covered by the corporation is not a retroactive law — no more so than an appropriation act providing for the pay- ment of a preceding claim"; and such an act of the leg- islature of Louisiana, imposing upon a city the payment of such a claim, evidenced by coupon bonds, was sus- tained.^ And acts of legislation dispensing with prece- dent conditions to the validity of municipal bonds, and curinor irresfularities in their issue, are considered constitu- tional and legal by that tribunal.^ § 1563. On the contrary, it has been held that an act of the legislature which declared valid and binding bonds which had been issued by county officers on account of the county court-house, and which bonds were not enforceable against the county because differing in form and substance from the warrants authorized by pre-existing statute, was in excess of legislative authority and void, it being thought that it was a judicial rather than a legislative act.^ " Courts," 1 First Municipality v. Orleans Theatre Company, 2 Rob. (La.), 209. « New Orleans v. Clark, 95 U. S., 5 Otto, 645. 'Thompson v. Perrine, 103 U. S. (13 Otto), S13; disapproving Horton v. Town of Thompson, 71 N. Y., 513. 'Commissioners of Shawnee County v. Carter, 2 Kans., 134, 135 ; Kingman, J.: "The act differs from those retrospective laws, which are frequently passed, supplying defects and curing informalities in the proceedings of officers and tri- bunals acting within the scope of their authority. The county commissioners were not acting within the scope of their authority in issuing these bonds. They did not conform to the law only in an irregular way, but they broke down the barriers which the law had raised in a very regular way, and tlieir acts in the premises were void, not for want of any formality or regularity or mistake as to time or otherwise, but for want of power under the law." "The defendant had his rights. The law pointed them out. He was entitled (if to anything) to his warrants, and must bide his time for their payment under the limited power of taxation conferred on the board. He preferred bonds with a higher rate of in- terest, trusting to the healing power of subsequent legislation. He had as much right and power to bind the county in the execution of these bonds as the board had. If he had made these bonds, the legislature would have had as much power to make them valid by an act declaring them binding upon the county as 580 THE VALIDITY OF MUNICIPAL BONDS. § I 5^4. said Kingman, J., " are estopped from an inquiry into the facts by the act itself." So it has been held in Wisconsin, that the legislature had no right to declare valid a contract of the common council of Milwaukee, made in excess of authority, without assent of the city,^ though, as explained in a subsequent case, the legislature may cause a retrospect- ive tax to be levied on a municipal corporation for a pub- lic purpose.^ These cases seem to us to strike the true line of demarcation of legislative power. § 1564. In the fourth place: may the legislature att- thorize municipal officers to ratify invalid securities witJiout a popular vote? — Where there has been a pop- ular vote in favor of a subscription to a public work, and the securities have been issued by an unauthor- ized ofhcer or agent, the legislature has power to con- fer upon the officer or agent who was empowered to issue them, the power to ratify them, and thus effect- uate the popular will.^ So it has been held that the legislature may authorize a city council to ratify securities it had in the present case. Let such a power be once recognized, and within what bounds will the exercise of it be limited ? The legislature undertook to make a law for this case, affecting and changing rights and imposing burdens contrary to previously established law, so that the act, if valid, has all the fcrce of a judgment, though in violation of the principles upon which judgments are rendered. If the act is a law, there is no evading it, even could it be proven that none of the work had been done, or that it had been previously paid tor, or that the contract had been procured by fraudulent collusion between the officers makino- it and the contractor. Courts are estopped from an inquiry into the facts b^'y the act itself, if it have any force in this case. We cite these results from the act, not as having any existence in this case, but to show the conse- quences which would result from upholding the power of a legislature to exer- cise such authority." See Mosher v. Ind. School Dist., 44 Iowa, 122. 'Hasbrouck v. Milwaukee, 13 Wis., 38. >* Mills V. Charleston, 29 Wise, 37 ; see also Ginn v. Weissenberg, 57 Penn. St., 433 ; Musselman v. Logansport, 29 Ind., 533. ' Hannibal, etc.. R.R. Co. v. Marion Co., 36 Mo., 294 ; Barton Co. v. Walker, 47 Mo., 202; Steines v. Franklin County, 48 Id., 187, 188. In Hannibal, etc., R R Co. V. Marion County, 36 Mo., 294, it appeared that doubts existed as to the validity of certain county securities, because, as alleged, they were issued by an a^^ent of the countv court instead of by the county court itself, as the statute requTred ; and the legislature passed a curative act. Wagner, J., said : " But if any doubts were entertained of their validity, by the sixth section of the amend- ed charter it is enacted that ' subscription shall be held valid and binding upon such counties,' etc., ' if aoproved of hereafter by the said county court.' Now, as we have heretofore seen, the county court did, after the passage of this act, approve of the subscription, and ratify it so far as they had power by virtue of § 1564. LEGISLATIVE CONTROL. 58 1 which it was empowered to issue upon the petition of three- fourths of the legal voters.^ In all. these cases mere irregularities were corrected by the curative acts. It is obvious that the question whether or not the legislature may go beyond this, and empower officers to ratify instruments utterly lacking in elements of validity, is the same as that heretofore discussed, to wit, whether it might authorize such officers to issue such in- struments without a popular vote. For, of course, the legislature could only confer retrospective power upon those who could receive a prospective power.^ and in accordance with said act. But it contended that the act is afflicted with a constitutional infirmity, and that it is necessarily inoperative as a confirm- atory act, because, if the proceedings of the court and its agents were void previous to tlie passage of the act, by want of authority, they could not be ren- dered effectual for any purpose by means of legislation. Although individuals may not have the power to make good ab initio that which was originally void by subsequent deed or acts of confirmation, yet that principle has but a slight, if any, application to the case. The act of the legislature does not purport to confirm, ratify, and make unqualifiedly valid the proceedmgs of the county court by its own terms; it does not act ex propria vigore, but delegates authority to those who had prior to that time subscribed for stock to apjirove of and confirm the same. It left the matter entirely optional with the county court, as the rep- resentative and agent of the county, to accept or reject the proffered remedy. They elected to ratify and affirm the subscription, and by that act they gave just the same effect to the contract to subscribe the stock, and to all the proceedings had by the county court in reference to it, as if they had had full authority in the first instance. Nor has the county any just cause of complaint from this concljsion, as it is obvious that the contract was entered into in good faith, and with the firm belief that ample power for the act existed ; and the only effect of the legislative act, and the approval by the court, was to execute and fully carry out precisely what was intended, but which they found was not accom- plished by a defect in their authority. The notes were made by the justices in a public capacity and in the line of their official duty ; the contract inured to the benefit of the county, and the county was bound by the obligation thereby created. Hodgson v. Dexter, i Cranch, 345 ; Tutt v. Hobbs, 17 Mo., 486. Upon a full view of the case, it appears that both parties acted with honesty and good faith ; the county made the subscription to plaintiff's railroad, and received cer- tificates of stock for said subscription, like all other shareholders ; that for nine years it had been regularly represented at the meetings of the stockholders and of the board of directors, and that during that period of time the interest ac- cruing on the stock notes has been regularly and punctually paid. It appears also that many of these stock notes, or obligations, have passed into the hands of bo7ia fide indorsers and innocent purchasers ; their rights ought not to be im- paired without good and substantial j-easons." ' Bissel V. Jeffersonville, 24 How., 295, Clifford, J. : " Mistakes and irregu- larities in the proceedings of municipal corporations are of frequent occurrence, and the State legislatures have often had occasion to pass laws to obviate such difficulties. Such laws, when they do not impair any contract, or injuriously affect the rights of third persons, are generally regarded as unobjectionable, and certainly are within the competency of the legislative authority." *See ante, §§ 1557. 1558 et se^. 582 THE VALIDITY OF MUNICIPAL BONDS. § IS^S* § 1 565. In the fifth place : may the legislature abolish the rio-ht of the municipality to plead the defence of illegality to its contract ? — This is another form in which the question of the right of the legislature to validate invalid securities arises, and it may be regarded as a settled principle of the jurisprudence of the United States that the legislature pos- sesses this power. Thus, suppose a municipal corporation issues a negotiable bond, and disposes of it in a usurious transaction, which renders it void ab initio, and in all hands, and that the legislature afterward repeals the right of the corporation to plead usury as a defence. In such a case the corporation has given its consent, and declared its intent and will, to be bound by the bond. The body of the contract has been created by its own act, and it lacks life only by reason of the legislative prohibition and refusal to recognize it ; and w^hen the legislature subsequently abolishes the right to plead usury, it simply withdraws the impediment of its prohibition, concurs in the pre-existing assent of the cor- poration to the contract, recognizes its act, and breathes life into it. These views have been held to apply to municipal contracts,* as well as to those of private corporations and indi- viduals,^ there being, as is conceived, no distinction as to the character of the parties to whom they are applicable. There can be no valid objection to the doctrine on the ground that it impairs vested rights, for a party "has no vested right to do v/rong." * Nor can it be objected that it impairs the obligation of a contract, for it is in furtherance of the enforcement of con- tracts, and of equity and good morals.^ 1 Town of Danville v. Pace, 25 Grat., i ; Cooley on Constitutional Limita- tions, 378. = Lewis V. McElvain, 16 Ohio, 347 ; Trustees v. McCaughy, 2 Ohio N. S., 155 : Johnson V. Bentley, 16 Ohio, 97 ; Syracuse Bank v. Davis, 16 Barb., 1S8; Curtis V. Leavitt, 17 Barb., 309 ; 15 N. Y., 9 ; Parmelee v. Lawrence, 48 I']- 33i Goshen v. Stonington, 4 Conn., 209 ; Woodruff v. Scruggs, 27 Ark., 26 ; An- drews V. Russell, 7 Black, 474 ; Bangher v. Nelson, 9 Gill, 299. = Satterlee v. Mathewson, 16 Sergt. & R., 191. Duncan, J. ; Town of Danville v. Pace, 25 Grat., 15, Staples, J. ; Foster v. Essex Bank, 16 Mass., 245, Parker C. J. ; Cooley on Constitutional Limitations, 378. * Lewis V. McElvain, 16 Ohio. 347 ; Cooley on Const. Lira., 374. CHAPTER XLIX. C II E C K S. SECTION I. WHAT IS A CHECK? § 1566. A check is (i) a draft or order (2) upon a bank or banking house, (3) purporting to be drawn upon a de- posit of funds (4) for the payment at all events of a certain sum of money, (5) to a certain person therein named, or to him or his order, or to bearer, and (6) payable instantly on demand. This definition has been approvingly quoted.^ Any instrument fulfilling the above description may, we think, be safely denominated a bank check, and the defini- tion given is sustained by many authorities, though not in the language of the text. Writers upon negotiable instru- vTients have differed in their definitions of this species of commercial paper, some falling short of giving all its dis- tinguishing qualities, and some ascribing to it qualities which it is not absolutely necessary that it should possess. And there is none which can be safely relied on as a guide in answering the question : Is this paper a check ?^ ' Blair & Hoge v. Wilson, 28 Grat., 170 (1877), Burks, J. " We cite the definitions and descriptions of checks which the text writers give. Their insufficiency will be readily observed by the attentive professional reader : " A check is a brief draft or order on a bank or banking house, direct- ing it to pay a certain sum of money," says Parsons, vol. 2, N. & B., 57. — " A check drawn on a bank is a bill of exchange payable on demand." Edwards on Bills, 396. — " A check on a banker is, in legal effect, an inland bill of ex- change drawn on a banker, payable to bearer on demand." Byles on Bills (Sharswood's ed.) [*I3], 84. — "A check is a written order or request addressed to a bank, or to persons carrj'ing on the business of bankers, by a party having money in their hands, requesting them to pay on presentment to another person, or to him or bearer, or to him or order, a certain sum of money specified in the instrument." Stor}' on Promissory Notes, § 487. Chitty's definition is substan- tially the same as Story's. Chitty on Bills (13 Am. ed.) [*5ii]. 578. (583) 584 CHECKS. §§ 1567, 1568. § 1567. In the first place, a check is a draft or order. — A bill is also a draft or order ; and it is often said that a check is, in legal effect, a bill of exchange drawn on a bank or banking house, with some peculiarities.^ In some cases it is called a bill payable on demand,^ and in others an in- land bill, or in the nature of an inland bill, payable on de- mand ;^ and the expression that a check is " like a bill" has been criticised on the ground that " 7iihil simile est idon" whereas " checks are bills, or rather bill is the genus, and check is a species."* In form a check is a bill on a bank- ing house (payable on demand, as we conceive) ; and it is perfectly correct to say that it is a bill with some peculiari- ties, or a species of a bill Sir G. Jessel, Master of the Rolls, calls it "a bill of exchange payable at a banker's."^ But this is not a definition. It comes within the general designation of a bill so far that a statute authorizing the protest of inland bills would include inland checks ; ^ but it is erroneous to ascribe to a check a necessary inland charac- ter. A draft drawn in one State, on a bank in another, is nevertheless a check ; and, in point of fact, checks are very much used in the United States in transmitting money from one State to another. "^ § 1568. Secondly, it is absolutely necessary that the draft, in order to be a check, should be drawn upon a bank or > Billgerry v. Branch. 19 Grat., 418; Matter of Brown, 2 Story, 502 ; Cruger v. Armstrong-, 3 Johns' Cas., 5 ; Boehm v. Sterling, 7 T. R., 423 ; Keene v. Beard, 8 C. B. N. S., 372 (98 E. C. L. R.) ; Blair & Hoge v. Wilson, 28 Grat., 170 (1877). " It is sometimes inaccurately described," says Burks, J., " as a bill of exchange payable on demand," or " as in leral effect an inland bill of exchange drawn on a banker payable to bearer on demand. While it has many of the properties of bills, it has several peculiar characteristics." " Harker v. Anderson, 21 Wend., 372; Edwards on Bills, 396. 2 Byleson Bills (Sharswood ed.) [*I3], 84; Keene v. Beard, 8 Com. B. N. S., 373 ; Merchants' Bank v. Spicer, 6 Wend., 445 ; Cruger v. Armstrong, 3 Johns' Cas., 8 ; Purcell v. Allemong, 22 Grat., 742, Anderson, J. * Matter of Brown, 2 Story, 502. " Hopkinson v. Forstei, 18 Eq. Cas. L. R., 74 (1874). ' Moses V. Franklin Bank, 34 Md., 574. ' Planters' Bank v. Kesee, 7 Heisk., 200 (1871) ; Herring v. Kesee, Southern Law Rev., Oct., 1872. 613; Roberts v. Austin, 26 Iowa, 315 ; 2 Parsons N. & B., 59. ^ 1569. WHAT IS A CHECK? 585 banker. — Upon this point the authorities are agreed.^ A bill may also be drawn upon a banker;' and, therefore, while it is necessary that a check should be so drawn, thai alone does not distinguish it. It does not seem necessary that the drawee, when an individual, should be described as a banker ; and an order addressed simply to " Messrs. A. & B." has been held a check, it being proved that they were bankers.' Between the original parties, the payee knowing them to be bankers, such an order might be regarded as a check with reason, although we think it would be better to require that the instrument should not be so considered, un- less its face showed that it was drawn on a banking house. But when transferred to a bona fide holder without notice, it is clear that it should be regarded as a bill, if it would operate any advantage to him to do so. § 1569. Thirdly : A check purports to be drawn upon a deposit. — It is frequently said that a check is drawn upon a deposit in the banker's hands ;^ and the fact that it is so drawn has been held necessary to constitute the draft a ' See Definitions, ante, § 1566, note; Espy v. Bank of Cincinnati, 18 Wall., 620; Bowen v. Newell, 8 N. Y., 195 ; Deener v. Brown, i MacArthur, 350. In Morrison v. Bailey, 5 Ohio St., 13, this point seems to have escaped notice. " Georg-ia National Bank v. Henderson, 46 Ga., 495 (1872), Warner, C. J., say- ing : " A chartered bank is an artificial person, and a bill of exchange may as well be drawn upon and made payable to an artificial person as to a natural per- son ; the three days of grace are allowed as well on bills drawn upon and pay- able to artificial persons as to natural persons. There is no distinction as to the time when a bill of exchange becomes due between one drawn upon and payable at a bank, and one payable to a natural person ; both become due on the last day of grace, unless, under our code, the bill is payable at a bank on sight or on demand. Why should there ever have been any difference as to the allow- ance of days of grace between a bill drawn upon and payable to a chartered bank and one drawn upon and payable to a natural person } The truth is, the same principles of commercial law apply to both, so far as the allowance of days of grace are concerned ; and did, when this bill of exchange was placed in the defendant's hands for collection, except checks drawn on a bank payable at sight or on demand." See cases cited in notes. ' Planters' Bank v. Kesee, 7 Heisk., 200 (1871) ; Herring v. Kesee, Southern Law Review, Oct., 1872, p. 613. * Morrison v. Bailey, 5 Ohio St., 13, where it is said : "A check is drawn on an existing fund." Espy v. Bank of Cincinnati, 18 Wall., 620, Miller, J. : "A check is drawn against funds on deposit with the banker." 586 CHECKS. § I57<^ check.^ But this can not be the true criterion. It is not the fact that the order is actually drawn on a deposit, but the fact that it purports to be so drawn, which constitutes it a check ; and it is more accurate to say that it is upon its face a draft upon a deposit.^ To hold otherwise would authorize the construction of a written contract by the light of an extraneous fact of which the holder had no notice. If there were no deposit, it would be a fraudulent check — but a check, nevertheless — and we can not conceive of a wider departure from principle than to hold that the fraud varied the nature of the instrument itself. § 1570. FotLvthly : A check viust be for the payment at all events of a ce^^tain sum of money. — In this respect it does not differ from other negoriable instruments ; and though, perhaps, it might still be termed a check although not payable in money, by which is meant the legal tender currency of the country, it would certainly not be negotia- ble if expressed to be payable " in bank bills" or " in cur- rency," ^ or if it lacked words of negotiability,^^ or were defi- cient in any of the characteristics in respect to certainty in fact and time of payment and party to whom payment is to be made. § 1 5 71. Fifthly : A check rnay be made payable to a cei^- tain person thereifi named, or to him or his order, or to him or bearer, or simply to bearer, in like manner as a bill of exchange, and may be transferred by indorsement or assignment, as the .case may be, in like manner and to the ' Planters' Bank v. Kesee, 7 Heisk., 200. Nicholson, J., said : " As it is drawn upon a deposit in bank, it falls directly within that class of bills of ex- change known in the commercial world as checks." In Herring v. Kesee, McFarland, J., referring to Brown v. Lusk, 4 Yerg., 210, said in that case " the drawer had no funds in the bank upon which to draw, and this was prcbab y the distinguishing feature." See Southern Law Review, October, 1872, article on Checks. "" See Champion v. Gordon, 70 Penn. St., 476 ; Deener v. Brown, i MacArthur, 350 ; Newman v. Kaufman, 28 La. Ann., 865. ' Bank of Mobile v. Brunn, 42 Ala., 108 ; Little v. Phcenix Bank, 2 Hill (N. Y.), 425. * Partridge v. Bank of England, 9 Q. B., 396. 5 1571^- WHAT IS A CHECK? 587 like effect as a bill of exchange. Certainty as to the payee is as requisite in a check as in a bill of exchange, and if no payee be named or indicated, it will be fatally defective.* Therefore an order drawn "pay to the order of on sight" is not a check, but would indicate that the drawer meant to draw a check, but left out the payee's name, and omitted any expression to show that it should be paid to bearer.* But 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.^ And checks may be drawn payable to an impersonal payee as " to the order of bills payable," or to the order of a certain number, or with some such phrase, to indicate the intention to express that negotiability which only exists in connection with the word order, or bearer. Such a check can not be indorsed in the usual way by any party to it, and is construed to be payable to bearer.'* The bank, it is conceived, would be entitled to a reasonable time to ascertain the genuineness of the indorser's signature before paying a check drawn payable to a certain person or order.^ § 1571^. Check may be payable to bearer. — There is no common law obligation, according to the English author- ities, upon a bank to pay checks other than those payable to bearer, it being considered that the bank has a right to require that it should not run the risk of mistaking the sig- nature of the party to whose order it is payable, and thus becoming responsible in the event of its turning out to be a forgery ; ^ and this has led some text writers and judges ' Rillgerr>-, V. Branch, 19 Grat., 418 ; Matter of Brown, 2 Stor)', 502 ; Cruger V. Armstronjj, 3 Johns' Cases, 5 ; Elting v. Brinkerhoff. 2 Hall, 459; Munn v. Burch, 25 111., 35 ; Stor>' on Notes, § 488. In First N. B. v. Hams, 108 Mass., 514. it was held that a national bank has authority to buy checks on other banks, whether they be payable to bearer or order. " Mcintosh V. Lytic, 23 Minn., 336 ; see vol. I, §§ 99 et seq. ' Mcintosh V. Lytle, 23 Minn., 336. * Mcintosh V. Lytle, 23 Minn., 336; Willets v. Phoenix Bank, 2 Duer, \^X Mechanics' Bank v. Stratton, 2 Keyes, 365. " Robarts v. Tucker, 4 E. L. & Eq., 236, §1618. ° Bellamy v. Majoribanks, 8 E. L. & Eq., 519. 588 CHECKS. § 1571^. to declare that a check must be payable to bearer.^ It is certainly not deemed requisite to its character and validity as a check that it should be so payable. And now the cus- tom of banks to pay checks drawn payable to order is so universally and notoriously recognized and followed, that it would doubtless be regarded as binding on the bank in all cases where nothing is said on the subject.^ As to the law in the United States it has been properly said that the opposite doctrine " is unsupported either by reason or au- thority." ^ In England, an instrument in form a check, but payable to order, was for a long time by statute made an inland bill, and required to be stamped as such. Parliament requir- ing that all checks should be made payable to " bearer" or to " A. or bearer." But by more recent enactment, checks payable to order have been legalized as checks ; but the same enactment has provided that : " Any draft or order drawn upon a banker for a sum of money payable to order on demand, which shall, when presented for payment, pur- port to be indorsed by the person to whom the same shall be drawn payable, shall be a sufficient authority to such banker to pay the amount of such draft or order to the bearer thereof, and it shall not be incumbent on such banker to prove that such indorsement, or any subsequent indorsement, was made by or under the direction or authority of the person to whom the said draft or order was or is made payable, either by the drawer or any indorser thereof."^ An indorse- ment on a check payable to order, purporting to be made by the agent of the payee, has been held to come within the statute, and a payment of it by the bank to be good.^ » Byles on Bills (Sharswood's ed.), [*I3], 84; Chitty (13 Am. ed.), [*5ii], 578 ; Woodruff V. Merchants' Bank, 25 Wend., 672. ^ Morse on Banking, 306 ; Mcintosh v. Lytic, 23 Minn., 336 ; Bowen v. Newell, 4 Selden, 190. ' Dodg-e V. National Exchange Bank, 30 Ohio St., 8. * 16&17 Vict., ch. 59, § 19; 2 Parsons N. &B., 596 ; Morse on Banking, 306. ' Charles v. Blackwell, 2 Com. PI. Div. H. C. J., 151 (1877) ; 20 Moaks' E. R., 426. § 1572. WHAT IS A CHECK ? 589 § 1572. Sixthly, a check is payable instantly on demand, — This is, as we conceive, the touchstone by which a check IS tested. Usually, no time of payment is expressed upon its face, but all commercial instruments in which no time of payment is expressed are understood to be, and im- pliedly are, payable on demand ; and when so payable by implication, or in express terms, they are payable instantly, without the allowance of grace, which pertains to those pay- able on a particular day.^ The whole theory and use of a check points to its immediate payability as its distinguishing feature, and its name imports it. A person deposits money with his bank or banker where it is subject at any time to his order. By an order he appropriates 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. But he does not agree to contract to pay at a future day by acceptance, and the depositor can not require it. § 1573- Whether or not a draft on a bank payable at a future day is a check ? — If a draft upon a bank or banker be dated on a certain day, say the first of December, and be payable on a future day named, say the tenth of De- cember, it has been considered by some authorities to be a check payable on the precise day named without grace ; » See Days of Grace, chapter xx, vol. i, § 617 ; Morse on Banking, 242. In the case of the Merchants' Bank v. State Bank, 10 Wall., 647, the Supreme Court of the United States says : " Bank checks are not inland bills of exchange, but have many of the properties of such commercial paper, and many of the rules of the law merchant are alike applicable to both. Each is for a specific sum, payable in money. In both cases there is a drawer, drawee, and payee. Without ac- ceptance no action can be maintained by the holder upon either, against the drawee. The chief points of difference are that (i) a check is always drawn on a bank or banker. (2.) No days of grace are allowed. (3) The drawer is not discharged by the laches of the holder in presentment for payment, unless he can show that he has sustained some injury by the default. (4) It is not due un- til payment is demanded, and the statute of limitations runs only from that time. (5) It' is by its face the appropriation of so much money of the drawer in the hands of the drawee to the payment of an admitted liability of the drawer. (6) It is not necessary that the drawer of a bill should have funds in the hands of the drawee. A check in such case would be a fraud." See Blair & Hoge v. Wilson, 28 Grat., 170; Deener v. Brown, i McArthur, 350. 590 CHECKS. § 157: and the high authority of Story and Sharswood sustains this view.^ Such an instrument payable at so many days after sight,^ and at so many days after date,^ has also been 1 Matter of Brown, 2 Stoiy, 502. The draft was as follows r " Granite Bank, $703-5o. " Boston, April iSth, 1841. " Pay to Curtis & Co., i8th May, or bearer, seven hundred three dollars and fifty cents. ^ „ " To cashier. Ephraim Brown. In Champion v. Gordon, 70 Penn. St., 474 (1872), the draft was as follows : " Philadelphia, November 22d, 1869. "The Commonwealth National Bank pay to H. Yerkes or order one hundred and fifty (December 3d, 1869) dollars. JOHN B. Champion." Champion v. Gordon, 70 Penn. St., 475 (1S72), Sharswood, J., saymg : " The ordinary commercial form of a bill of exchange payable at a future day is at so many days' or months' notice after date or sight. An order so drawn, whether upon a banker or any other person, ought to be regarded as a bill, with all the privileges and liabilities which by the law merchant are incident to a bill. The drawer, by adopting this usual form, must be held so to intend. So if an order be drawn on a merchant or other person not a banker, with whom the drawer keeps money on deposit subject to draft, payable at a future day named, there exists no reason why the same rule should not apply. But there is a good rea- son why there should be a difference between an order so drawn upon a banker, which certainly must be presumed to be by a person who keeps money on deposit with such banker, subject to draft, and an order on a merchant or other person. If such an order, drawn upon a bank payable at a future day named in it, must be considered as an inland bill of exchange, and not a check, then the payee or holder has the right to present it at once for acceptance, protest it at once for non-acceptance, and sue the drawer immediately. Should it be accepted, how- ever, the funds of the drawer in the bank would necessarily b^ thereby tied up until the day of payment. All the objects of directing payment at a future day would thus be frustrated. What the drawer undertakes is, that on a day named he will have the amount of the check to his credit in the bank. In the niean- time he wants the full and free use of his entire deposit. It is not denied that a post-dated check can not be presented for acceptance. That is by implication payable on a future day. Why, then, is a check expressly so made payable to stand on different ground ? In the case before us, an ordinary printed torm ol a bank check was evidently used, and the day of presentment written in one of the blanks This is the most convenient form, for it calls the attention of the cashier or paying teller to the fact, which he would be likely to overlook if it were expressed only by the date. Nothing, I am told, is more common tnan such mistakes in the payment of post-dated checks, and depositors often thus find their accounts overdrawn, very much to their embarrassment. If we de- termine that an order hke that before us is not presentable for acceptance before maturity, we settle the question. It is a check, and not a bill of exchange. In Bowen v Newell, 5 Sand., 326, the court held that an order on a bank payable at a future day was a check, and not entitled to grace. This decision was follovyed in the same case reported in 5 Duer, 584. But in 4 Seld., 190, the contrar)' view was taken. And finally, in 3 Kern, 290 (the case having been four times htiga- ted) the court came to the conclusion that by the principles of the law merchant the instrument was entitled to grace, but permitted local usage to control to the contrary. 2 Herring v. Kesee, Southern Law Review, October, 1872, article on Checks. The order was upon a firm not described as bankers, and payable ten days after Eight. It was accepted by the drawees and held a check. « Westminster Bank, 4 R. I., 30. Instrument payable "ninety days after date " was deemed a check. § 1574- WHAT IS A CHECK. 59 1 deemed a check payable at the expiration of the number of days named, without grace. There is more reason for considering a draft payable on a precise day named a check than for so considering it when payable at a certain time after sight, or after date. For it is not usual to frame bills of exchange payable on a precise day, while " after date " and "after sight" are phrases of constant use in drawing them. Nor can we perceive any commercial utility in regarding it as a check. If the draw^er wishes to give the draft paya- ble in future the characteristics of a check, he can do so by post-dating it ; and then it could not be presented for ac- ceptance, because it would not be operative until the day of its post-date arrived.^ Or, if he desired it to have the effect of a bill, and yet not have grace, he could express " without grace " on its face ; ^ and if he did not wish to have it presented for acceptance, he could express it in like manner "without acceptance."^ Thus the various uses and objects of the different instruments could be subserved ; but otherwise they become confused and difficult to attain. § 1 5 74. Draft 071 bank not payable immediately is a bill of exchange. — But every draft upon a bank or banker which is not payable immediately, possesses, as we think, all the qualities of a bill of exchange ; and the preponder- ance of authority sustains this view, whether the instrument be payable on a precise day named or at so many days after date or sight. In Missouri the paper in question was dated 12th Octo- ber, i860, was addressed to "The Southern Bank of St. Louis," and ran : " Pay to M. C. Jackson & Co., or order, five hundred dollars, on 2 2d October." The bank receiv- ing the draft for collection presented it on October 2 2d, * S&e. post, § 1578, and section iv. ' See chapter XX, §633, vol. i. » See chapter xvii, §454, and chapter xviii, §481, vol. r. . 592 CHECKS. § ^575' and payment being- refused, it was held liable for negligence for not presenting it on the 25th, allowing grace. The court said : " This bill is neither payable at sight nor on de- mand, but on a day certain ; and it was, ther-efore, entitled to grace, and it was negligence to present it before grace had expired."^ So in Georgia the following instrument was held to be a bill of exchange entitled to grace, and not a check : " At- lanta, Georgia, August 4th, 1866. Georgia National Bank of Atlanta, Georgia. Ninety days after date, pay to F. R. Bell, or order, one thousand dollars. (Signed) Massey & Herty." ^ And the like view has been taken in Ohio,^ Cal- ifornia,* and other States. § 1575. Checks not entitled to grace. — It follows, as mat- ter of course, from what has been already said, that a check is not entitled to grace. The very idea of the instrument is its immediate payability. And the question which is often discussed, whether or not a check drawn payable at a future day is entitled to grace, in itself confounds the dis- tinction between a check and a bill. For if payable at a future day, it is not a check, but a bill, and as such entitled to grace, like any other bill payable in the future.^ ' Ivory V. Bank of the State, 36 Mo., 475. = Henderson v. Pope, 39 Ga., 361, reaffirmed in Georgia National Bank v. Henderson, 46 Ga., 496 (1872). ' In Morrison v. Bailey, 5 Ohio St., 13, the instrument was dated June 30th, and was payable " on the 13th July." It was held not a check, but a bill entitled to grace. In a later case the question was held to turn on the intention of the parties. Andrew v. Blackley, 1 1 Ohio St., 89. * In Mintumv. Fisher, 4 Cal., 36 (1854), the instrument was dated "San Francisco, June 9th, 1853," and was addressed to P. B. & Co., bankers, request- ing them to pay $3,890.18 " on the fifteenth (15th) inst." It was held a bill, and not a check, and entitled to grace, and demand on the 15th was premature. Work V. Tatman, 2 Houst. (Del.), 304 ; Bradley v. Harrington, 5 Harring., 305 ; 2 Parsons N. & B., 68, 69. ^ In Morse on Banking, p. 243, it is said : " Often an instrument, in its form substantially like a check, is made payable at a day subsequent to that both of its date and of its issue, either by naming such a date in the body of the instru- ment, or by making it payable so many days after date. In such cases it is often a question whether or not grace is to be allowed. But though this is the ques- tion, it does not take the form of whether or not grace is to be allowed on such a check, but whether or not such an instrument is a check at all. For if it is a <$ I57S. FORMAL PARTS AND VARIETIES OF CHECKS. 593 § 1576. Effect of 2isage. — Whether or not the usage of banks in any particular place, and of business men to re- gard drafts on banks payable at a future day after date as checks, and not entitled to grace, is admissible in evidence to control the general law merchant, is a question upon which the authorities are divided. Some cases hold such evidence inadmissible ; ^ but others take the ground that the common understanding of the business community ought to be carried out, and admit such evidence to effectuate it.^ SECTION II. FORMAL PARTS AND VARIETIES OF CHECKS. — BUSINESS AND MEMORANDUM CHECKS. § 1577. As to the date: A check should be dated. — It may bear its actual date, or be ante-dated or post-dated. " But it would seem," says Morse in his excellent treatise, " that if a check is not dated at all, and contains no state- ment of a date when it is to be paid, it is never payable."^ There is no adjudication to this effect. And while it may be that a bank would be warranted in refusing to pay an undated check (and this is doubtful), it would not be un- reasonable for it to assume a contemporaneous date, and to pay it accordingly. § 1578. Checkmay be post-dated, or ante-dated. — It makes no difference (independent of any statutory regulation) check, that simple fact is conclusive of the fact that it is payable immediately on demand on the day named, without grace. A check is and must always be so payable. But if it be not a check, then it will probably have the customary grace of the place where it is made payable, and will be called a bill of ex- change." See 2 Parsons N. & B., 68, 69. ' Morrison v. Bailey, 5 Ohio St., 13 ; Minturn v. Fisher, 4 Cal., 35. * Bowen v. Newell, 3 Kern, 290 ; Champion v. Gordon, 70 Penn. St., 476 (1872) ; Morse on Banking, 247. ' Morse on Banking, 238. Vol. II.— 38 594 CHECKS. § 1579. whether a check be post-dated or ante-dated, and it is still payable according to its express terms. The drawing of post-dated checks is an every-day occurrence in the com- mercial cities ; and the uniform understanding of parties is that when the check is post-dated — say as of the 14th of January, when actually drawn on the ist — that it is payable on the day it purports to be, without any days of grace, even though it be negotiated beforehand.-^ If the check be post-dated so that it falls due on Sunday, that is, bears date as of a coming Sunday, payment can not be demanded until the Monday afterward ; and if the bank pay it before that Monday it acts at its peril. ^ § 1579. As to the language of the check. — There must, of course, be words expressing an order that the bank shall pay the amount. They need be in no particular form. And sometimes they are accompanied with the words " for value received," or a statement of the consideration. This slight addition is immaterial.^ § 1580. As to the sum payable. — The sum should be dis- tinctly and carefully expressed in figures and in words to avoid any question. But either words or figures are suffi- cient. The amount should be named in the currency of the country (in the United States simply in dollars) ; and the bank might properly refuse payment of a check expressed in sovereigns, francs, or any other foreign currency.* In the United States the mark " $ " is alone sufficient to ex- press "dollars,"^ as in England '' £ s. d." expresses ^ Taylor V. Sip, i Vroom, 284 ; Mohawk Bank v. Broderick, 10 Wend., 304 ; S.C. 13 Wend., 133 ; Matter of Brown, 2 Stor}', 502 ; Salter v. Burt, 20 Wend., 205. Independent of the stamp act, the rule is likewise in England. Story on Prom. Notes, 490 ; Whister v. Foster, 32 L. J. C. P., 161 ; 14 C. B. N. S., 238 (108 E. C. L. R.) ; Austin v. Bunyard, 34 L. J., 217 ; Allen v. Keeves, i East., 435. In England the stamp act has led to much controversy as to post-dated checks, which it is unnecessary to discuss here. See 2 Parsons N. & B., 69, 71 ; Byles on Bills [*I5], 87, et seq., and numerous cases referred to. . " Salter v. Burt, 20 Wend., 205. * Wells v. Brigham, 6 Cush., 6. *Rastell V. Draper, Yelv., 80; Moore, 775 ; Cro. Jac, 88; Morse on Banking, 236 ; Grant on Banking, 16. 'Corgan v. Frew, 39 111., 31. § 1582. FORMAL PARTS AND VARIETIES OF CHECKS. 595 pounds, shillings, and pence.^ And it has been held that the figures " 37.89," divided by a period as indicated, and without even the dollar mark, " $," were sufficient to raise the inference that dollars was intended.* Where the marginal figures differ from the written words, the words should be attended to and not the figures. And a change of the figures, so as to conform them to the words, made by the holder, without the knowledge or con- sent of the drawer, has been held not a material alteration or forgery, as tHe figures served only as an index, for con- venience of reference, and constituted no part of the bill.^ § 1 58 1. As to the address. — The name of the bank on which the check is drawn is usually printed in large charac- ters on the top of the check, and frequently in the lower left-hand corner are the words " To the cashier," or " To the cashier of — ."* It has never been decided, that we are aware of, whether or not these latter words are necessary. And it has been said to be " very doubtful," with the inti- mation that it is decidedly safer to consider the address " to the cashier " as essential.^ But very many checks have only the name of the bank upon it. It is the bank to whom it is really addressed, and which is to pay it, and we can not see that more is needful. § 1582. As to delivery. — A check, like any other instru- ment, must be issued before it is binding ; and it is consid- ered as issued as soon as it is in the hands of any party who can demand its payment.^ If it be lost or stolen before being issued, the thief or finder can not enforce it against the drawer. But, nevertheless, if presented at the bank ' Kearney v. King, 2 Barn. & Aid., 301. * Northrop v. Sanborn, 22 Vt., 433. "Smith V. Smith, i R. I., 398 ; see ante, chapter III, § 86, note 5, vol. i. and vol. 2, § 1499a. * Matter of Brown, 2 Stor>', 502 ; Allen v. Sea Fire, etc., Ins. Co., M. G. & S. 573 ; Ellison v. Callingridge, Id., 570. ' Morse on Banking, 238. Grant on Banking, 14; Morse on Banking, 239. 59^ CHECKS. § 1583. and payable to bearer, the bank would be protected in paying it. And a bona fide holder without notice that it had never been issued, would be protected to the full extent, as would the holder of any other negotiable instru- ment. § 1583. Memorandum checks. — There is a class of checks which has recently sprung up in our commercial communi- ties, of a peculiar character, and known as memorandum checks. In their form they do not differ from ordinary checks, and as to third parties who are holders bona fide for a valuable consideration, without notice, they are affected with all the legal rights and consequences of or- dinary checks.^ " They are in fact, and in law," says Mr. Morse, " equivalent to the drawer's promise to pay for value received. The holder may sue upon them as upon a promissory note, and by reason of their peculiar character he is not held to present them at the bank for payment, prior to bringing his suit against the maker." ^ § 1584. The difference in form, between the ordinary and the meinorandum check is, that the latter usually has the in- sertion of the word "mem.," which is used to indicate the understanding between the immediate parties.^ Sometimes the name of the bank is cancelled ;^ but whether the word " mem." constitutes the only mark on its face, or the bank's name be cancelled in addition, the effect of the memorandum check is to create an absolute contract of the maker to pay the bona fide holder, unconditionally, and not upon the con- dition of presentment at the bank, non-payment and notice, the formalities being regarded as waived.^ * Language of Story on Promissory Notes, § 499. " Morse on Banking, 313 ; Franklin Bank v. Freeman, 16 Pick., 535 ; Gushing V. Gore, 15 Mass., 69. ' Dykers v. Leather Bank, 11 Paige, 612; Franklin Bank v. Freeman, 16 Pick., 535. *Ball V. Allen, 15 Mass., 433 ; Ellis v. Wheeler, 3 Pick., 18. * Franklin Bank v. Freeman, 16 Pick., 535 ; Dykers V. Leather Bank, 11 Paige, 612. 5 1585- FORMAL PARTS AND VARIETIES OF CHECKS. 597 In a Massachusetts case, the paper sued on was in form as follows : " Market North Bank, Memo. : " icoo dolls.— cts. Boston, Aug. 27, 1833. " Pay to payable, Friday, 30 inst., or bearer, one thousand dollars, y^. " To the Cashier. Benj. Freeman." The word " North " had two lines run through it. The court said : " A memorandum check is a contract, by which the maker engages to pay the bona fide holder absolutely, and not upon a condition to pay if the bank upon which it be drawn should not pay upon presentation at maturity, and if due notice of the presentation and non-payment should be given. The word ' memorandum,' written or printed upon the check, describes the nature of the contract with pre- cision."^ According to the Massachusetts cases, the erasure of the name of the bank destroys the presumption of consideration which attaches to an ordinary check ; ^ but proof of value given, and bona fides, authorizes a recovery against the drawer of a regular memorandum check in which the name of the bank is cancelled.^ A check in the ordinary form can not be shown by parol evidence to be a memorandum check, and not intended for presentment, and so excusing the holder from presenting before he charged the drawer,'* nor can the drawer of such a check show that he was not to be responsible.^ § 1585. In Morse on Banking, 313, it is said: "The fact that the word ' memorandum ' or the abbreviation * memo.' is written on a check is sufficient in law to render it a memorandum check. But the bank is not bound to pay any attention to these words, or to recognize any contract > Franklin Bank v. Freeman. i6 Pick., 535. The paper being payable at a future day, seems to have been a bill rather than a check. But this point was not adverted to, nor did it seem essential. See ante, § 1573, and §§ 161 ct scq., vol I. " Ball V. Allen, 15 Mass., 433. ' Ellis v. Wheeler, 3 Pick., 18. * Kelley v. Brown, 4 Gray, 108. * American Emigrant Co. v. Clark, 47 Iowa, 672. 598 CHECKS. § 1585^ as implied by them between the maker and payee which gives the check any pecuhar character. If such a check is presented for payment, and the drawer has to his credit suf- ficient funds to meet it, the bank must honor it precisely like any other ordinary check. If the agreement or under- standing between the drawer and payee is, that it shall not be presented for payment, any remedy of the drawer for the breach is solely against the payee. If the check is once drawn and delivered, the drawer's reliance that it will not be presented at the bank can rest only upon the good faith of the holder. He can not drag in the bank as a partner in the arrangement, neither alter the duty of the bank to pay his drafts out of his deposit. This is a rule of law. Usage, or the customary understanding of business men to the contrary, can not operate to change it." § 1585^. Crossed checks. — In England there is a well- known usage, which has become the subject of legislation, for the drawer or holder of a check to cross it with the name of a banker, the effect of which was, before the statute which now exists, a direction to the drawee bank to pay the check to no one but a banker ; or rather according to the cases, with only a caution or warning to the drawees that care must be used in paying it to any one else. The check re- mained payable to bearer, and its negotiability was not restrained.^ The statute of 19 and 20, Victoria, c. 25, recites that its object is to provide that drawers or holders of drafts, payable to bearer or order on demand, may be enabled effectually to direct the payment of the same only to or through some banker. It then enacts that the crossing shall have the force of a direction to the bankers upon whom the check is drawn, that it is to be paid to or through some banker, and the same shall be payable only to or through some banker. This statute was held not to restrain the ne- ■ Bellamy v. Majoribanks, 7 Exch., 389 ; 21 L. J. Ex., 70; Carlon v. Ireland, 5 E. & B., 765 ; 25 L. J. Q. B., 113 ; Simmons v. Taylor, 2 C. B. N. S., 528 ; 4 C. B. N. S., 463 ; 27 L. J. C. P., 45. 248. § 1586. PRESENTMENT AND PROTEST. 599 gotiability of the check.* Another statute, 21 and 22 Vict, c. 79, enacts this more at large. It says the crossing shall be deemed a material part of the check, and provides against obliteration of the crossing. But this statute has been also held not to restrain the negotiability of the check, and its effect explained by the Court of Appeal.^ The English usage is not practiced, that we are aware of, in the United States. § 1585^. In Louisiana, where a check was indorsed by a party as " surety," it was considered that the party so in- dorsing it must have known that it was not designed for use in the usual manner ; and that no other object could be well imagined for requiring a surety on a check, than that it should be held for a time, or until funds should be provided. And therefore, that the surety would not be released by failure to demand payment in reasonable time.^ We sug- gest that it is quite imaginable that the party taking the check might have questioned the existence of funds to meet it, and therefore have required a surety. ^ SECTION III. PRESENTMENT AND NOTICE, AND PROTEST OF CHECKS. § 1586. It is the general rule, in respect to checks, that the holder has no recourse upon the drawer until the check ' Simmons v. Taylor, supra. * Smith V. Union Bank, L. R., i Q. R. Div., 31 (1875), affirming same case, L. R., 10 Q. B., 291 : " It is asked," said Lord Cairns, delivering the opinion of the Queen's Bench Division of the Court of Appeal, " what is the effect of the statute in enabling the payee to cross a check? We think the answer is easy. It imposes caution, at least, on the bankers. But further, by its express words, it alters the mandate, and the customer, the drawer, is entitled to object to being charged with it if paid contrary to his altered direction. This must often operate for the benefit of the payee or holder who had crossed the check. Fur- ther, if, in addition to the check being crossed, the signature of the payee was forged, he would retain his property as pointed out by Mr. Justice Blackburn, and could recover it from the banker notwithstanding 16 and 17 Victoria, c. 59, § 19, which protects a banker paying on a forged indorsement." ' Newman v. Kaufman, 28 La. An., 865. 600 CHECKS. § 1587. has been presented to the bank, and payment refused ; and such presentment and refusal are essential prehminaries to an action against him. And the same rules which are es- tablished in relation to the necessity of presentment and notice, in order to charge the drawer and indorsers of bills of exchange in general, apply as well to checks.^ The fact that the check is presumed to be drawn against deposited funds makes it of even greater importance than in the case of a bill, that a check should be presented, and that the drawer should be notified of non-payment, in order that he may speedily inquire into the causes of refusal, and be placed in a position to secure his funds which were de- posited in the bank.^ § 1587. Distinctio7i between bills and checks as to con- sequence of delay or neglect. — But there is an important distinction as to the extent of the legal consequence of neglect and delay in presentment and notice, between bills and checks. It is true that the indorsers of such instruments stand on the same footing in reference to the effect of delay, or failure in making presentment, or giving notice. They are absolutely and entirely discharged, if presentment be not made within a reason- able time, and due notice given.^ But the drawer of > Purcell V. Allemong, 22 Grat., 742 (1872) ; Judd v. Smith, 3 Hun, 190 (10 N. Y. S. C. R.) ; Conkling v, Gandall, i Keyes, 228 ; Middletown Bank v. Morris, 28 Barb., 616; Cruger v. Armstrong, 3 Johns' Cas., 79; Murray v. Judali, 6 Cow., 484 ; Harker v. Anderson, 21 Wend., 372 ; Merchants' Bank v. Spicer, 6 Wend., 445 ; Franklin v. Vanderpool, i Hall, 80 ; Levy v. Peters, 9 Serg. & R., 125; Ctnroy v. Warren, 3 Johns' Cas., 259; Edwards v. Moses, 2 Nott & McCord, 433; Sherman V. Comstock, 2 McLean, 10; Daniel v. Kyle, 5 Ga., 245 ; Humphreys v. Bicknell, 2 Litt. (Ky.), 298 ; Ford v. McClung, 5 West Va. (Hagans), 156; Edwards on Bills, 396 ; Clark v. Bank, 2 MacArthur, 249; Pollard V. Bowen, 57 Ind., 234; Farwell v. Curtis, 7 Bissell, 160. "^ Purcell V. Allemong, 22 Grat., 742 ; Eichelberger v. Finley, Harr. & John., 381 ; Merchants' Bank v. State Bank, 10 Wall, 657 ; True v. Thomas, 16 Me., 36 ; Hoyt V. Seeley, 18 Conn., 353 ; Matter of Brown, 2 Story, 502 ; Moody v. Mark, 43 Miss., 210 ; Linville v. Welch, 29 Miss., 203 ; Franklin v. Vanderpool, 1 Hall, 78; Foster v. Paulk, 41 Me., 425 ; Humphreys v. Bicknell, 2 Litt., 296; Pack V. Thomas, 13 Sm. & M., 11 ; Case v. Morris, 31 Penn. St., 100 ; 2 Par- sons N. & B., 71. * Merchants' Bank v. Spicer, 6 Wend., 445 ; Marcy, J. : " As the defendant is sued as an indorser, the plaintiffs must establish a due presentment for payment, ^ 1587. PRESENTMENT AND PROTEST. 60I a bill Stands upon a different footing from the drawer of a check. In the case of a bill of exchange, negligence, in re- spect to presentment or notice, absolutely discharges the drawer. But the drawer of a check is regarded as the prin- cipal debtor, and the check purports to be made upon a fund deposited to meet it. And negligence of the holder in not making due presentment, or not giving him notice of dishonor, does not absolutely discharge him from liability unless he has suffered some loss or injury from such negli- gence, and then only to the extent of such loss or injury. He is at most entitled only to such presentment and notice as will save him from loss.^ Were it otherwise the drawer would profit by a neglect which could do him no injury.* If all of the funds be lost by neglect or delay, the holder of and a notice of non-payment to the defendant, before he can be made chargeable for the amount of this check." Little v. Phoenix Bank, 2 Hill (N. Y.), 429 ; Murray v. Judah, 6 Cow., 490; Humphreys v Bicknell, 2 Litt., 298; Daniel v. Kyle, I Kelly (Ga.), 304 ; Harbeck v. Craft, 4 Duer, 129. * Purcell V. AUemong, 22 Grat., 743 ; Bell v. Alexander, 21 Grat., i ; Stewart V. Smith, 17 Ohio St., 82 ; Emery v. Hobson, 63 Me. ; Taylor v. Slip, i Vroom (N. J.), 284 ; Murray v. Judah, 6 Cow., 490 ; Conroy v. Warren, 3 Johns' Cas., 259; Mohawk Bank v. Broderick, 10 Wend., 309; Little v. Phoenix Bank, 2 Hill, 425 ; Planters' Bank v. Kesee, 7 Heisk., 200; Park v. Thomas, 13 Sm. & M., II ; Daniel v. Kyle, i Kellv, 304; Stewart v. Smith, 17 Ohio St., 82; Mor- rison V. Bailey, 5 Ohio St., 13 ; Cox v. Boone, 8 W.Va., 500; Cork v. Bacon, 45 Wise, 192 ; Scott V. Meeker, 20 Hun, 163 ; Howes v. Austin. 35 111., 396; Law- rence V. Schmidt, 35 III, 440 ; Willetts v. Paine, 43 111., 432 ; Heartt v. Rhodes, 66 111., 351 ; Stevens v. Park, 73 111., 387 ; St. John v. Homans, 382 ; Mornson V. McCartney, 30 Mo., 183 ; Gregg v. George, 16 Kansas, 546. In Lovett v. Cromwell, 6'\Vend., 369, it was held that where an injunction from chancery, under the act to prevent fraudulent bankruptcies by incorporated companies, was served upon a bank half an hour after it opened for business, by which its oper- ations were suspended, that the holder of a check, received after banking hours on the preceding day, was not bound to show a presentment of the check for payment, to entitle him to recover upon the original consideration, although it appeared that the drawer had sufficient funds in the bank to pay the check, and that it would have been paid had it been presented before the service of the in- junction. Matter of Brown, 2 Story, 502 ; Searle v. Norton, 2 M. & R., 401 ; Alexander v. Burchfield, 7 M. & G., 1067 ; Laws v. Rand, 3 C. B. N. S., 442 ; Keene v. Beard, 8 C. B. N. S., 380 (90 E. C. L. R.) ; Robinson v. Hawkstord, 9 Q. B., 52 ; Blair & Hoge v. Wilson, 28 Grat.. 171 ; Clark v. National Metropol- itan Bank, 2 MacArthur, 249 ; Deener v. Brown, i MacArthur, 350 ; Grithn v. Kemp, 46 Ind,, 172. ' Hoyt V. Seeley, 18 Conn., 360, Waite, J. In Kinyon v. Stanton, 44 Wise, 479, the holder entirely failed to present the check, and eight days after its date the bank failed. But previously to its failure, the drawer withdrew his lands. He/d, he was still bound. 602 CHECKS. § I5S8. the check suffers of course a total loss.* It is not sufficient to show a probability of injury, — it must be proved.^ § 1588. Bicrden of proof as to injury to the drawer. — If, however, suit be brought against the drawer, and there has not been due presentment and notice, the burden of proof is upon the plaintiff to show that the drawer has suffered no injury — injury being prima facie presumed.^ But when it is shown that the drawer had no funds, or withdrew them, this presumption of injury is rebutted, and he is chargeable without presentment or notice.'* But while it is true that the burden of proof is upon the plain- tiff to show that no loss or injury resulted to the drawer when he seeks to excuse the non-presentment of the check ; yet where the suit is brought on the pre-existing debt for which the check was given, it has been held that the de- fendant who pleads payment must not only show delivery to and acceptance of the check by the plaintiff, but also that through the plaintiff's laches, loss or mjury has ac- crued.^ ' In Smith v. Jones, 2 Bush (Ky.), 103, the check was dated April 12th, 1862, and was not presented until the 13th of January, 1863, at the Citizens' Bank of Louisiana, at New Orleans, on wliich it was drawn. The city had in the mean- time been captured by the Federal forces, and the funds on which the check was drawn had become worthless. Robertson, J., said : " Unlike a bill of exchange, a check does not require ' due diligence,' and apparent laches in presenting it for payment does not exonerate the drawer, unless by unreasonable delay he has suffered loss, and then he is entitled to relief /r^ tajito. But the evidence au- thorizes the deduction, that for nearly a month afier the date of the appellee's check, the appellants, if only reasonably provident and diligent, might have pre- sented the check and recovered the amount of it. And it is evident that when nine months after its date, the check was presented for payment, the property of the appellants was almost worthless, and could not be drawn Irom the bank, or exchanged or circulated within the Federal lines, consistently with national policy or law." It was held, therefore, that there could be no recovery on the checif. " Syracuse, etc., R.R. v. Collins, 57 N. Y., 641. « Ford V. McClung, 5 W. Va. (Hagans), 166 (1872) ; Little v. Phoenix Bank, 2 Hill, 425 ; Daniel v. Kyle, i Kelly, 304; Harbeck v. Craft, 4 Duer, 122; see Conroy v. Warren, 3 Johns' Cas., 259 ; 2 Parsons N. & B., 71. * Eichelberger v. Finley, 7 Har. & J., 381 : Healy v. Oilman, i Bos., 235; Shaffer v. Maddox, 9 Neb., 205 ; Kinyon v. Stanton, 44 Wise, 479 ; 2 Parsons N. & B., 71 ; see chapter xxxi, on Excuses for Want of Presentment and No- tice, § 1073, p. 117, et seq. " Syracuse, etc., R.R. Co. v. Collins, 3 Lans., 29. § 1590* PRESENTMENT AND PROTEST. 6o^ § 1589. 1/ bank remains solvent check-draiver is bound. — It follows from the principles already stated, that if the bank on which the check is drawn remains solvent and able to pay, the drawer will remain bound after present- ment and refusal of payment, although many months, or even years, have elapsed since the check was drawn.^ And when the holder sues upon the check, and proves the presentment to the bank, and due notice of dishonor to the drawer, it will devolve upon the latter to show that the bank had be- come insolvent, and unable to pay, after the check was drawn and before presentment was made, in order to defeat a recovery.^ A check may be barred by statute of limita- tions whether the drawer kept his funds in the bank or not' § 1590. Within what time check must be presented. — A failure of the bank or banker who is drawee of the check, and who held on deposit a fund to meet it, which is thereby lost, presents the usual, if not the only, case in which delay of the holder in making presentment, or giving notice of dishonor, devolves loss upon him. But it is by no means an infrequent case, and therefore important to be consid- ered. If at the time the check was delivered to the payee, the bank was solvent, and held funds of the drawer suffi- cient to meet it, it would be a fraud for the drawer, after giving a check upon them, to withdraw the amount which should pay it ; and as he could not rightfully withdraw the amount, it would be unjust to require that, however long the check holder might permit it to remain, it should be at the drawer's risk. The law has therefore declared that it must be presented within a reasonable time ; at the expira- tion of which such risk terminates as to the drawer, and becomes the risk of the holder if he permits the deposit to remain in bank. And if in the meantime the bank in which the check is drawn fails, the loss must fall upon the ' Bell V. Alexander, 21 Grat., 6 ; Emery v. Hobson, 63 Me. ; Byles on Bills (Sharswood's ed.) [*2o], 93. " Stewart v. Smith, 17 Ohio St., 85, 86. ' Brust v. Barrett, 17 Hun, 409. 604 CHECKS. § 1590* holder.^ Such reasonable time has been definitely fixed by the decisions as follows : (i) First, as between the drawer aitd payee. — Where the payee to whom the check is delivered by the^ drawer, re- ceives it in the same place where the bank on which it is drawn is located, he may preserve recourse against the drawer, by presenting it for payment at any time before the close of banking hours on the next day (by which is meant the next secular day, for if he receive it on Saturday, he has until the close of banking hours on Monday to pre- sent it) ; ^ and if in the meantime the bank fails, the loss will be the drawer's.^ "The rule to be adopted," said Lord Ellenborough, in a leading case, " must be a rule of con- venience ; and it seems to me to be convenient and reason- able that checks received in the course of one day should be presented the next. Is this practice consistent with the law merchant ? It can not alter it. Banks would be kept in continual fever if they were obliged to send out a check the moment it was paid in." * The allowance of a day to present the check does not extend to an agent who re- ' Cork V. Bacon, 45 Wise, 192 ; a7ite, § 1587, and notes. * Mead v. Caswell, 9 Mod., 60 ; O'Brien v. Smith, i Black (U. S. Sup. Ct.), 99. where it was held that a check received on Saturday might be presented any time during banking hours on Monday. Cox v. Boone, 8 W. Va., 500. « Syracuse, etc., R.R. Co. v. Collins, 3 Lans. (N. Y.), 29 ; 57 N. Y., 641 ; Smith V. Miller, 6 Rob. (N. Y.), 157; 43 N. Y., 171 (1870); 52 N. Y., 546 (1873) ; Kelty v. Bank, 52 Barb., 328 ; Nunnemaker v. Lanier, 48 Barb., 234 ; Merchants' Bank v. Spicer, 6 Wend., 443 ; Cawein v. Browinski, 6 Bush (Ky.), 457 ; Shrieve v. Duckham, i Lit., 192 ; Bickford v. First Nat. Bank, 42 III, 238 ; Morrison v. Bailey, 5 Ohio St., 13; Simpson v. Pacific, etc., Ins. Co., 44 Cal., 139; Himmelman v. Hotaling, 40 Cal., ill ; Ritchie v. Bradshaw, 5 Cal, 228; Veazie Bank v. Winn, 40 Me., 60; Bailey v. Bodenham, 16 C. B. N. S., 288; III E. C. L. R. ; Boddington v. Schlencker, 4 Barn. & Aid., 752 ; Robson v. Bennett, 2 Taunt., 410 ; Rickford v. Ridge, 2 Camp., 537 ; Blair & Hoge v. Wilson, 28 Grat., 171. See Clark v. National Metropolitan Bank, 2 MacArthur, 249; Andrews v. German National Bank, 9 Heisk.. 211; Story on Notes, § 493 ; Story on Bills, §§ 470, 471 ; Thomson on Bills (Wilson's ed.), 119 ; Ros- coe, 9, 1 58. " Rickford v. Ridge, 2 Camp., 537. Lord Mansfield, in the case of Tindal v. Brown, I T. R., 168, states, that in the previous case of Metcalf v. Douglas, " the jury struggled so hard in spite of the opinion of the court to narrow the rule, that they held, you must, in certain cases, demand payment of a banker s draft within an hour." The law of England is now well settled to be as stated in the text. Bank v. Alexander, 84 N, C, 30. J 1592. PRESENTMENT AND PROTEST. 605 ceives one for a debt of his principal. Pie must present it instantcr} § 1 59 1. If the bank, in the same place where the check was drawn, should stop payment after the commencement of business hours on the day following, it will be no defence to the drawer that the check would have been paid if pre- sented at an early hour of the day ; and it seems that the stoppage of payment by the bank before the close of busi- ness hours on that day would be a full excuse for want of presentment altogether, as the holder has been guilty of no negligence at the time of stoppage, and from his subsequent delay no loss could accrue to the drawer.^ § 1592. Where the payee receives the check from the drawer in a place distant from the place where the bank on which it is drawn is located, it will be sufficient for him to forward it by the post to some person at the latter place on the next secular day after it is received ; and then it will be sufficient for the person to whom it is thus forwarded to present it for payment on the day after it has reached him by due course of mail.^ This period, which is requisite for the convenient presentment of the check by diligent means must have been contemplated by the drawer, and he remains absolutely liable although the bank might fail pending its duration. Where the party receiving the check resides in the county at some distance from the post-office, the rule of diligence may not be so exacting as in commercial centres.^ ' Smith V. Miller, 43 N. Y., 171 ; Farwell v. Curtis, 7 Bissell, 165 ; First N. B. V. Fourth N. B., 17 Hun, 332. * Syracuse R.R. Co. v. Collins, 3 Lans., 29. ' Middletown Bank v. Morris, 28 Barb., 616; Smith v. Jones, 20 Wend., 192 ; Moule V. Brown, 4 Bing., N. Cas., 266 ; Hare v. Henty, 30 L. J. C. P., 302 ; Rickford v. Ridge, 2 Camp., 537 ; Bond v. Warden, i Collyer, 583 ; Story on Notes, § 493 ; Byles (Sharswood's ed.), [*2o], 94. * See Cox v. Boone, 8 W. Va., 500, where party four miles from post-office received check on a Wheeling bank on account of a debt. He did not forward by next mail, which left at 7 : 30 A.M. next day ; or by mail next thereafter which left two days later, and before it was forwarded bank failed. Held drawer of check was still liable. But this case is very questionable. 6o6 CHECKS. § 1593 Where a check was forwarded by mail by the bank with which the payee deposited it for collection in due course of mail and it was lost, and the collecting bank did not discover the loss until the sixteenth day thereafter, it was held chargeable with negligence in not sooner discovering the loss, and liable for the amount* § 1593. But while the drawer will not be discharged where the check is drawn on a bank in the same place if presentment be made on the next day, yet, if presentment for payment be actually made on the very day the check is drawn, and payment tendered, the holder can not then change his mind and leave the funds at the drawer's risk until the next day. He is allowed until the next day as matter of convenience and accommodation to him ; and while he need not hurry to make presentment the same day, having once done so, he has fixed the money at his own risk. This was illustrated in a recent California case, where a check was drawn on a bank in Sacramento City about nine o'clock in the morning, and immediately there- after the check was presented and payment tendered, but declined. At two o'clock the same day the holder called again and demanded payment, but the bank had then sus- pended ; and it was held that the drawer could not be bound.^ > Shipsey v. Bowery National Bank, 59 N. Y., 485. -Simpson v. Pacific, etc., Ins. Co., 44 Cal., 143, Crockett, J., saying: "On these facts the question to be solved is, whether the holder of a bank check drawn against a sufficient fund, who presents it for payment within the proper time, and to whom payment is then tendered by the bank, but who declines to accept the money at that time, preferring to retain the check temporarily, can hold the drawer of the check by again presenting it for payment at a later hour of the same day, when payment is refused and due notice of dishonor given. The question is novel and not free from difficulty ; but we shall be materially aided in its solution by first ascertaining with accuracy what are the elements which constitute a presentation for payment in its legal sense. The presenting of a check for payment implies that the holder of it desires, and is ready and will- ing, to accept payment. It would be a contradiction in terms to say that the holder of a check presented it for payment, intending and averring at the time that he would not accept payment. If he should present it for the sole purpose of ascertaining whether the signature was genuine, or whether the drawer had funds to his credit, or merely for the purpose of being identified as the person § 1 595- PRESENTMENT AND PROTEST. 6oJ § 1594. (2) Second, as between the indorse?' and indorsee of a check, the same rules which regulate diligence as be- tween the drawer and the payee apply — the indorser being regarded as a new drawer, and the indorsee as a new payee ;* and what is diligence as between them has been already stated. § 1595- (3) ^^^ ^^ ^^^^ third place, as between the indorsee or assig7iee and the drawer ^ it does not follow from what has been said, that every indorsee or assignee has the same period from the time he received it, within which to present the check, as against the drawer ; and that the drawer would still be liable in all events, if the last holder present- ed it within a day, or forwarded it by the next mail after he himself received it. On the contrary, the period with- in wiiich the check must be presented, in order to make the drawer's liability absolute, is itself absolute. And no trans- fer or series of transfers can prolong the risk of the drawer beyond it. Though each party is allowed the same period, as between himself and his immediate predecessor, that the payee had as between himself and the drawer, yet no trans- feree can stand on any better footing than his transferrer in respect to the time within which the check must be pre- sented, in order to render the drawer's and previous in- entitled to payment, not intending then to present it for payment, it is clear that this would not constitute a demand of payment, which, in its very nature, imports a willingness on the part of the holder to accept the money at that time. But if the check is presented for payment, with the present intention in the mind of the holder to accept the money if tendered, this must be deemed to be a demand of payment for all purposes affecting the rights of the drawer, even though the holder should afterward change his purpose and decline to accept the money when tendered by the bank. Having once demanded payment in due form and within the proper time, and the bank being then and there ready and willing and offering to pay the check, the holder is not at liberty after this to retract or waive his demand and decline to accept payment without thereby releasing the drawer from further liability on the check. If the holder declines to accept pay- ment when it is tendered on a proper demand, the liability of the drawer ceases, for the reason that his undertaking was that the check would be paid when pay- ment should be first demanded in due form and within the proper time ; but he does not undertake that it will be paid on a second demand, when payment has been tendered and refused on a prior demand made in due form and within the proper time." 1 Mohawk Bank v. Broderick, 10 Wend., 304; 13 Wend., 133. 6o8 CHECKS. § 1596. dorsers' liabilities absolute, in the event of a failure of the bank.^ And this rule is clearly founded upon just princi- ples, for the drawer can not rightfully withdraw the deposit, and as it has passed beyond his control, it would be wrong to hold that it should remain indefinitely at his risk be- cause it suited the convenience of others to transfer instead of presenting the checks.^ And a check, unlike a bill of exchange, which need not be drawn upon a deposit, is gen- erally designed for immediate payment, and not for circu- lation.^ § 1596. Excuses for failure or delay in making pre- sentmejit for payment or giving notice of disJiojior. — There may, however, exist sufficient excuse, on the part of the holder, for delay or failure in making presentment, or giv- ing notice. Thus, if the drawer had no funds in the bank at the time of drawing the check, or subsequently with- drew them, he commits a fraud upon the payee, and can suffer no loss or damage from the holder's delay or failure in respect to presentment and notice. He is, therefore, liable without presentment or notice, and may be sued im- mediately.* And so when the drawer directs the bank not to pay the check, the same rule applies.^ And when the ' St. John V. Homans, 8 Mo., 382 ; Foster v. Paulk, 41 Me., 425 ; Reid v. Reid, II Tex., 585 ; Lilley v. Miller, 3 Nott & McC, 257; Brown v. Lusk, 4 Yerg., 210; Taylor V. Young, 3 Watts, 343; Marker v. Anderson, 21 Wend., 372; Cruger v. Armstrong, 3 Johns' Cas., 5 ; Story on Notes, §§ 495, 496. ^ Boehm v. Sterling, 7 Term R., 423 ; Story on Notes, § 496 ; Byles (Shars- wood's ed.) [*20, 21], 95. • ' Down V. Hailing, 4 Barn. & C, 333. * Bell V. Alexander, 21 Grat., 6 ; Fletcher v. Pierson, 69 Ind., 281 ; Brush v, Barrett, 82 N. Y., 401 ; Kinyon v. Stanton, 44 Wise, 569; Hoyt v. Seeley, 18 Conn., 353; Gushing V. Gore, 15 Mass., 59; True v. Thomas, 16 Me., 36; Nor- ris V. Despard, 38 Aid., 491 ; Eichelberger v. Finley, 7 Har. & J., 381 ; Conroy V. Warren, 3 Johns' Cas., 259 ; Murray v. Judah, 6 Cow., 484 ; Commercial Bank V. Hughes, 17 Wend., 94; Franklin v. Vanderpool, i Hall, 78 ; Healy v. Gilman, I Bosw., 23s ; Matter of Brown, 2 Story, 502; Valk v. Simons, 4 Mason, 113; Blankenship v. Rogers, 10 Ind., 333 ; Lilley v. Miller, 2 N. & McC., 257 ; Coyle V. Smith, I E. D. Smith, 300; Kemble v. Mills, i Man. & G., 757; 2 Scott N. R., 121 ; 9 Dowl., 446; st& ante, §§ 1073 ei seq. '^ Jack V, Darrin, 3 E. D. Smith, 557; Purchase v. Mattison, 6 Duer, 587; Whaley v. Houston, 12 La. Ann., 585 ; Woodin v. Frayze, 38 N. Y. Sup, Ct., 190. § 159*^- PRESENTMENT AND PROTEST. 609 bank or banker has been restrained from paying out money by order of court, or from transacting business, the neces- sity of presentment and notice is dispensed with.^ The indorser of a check stands upon a different footing from that of the drawer. He can not be presumed to know, as the drawer must know, the state of the latter's account with the bank ; and although the drawer without funds will be absolutely bound, the indorser of his check will not be so bound, unless it be affirmatively shown that he knew the fact that there were no funds to meet it, and thus participates in the wrong committed upon the holder.^ If the holder of a check presents it when he knows there are no funds to meet it, he participates' in the drawer's fraud, and though the amount be passed to his credit the bank will not be bound. ^ If the holder of the check becomes unable to present it within the requisite time, by reason of the removal of the bank and the disturbed condition of the country, he should give notice of the fact to the drawer, and offer to return the check ; and if he fails to do so, the drawer is not liable.^ And though the holder of the check is himself physically disabled, so that he can not proceed in person to present the check for payment, yet if he might have sent it by mail, he will not be excused for non-presentment.^ If the bank has removed from the place upon which the check is drawn, and the check be returned to the drawer or his agent, the debt for which it was given remains due.^ Other circumstances (such as those which excuse delay in presentment of an ordinary bill) may excuse delay in pre- senting the check. The necessity of procuring the indorse- ment of a school board, which had to be convened, and ' Lovett V. Cornwall, 6 Wend., 367. - Humphreys v. Bicknell, 2 Litt., 300. ' Peterson v. Union Nat. Bank, 52 Penn. St., 207 ; Martin v, Morgan, 3 Moore, 645 ; Thomson on Bills, 270. ^"Purcell V. Allemong, 22 Grat., 739. '' Purcell v. Allemong, 22 Grat., 739. ° Larue v. Cloud, 22 Grat., 513. Vol. II. — 39 6lO CHECKS. § 1597. which requires time, was held sufficient to excuse delay of a week in a recent Pennsylvania case.^ § 1597. Partial deficiency of deposit is excuse for want of demand and notice. — It not infrequently happens that the drawer has only a portion of the amount in bank neces- sary to pay his check, and the question then arises whether the deficiency of his deposit is an excuse for want of pre- sentment and notice. We should unhesitatingly say that the drawer of an over-check is bound without demand or notice. A check is intended to be the representative of cash. It is the business of the drawer to know the state of his accounts with his bank, and whether through fraud or carelessness he makes the representation that he has cash to meet it, as he does by the act of drawing it, it would only put a premium upon looseness in commercial transactions to permit him to shield himself behind the plea of want of presentment or notice. It is he who is chargeable with the duty of notice as to his own funds, and he perpetrates a legal fraud when he undertakes to transfer and assign to another that which he does not possess. It will be readily seen that the difference between checks and bills of ex- change induces this relaxation of the strict rules as to pre- sentment and notice in respect to the former. The check purports to be drawn upon an actual deposit, and it is only when there is a deposit that the drawer has a right to expect that it will be honored ; the officers of the bank would commit a wrong upon the stockholders to honor it without funds ; while in the case of a bill of exchange, it is fre- quently drawn upon consignments, expectation of funds, or accommodation arrangements, which the drawer may reasonably confide in. In a Maryland case, where there were two checks drawn, one for $1,450 and one for $1,500, both were dated March, 26th. At that date the balance to the drawer's credit was * Muncy Borough School Dist. v. Commonwealth, 84 Penn. St., 471. § 1599- PRESENTMENT AND PROTEST. 6ll $500, on the next day $400, and for several days afterward from $200 to $400. The checks were presented June 3 , and in May the bank had appropriated the balance on hand to a debt due it by the drawer. The drawer was held bound to the holder without notice of non-payment. And Dorsey, J., after referring to the cases on bills of exchange, said : " But it is conceived that, waiving all exceptions to the soundness of these decisions, they bear no application to the case now under consideration. They were made on transactions between individual correspondents who may have had a mutual confidence and credit, and were perfectly competent to honor each other's bills, drawn either with or without effects. Not so as to officers of the public banking institutions in this State. With them the customers of the bank have no accommodation credit, and without a gross violation of their trust they can honor no check or draft upon them beyond the amount of deposits standing to the credit of him by whom such check or draft may be drawn."* § 1598. Waivers of da^iand and notice. — Neglect or delay in respect to presentment and notice may be waived by the drawer of a check in like manner as the drawer of a bill of exchange.^ Or the drawer may extend the time for presentment by any agreement, express or implied, the understanding of the parties at the time the check was drawn entering into the contract.* In no case can the period within which it will be suffi- cient for the check to be presented by the principal holder, be prolonged by its being placed in the hands of a banker or other agent for collection.^ § 1 599. Whether check may be presented by mail. — The bank undoubtedly has a right to an actual presentment of ' Eichelberger v. Finley, 7 Harris & J., 381, 387. 2 See chapter on Excuses for Want of Presentment and Notice, ante, pp. loi, et seq., and/c?^/, § i634(Z. * Woodruff V. Plant, 41 Conn., 344. * Moule V. Brown, 4 Bing. N. Cases, 266 (33 E. C. L. R.) ; Morse on Banking, 324; Byles on Bills (Sharswood's ed.) [*2oJ, 94; see ante, § 1595. 6l2 CHECKS. § 1599^- the check, and this is generally made by the holder or his ao-ent at the counter of the bank. It seems that sending a check by post to the drawee bank, with a demand of payment, is a good presentment. In such a case, Erie, C. J., said : " I do not mean to afhrm that this was a good presentment. I incline to think it was. But unless the money was remitted by return of post, the absence of an answer should have been consid- ered as a dishonor, and notice of such dishonor should have been given promptly."^ This method of presentment is doubtful, and it has been recently said : " In these days, when such facilities are furnished by express companies for presentation at distant places, there is no reason for adopt- ing a less direct or effective mode to accomplish the ob- ject." ^ Where the check is sent to the drawee bank by mail, for collection and return, the holder makes the drawee his agent, and must bear any loss arising after the time when the check could have been presented by express or other usual method.^ § 1599^. Since the second edition of this work the method of presenting negotiable paper payable at a bank, by letter sent by post directly to the bank has been ap- proved in New York, and a mature consideration of the custom of banks, and of the reasons underlying them as well as of the authorities, satisfy the writer that this method should be sustained as legal and proper.* A check comes evidently within the same principle. 'Bailey v. Bodenham, i6 C. B. J. Scott, N. S. (iii E. C. L. R.) 294 (1864) ; see Morse on Banking. 334. See also Heywood v. Pickering, 9 L. R. Q. B., 428 ; Prideaux v. Criddle, 4 L- R- Q- B., 428 ; Hare v. Henty, 10 L. R. Q. B., 65 ; Shipsey v. Bowery National Bank, 59 N. Y. ^Farvvell v. Curtis, 7 Bissell, 162 (1876), Hopkins, J. 'Farwell v. Curtis, 7 Bissell, 162. ♦Indi^ V. National City Bank, 80 N. Y., loi, Rapallo, J.: "The defendant, instead of sending the note to an agent or correspondent at Louisville tor pre- sentment, sent it by mail directly to the respondent (the National City Bank) where it was payable. This appears to be an ordinary method of transacting such business, and the defendant was bound only to adopt the ordinary rule. See vol. I, §654^. $ l6oi. CERTIFICATION OF CHECKS. 613 § 1600, The protest of checks. — While checks have not all the incidents of bills of exchange, they may be yet in- cluded in that term when applied to the steps to be taker in case of dishonor. The same reasons that would author ize the protest of an inland bill of exchange for non-pay ment, would authorize the protest of a check, the payment of which had been refused on presentment. And therefore where a statute provides for the protest of inland bills and promissory notes, a check would be embraced within the description of paper denominated inland bills of exchange, and might be protested in like manner.^ And if drawn in one State upon another, a protest would doubtless be necessary in order to charge an indorser, the check being in that event a species of foreign bill,'^ It has been said in a well-known case, that a check " is not protestable, or, in other words, protest is not requisite to hold either the drawer or an indorser."^ But the remark, it is conceived, applies only to inland checks. SECTION IV. CERTIFICATION OF CHECKS. § 1 60 1. A check being always payable immediately on demand, the holder can only present it for payment, and the bank can only fulfil its duty to its depositor by paying the amount demanded. In other words, the holder has no right to demand from the bank anything but payment of the check. And the bank has no right, as against the drawer, to do anything else but pay it. Consequently ' Moses V. Franklin Bank, 34 Md., 574; Norris v. Despard, 38 Md., 491. 'Harkerv. Anderson, 21 Wend., 372; see Edwards on Bills, 396. ^ Morrison v, Bailey, 5 Ohio St., 13 (1855). In Pollard v. Bowen, 57 Ind., 234 (1877), Nibkick, J., says: "A protest of a check is not necessary in case of its non-payment." See also Jones v. Heiliger, 36 Wis., 149; Griffin v. Kemp, 46 Ind., 172. 6i4 CHECKS. § i6oia. there is no such thing as acceptance of checks in the ordi- nary sense of the term. For acceptance ordinarily implies that the drawer requests the drawee to pay the amount at a future day, and the drawee " accepts " to do so, thereby becoming the principal debtor, and the drawer being his surety. But still, by consent of the holder, the bank may enter into an engagement quite similar to that of accept- ance, by certifying the check to be " good " instead of pay- ing it. § i6oi^. Effect of certification of check. — By certifying a check (i) the bank becomes the principal and only debtor ; (2) the holder by taking a certificate of the check from the bank, instead of requiring payment, discharges the drawer ; (3) and the check then circulates as the repre- sentative of so much cash in bank, payable on demand to the holder. Such in brief is the effect of the certification of a check. It has been said to be, and obviously is, " equivalent to acceptance " ^ in respect to the obligation it creates upon bank ; but it would be confounding terms to regard it as altogether the same thing in its effects upon the relation of the parties. § 1602. Certification of checks is of recent origin. — 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 was a practice unknown when Kyd and Byles wrote their treatises. It is not alluded to in the works of Story, and receives but brief mention in the elaborate volume of Parsons, written in 1862, and published as recently as 1 868. And yet now the reports are filled with cases on the subject ; and recent writers — • Morse ^ and Bigelow^ and Redfield* — give it considerable prominence and attention. The fact stated by the United States Supreme Court that " it is computed by competent » Merchants' Bank v. State Bank, lo Wall., 648. ' Morse on Banking, • Bigelow on Estoppel. * Redfield & Bigelow's Lead. Cas. § 1603. CERTIFICATION OF CHECKS. 615 authority that the average daily amount of such (certified) checks in use in the city of New York is not less than one hundred millions of dollars," ^ is sufficient warrant for an en- larged statement of the principles affecting them. § 1603. Bank by certifying check becomes pri^icipal debtor. — Let us consider more at length the effect of the certification of checks. In the first place, the bank be- comes at once the principal debtor.^ When the holder presents the check to the bank, the latter can only respond to the demand for payment by making payment. But if it be agreed to between them, the check is certified to be "good"; and thus, in contemplation and by operation of law, it is the same as if the funds had been actually paid out by the bank to the holder, by him redeposited to his own credit, and a certificate of deposit issued to him there- for. In other words, a certified check is a shorthand cer- tificate of deposit in favor of the holder, and pa3^able to him, or to him or order, or to bearer, according to its terms.' Thus the bank ceases to be the debtor of the oriirinal ' Merchants' Bank v. State Bank, 10 Wall., 648, Justice Swayne saying : " By the law merchant of this country, the certificate of a bank that a check is good is equivalent to acceptance. It implies that the check is drawn upon sufficient funds in the hands of the drawee ; that they have been set apart for its satisfac- tion, and that they shall be so applied whenever the check is presented for pay- ment. It is an undertaking that the check is good then, and shall continue good ; and this agreement is as binding on the bank as its notes of circulation, a certificate of deposit payable to the order of the depositor, or any other obliga- tion it can assume. The object of certifying a check, as regards both parties, is to enable the holder to use it as money. The transferee takes it with the sanie readiness and sense of security that he would take the notes of the bank. It is available, also, to him for all the purposes of money." .... " The practice of certifying checks has grown out of the business needs of the country. They en- able the holder to keep or convey the amount specified with safety. They en- able persons not well acquainted to deal promptly with each other, and they avoid the delay and risks of receiving, counting, and passing from hand to hand large sums of money. It is computed by a competent authority that the average daily amount of such checks in use in the city of New York is not less than one hundred millions of dollars. We could hardly inflict a severer blow upon the commerce and business of the country than by throwing a doubt on their validity." ' Andrews v. German National Bank, 9 Heisk., 217 ; Merchants' Bank v. State Bank, 10 Wall, 648 ; Essex Co. Bank v. Bank of ^iontreal, 7 Biss., 193 ; First National Bank v. l^each, 52 N. Y., 330 ; Freund v. Importers', etc., Bank, 19 N, Y. S. C. (12 Hun), 537. • Thomson v. Bank of British N. A., 82 N. Y., I. 6l6 CHECKS. § 1603. depositor, and becomes the debtor of the holder of the check, who may demand the amomit, and sue the bank for its recovery at any time,^ even after the lapse of many years.' It will be too late after the bank has certified -the check for the drawer to revoke it, and the bank will be bound to pay it though notified by the drawer not to do so.^ It will also be too late for the bank to say that the check was forged, and was not in fact the drawer's, unless it be still in the hands of one who was guilty of the forgery, or had knowl- edge of or complicity in it, for it has conceded its genuine- ness, and indeed asserted it by certification.* Nor can it say that there were in fact no funds of the drawer to meet the check, for its certificate is an assurance that there were such funds, and that it will apply them to that purpose.^ These doctrines are now universally settled, and the United States Supreme Court has declared that it could not inflict a severer blow upon the commerce and business of the country than by throwing a doubt upon them.^ In New York it has been (and as it seems rightly) held that the legal effect of certification is only to warrant the signature, and not the terms of the check ; that evidence that it was understood by the custom of merchants to warrant more is inadmissible ; that the teller has no authority to warrant more, and his act in doing so would not bind the bank.''^ * Gerard Bank v. Bank of Penn Township, 39 Penn. St., 92 ; Morse on Bank- ing-, 281-283; Willetts V. Phoenix Bank, 2 Duer, 121. ^ Gerard Bank v. Bank of Penn Township, 39 Penn. St., 92. In this case the check was certified October 7th, 1852. The drawer withdrew his funds October loth, 1854 ; and the holder demanded payment September 3d. 1859. The bank was held liable, the statute of limitations not having accrued. ^ Freund v. Importers', etc., Bank, 19 N. Y. S. C. (12 Hun), 537 ; 76 N. Y., 352 ; First N. B. V. Leach, 52 N. Y., 350. * See infra, §§ 1359 et seq., and chapter XViiI, on Acceptance, §§ 532 et seq., vol. I. ^ Espy V. Bank of Cincinnati, 18 Wall., 621. ° Merchants' Bank v. State Bank, 10 Wall., 648. ' Sec'y Bank v. National Bank, 67 N. Y., 458 ; Marine N. B. v. National City Bank, 59 N. Y., 67; White v. Continental Bank, 64 N. Y., 316; 2 Ames B. & N., 802 ; see also Espy v. Bank of Cincinnati, 18 Wall., 621. Contra, La. Bank V. Citizens' Bank, 28 La. An,, 189. § l6o6. CERTIFICATION OF CHECKS. 617 § 1604. Holder taking certification of check discharges drawer. — In the second place, the holder, by taking a cer- tificate of the check instead of payment, discharges the drawer. This results from what has been already said. If the bank refuses payment, the drawer should be notified. But if the holder receives something else in lieu of pay- ment, it is the same as payment ; and as the drawer can not legally withdraw the funds after checking on them, it would be unjust that they should be held at his risk or his liability on the check extended.^ The indorser of a check who is a new drawer would also ordinarily be discharged if the holder had it certified instead of requiring payment ; but if the indorser request or consent to the certification, this rule would not apply ; ^ and if the holder of a certified check indorse it, his indorsee may hold him liable as well as the bank.^ § 1605. Certified check circnlates as cash. — In the third place, the check when certified circulates as the representa- tive of so much cash in bank, payable whenever demand- ed, to the holder. It is then like cash, but still it is not the same as cash, for " nullus simile est idem!' Frequently a depositor procures his own check to be certified before he offers it in payment. In such cases it does not lose its character as a check in any particular — it only has the additional credit imparted to it by the certificate. § 1606. As to how a check may be certified. No particji- lar form of certification is requisite. — Ordinarily the bank officer simply writes the word "good" across the face of ' First National Bank v. Leach, 52 N. Y., 350 (1873). Peckham, J. : "The theory of the law is, that where a check is certified to be good by a bank, the amount thereof is then charged to the account of the drawer in the bank certifi- cate account. Every well-regulated bank adojits this practice to protect itself. .... It follows, that after a check is certified the drawer of the check can not draw out the funds then in the bank necessary to meet the certified check. The money is no longer his." Morse on Banking, 382 ; Essex Co. National Bank v. Bank of Montreal, 7 Bissell, 197. "" Mutual N. B. V. Rotge, 28 La. An., 933. » Mutual N. Bank v. Rotge, 28 La. An., 933. 6i8 CHECKS. § i6o6a the instrument* Sometimes his name, or initials, is added.^ In England a well-known mark was at one time generally used for this purpose ; but by statute now a distinct prom- ise, written and signed, is requisite. § i6o6(2. Effect of verbal statement of bank officer that check is good. — In the absence of any statutory provision on the subject, the mere verbal statement of the bank officer that the check is "good,"^ or a promise on the part of the bank to pay it, will be sufficient to operate as certification, and by way of estoppel, provided such statement or promise be communicated to the holder, and induce him to take the check.'' But unless so communicated it would not be.^ It has been held by the United States Supreme Court, that even where so communicated, it would not bind the bank further than as to the genuineness of the drawer's signa- ture, and the state of his account ; and if the check were " raised " in respect to the amount, the bank giving infor- mation that it was " good " and not intending to certify it for circulation would not be bound,^ and in the U. S. Cir- cuit Court for the First Circuit it has been held that the verbal promise of a bank to pay a check when not in funds to do so is void under the statute of, frauds, being a verbal agreement to pay the debt of another.' > Barnet v. Smith, lo Fost., 256. ' Morse on Banking, 284. * Barnet v. Smith, 10 Fost., 256 ; Pope v. Bank of Albion, 59 Barb., 226, the court said : " Any language, whether verbal or written, employed by an officer of a banking institution, whose duty it is to know the financial standmg and credit of its customers, representing that a check drawn upon it is good, estops the bank from thereafter denying, as against a bona fide liolder of the check, the want of funds to pay the same." See Morse on Banking, 286, 287, ^ Nelson v. First Nat. Bank, 48 111., 36 ; Carr v. Nat. Sec'y Bank, 107 Mass., 48. " Bank v. Pettel, 41 III., 492. « Espy V. Bank of Cincinnati, 18 Wall., 621 (1873), Miller, J., saying: "There was no design or intent on the part of the bank to assume a responsibility be- yond the funds of the drawer in their hands, nor to enable the payee of the check to put it in circulation. Nothing was said or done by the bank officer which could be transferred with the check as a part of it to an innocent taker of it from the payee. Such subsequent taker would have no right to rely on what was said by the bank officers, any further than the payee would." But see Lou- isiana National Bank v. Citizens' Bank, 28 La. An., 189. ' Morse v. Massachusetts N. B., i Holmes, 209. ^ 1607. CERTIFICATION OF CHECKS. 619 . § 1606b. Certification of check payable mfutiire. — Or- dinarily the certification states no time of payment, and the check is then payable instantly on demand ; but if the cer- tificate specify a future day of payment, it is binding be- tween the bank and the holder receiving it.^ § 1607. As to what checks may be certfied, and luhen. — ■ No officer of the bank has any authority to certify a check when there are no funds of the drawer to meet it. And it is only in favor of bona fide holders for value and without notice that, without funds to meet the check the law will enforce the liability of the bank upon its officers' certificate.' Nor can any officer or agent of the bank certify his own checks ; for no one acting in a fiduciary capacity as trustee or agent can employ his position for his own private bene- fit. And where the name of the officer who certifies the check is the same as the drawer, that circumstance is suf- ficient to charge all persons dealing with the check that they are the same person ; and if such be truly the case, and the check were improperly certified, no holder could recover.^ No officer, moreover, has any implied authority to certify a check until it is presented for payment, when, of course, it must be actually due and payable. Therefore, should any officer certify a post-dated check, such check bears on its face, until the day of its date arrives, notice and informa- tion to all parties receiving it, that it has not been certified in the usual course of business ; and if it turn out that the drawer had no funds on deposit at the time of the certifica- tion, no party so receiving it can hold the bank liable.'* ' Bank of England v. Anderson, 4 Scott, 50. '' Atlantic Bank v. Merchants' Bank, 10 Gray, 532; Morse on Banking, 194, 195 ; Claflin v. Farmers', etc., Bank, 25 N. Y., 293 ; Cooke v. State Nat'l Bank, 52 N. Y„ 115. ' Claflin V. Farmers', etc., Bank, 25 N, Y., 293, overruling same case in 36 Barb., 540. * Clarke Nat. Bank v. Bank of Albion, 52 Barb., 593. In this case the check was dated January loth, 1866; but it was drawn and certified early in December, 1865, and discounted about the same time to Ward & Brother, bankers. The check was for $6,000, and the drawer when it was certified had only §16.75 ^o 620 CHECKS. § 1607^. Without special authority conferred upon him, the officer of a bank has no implied authority to certify any but com- mercial checks — that is, those drawn in commercial' form, in the usual course of business ; and if the check bear upon it a memorandum that it is to be " held as collateral, etc.," the cashier's certification is not in due course, and will not bind the bank unless expressly authorized.^ § 1607^. Certification of 2imndo7'sed ckeck.^SomQtixnts a check payable to order is certified without the indorse- ment of the payee being upon it, and when it is already in the hands of a third party. In such cases it is understood that the proper indorsement will be obtained before the amount is withdrawn, and that the amount will be held by the bank to meet it. But if in fact the holder be the as- signee by delivery of the check for a valid consideration and entitled to receive the money, although not an indorser, his credit ; and lie made no deposit to meet it. The court saying : " Checks are never presented for acceptance, but only for payment, to enable the holder immediately to demand and receive the money stated therein — and in theory are not intended to circulate as commercial paper. They are always sup|)osed to be drawn upon a previous deposit of funds, and are an appropriation of so much of the money in the hands of the banker to the holder of the check (Story on Prom- issory Notes, §§ 488, 489). They must be regarded as drawn and dated the day they bear date (The Mohawk Bank v. Broderick, 13 Wend., 133). Where a check is drawn and negotiated before it bears date, the effect is, that the same is payable on demand, on and after the day on which it purports to bear date, and nothing more (S. C, 10 Wend., 308). They are not due before payment is demanded, in which respect they differ from bills of exchange on a particular day (Chitty on Bills, 7 Am. ed., 322 ; Harker v. Anderson, 21 Wend., 374). From these propositions of law, it follows that this check was certified by the cashier before its payment could have been legally demanded, and before it could be presumed that the drawer had made a deposit for its payment ; all of which appeared on the face of the paper, and was in the law full notice to Ward & Bro. Post-dated checks are instruments often used, and their nature and character are well understood by bankers and the trading community. By all such persons it is regarded that the drawer is not in funds at the bank on which he draws his check, when he makes and delivers the same, and does not expect to be until the arrival of the date inserted in the check. Ward & Bro. could not then have maintained an action on the check against the bank, because : First : This check was certified by the cashier before it was payable by its terms, and before any legal demand of payment was or could be made. Second: It was certified when the presumption is that the drawer had no funds in the bank to meet it. Third: Ward & Bro. were not bona fide holders of this check without notice o' the facts, which vitiates the certification." ' Dorsey v. Abrams, 85 Penn. St., 299. § 1609. CERTIP^ICATION OF CHECKS. 62 1 the bank, it has been held, would be protected in paying him, where the check was drawn for accommodation.^ § 1608. Checks certified by mistake. — If the bank certi- fies a check to be good by mistake, under the erroneous impression that the drawer had funds on deposit, when in fact he had none, or has been induced by some fraudulent representation to certify it as good, the certification may be revoked and annulled, provided no change of circumstances has occurred which would render it inequitable for such right to be exercised. If the check still remains in the hands of the holder who held it when it was certified, and the mistake is discovered and notified to him so speedily that he has time afforded him to notify and pre- serve the liability of indorsers, the bank may retract its certificate.^ But if another person has become the holder of it, or circumstances have so changed that the rights of the holder would be prejudiced, and especially if it has been paid to a bona fide holder without notice, it is absolutely es- topped from doing so.^ § 1609. As to who may certify for the bank. President or board of directors may. — What officers of the bank have implied power ex officio to certify checks is next to be con- sidered. The board of directors undoubtedly have, for they are the bank's managers and its representatives in the broadest sense.* And the president of the bank, who is ex officio their president and mouthpiece, also undoubtedly has such power.^ >Freund v. Importers', etc., Bank, 76 N. Y., 352 (1879). Compare Abrams v. Union N. Bank, 31 La. An., 61. See § 726 as to equities pleadable against purchaser of overdue paper which present analogies to the question decided in this case. ^ Irving Bank v. Wetherald, 36 N. Y., 335 ; 34 Barb., 323 ; Second National Bankv. Western National Bank, 51 Md., 128 ; see chapter xvni, on Accept- ance. § 493, vol. I. 'Bank of Republic v. Baxter, 31 Vt., loi. * See chapter on Corporations as Parties. * Claflin V. Farmi^rs', etc., Bank, 25 N. Y., 293. 622 CHECKS. § 161O. § 1 6 10. Cashier has implied power to certify checks. — ■ The cashier undoubtedly has implied power to certify checks, and it has been so held in numerous cases.^ In Massachusetts alone has the contrary doctrine prevailed, on the ground that it is a power to pledge the credit of the bank to its customers, which, by the very constitution of a bank, resides only in the president and directors. And there it has been held that even if it were proved that the teller had by usage certified checks, it would be a bad usage, and could not be upheld.^ But besides the authorities cited in the note as sustaining the cashier's implied power, it has been decided by the United States Supreme Court that a bank is liable upon checks certified by its cashier, although it was proved that he acted without authority, and although it was not shown that he had ever certified checks before, or that the cashiers of banks in the same place were accustomed to certify checks. The court said : *' The power of the bank to certify checks has been suf- ficiently considered. The question we are now considering is the authority of the cashier. It is his duty to receive all the funds which come into the bank and to enter them upon its books. The authority to receive implies and car- ries with it authority to give certificates of deposit and other proper vouchers. When the money is in the bank he has the same authority to certify a check to be good, charge the amount to the drawer, appropriate it to the pay- ment of the check, and make the proper entry on the books of the bank. This he is authorized to do virtute officii. The power is inherent in the office."^ And the exercise of such power is rather a mere transfer of credit from the drawer of the check to the holder of it than a pledge of the credit of the bank.^ ' Clarke National Bank v. Bank of Albion, 52 Barb., 592 ; Pope v. Bank ot Albion, 59 Barb., 226 ; Cooke v. State National Bank, 52 N. Y., 115. 2 Mussey v. Eagle Bank, 9 Mete, 313 ; Atlantic Bank v. Merchants' Bank, ic Gray, 532. * Merchants' Bank v. State Bank, 10 Wall., 648. ■* Morse on Banking, 192 5 l6ll CERTIFICATION OF CHECKS. 623 § 1610^. Teller has implied powci^ to certify checks. — The teller of the bank also undoubtedly has an inherent implied power to certify checks, for, though a subordinate of the cashier, he is simply an arm with which certain por- tions of his work are performed ;^ and it has been thought that he is the more proper officer to discharge this partic- ular duty.^ But the fact that the teller may certify checks by no means implies that when he may, the cashier may not. § i6iO(^. Assistant cashier has no implied power to cer tify checks. — The assistant cashier of a bank has no im plied power to accept or certify a check, and where such an officer wrote on a check presented to the bank, "Accepted, A. J. Chester, A. Cash.," it was held that even a bona fide holder for value was chargeable with an infirmity in the transaction, the style of the acceptance putting him on guard as to the authority of the officer.^ § 1 6 II. Bank officer can not certify his own check. — There is this limitation upon the implied power of the president or other officer of a bank to certify checks : he can not certify his own check, and any party taking a check drawn by a party, and then certified by him for a bank as its officer, takes it with notice of the double relation he is acting in, and can not be placed upon the footing of a bona fide holder without notice. This doctrine rests on the principle that no person can act as agent of both parties to a contract, although he may himself have no interest on either side ; nor can he act as agent in regard to a contract in which he has any interest, or in which he is a party on the side opposite to his principal.* * Farmers', etc., Bank v. Butchers', etc.. Bank, 14 N. Y., 624 ; 16 N. Y., 133 ; Mead V. Merchants' Bank, 25 N. Y., 146 ; Irving Bank v. Wetherald, 36 N. Y., 335 ; contra, Mussey v. Eagle Bank, 9 Mete, 313. " Farmers', etc., Bank v. Butchers', etc., Bank, 14 N. Y„ 624; 16 N. Y., 133. ' Pope V. Bank of Albion, 57 N. Y., 127. Claflin V. Farmers', etc.. Bank, 25 N. Y., 294, overruling S. C. in 36 Barb., 540 ; see also New York & N. H. R.K. Co. v. Schuyler, 34 N. Y., 30, 64 ; Titus V. Great Western Turnpike Co., 5 Lans., 253 (5 N. Y. S. C. R.) ; ante, § 1607. 624 CHECKS. $ 1612, SECTION V. WHOSE CHECKS SHOULD BE PAID BY THE BANK. § 161 2. Signature of check-drawer should be identical with entry of credit. — When a deposit has been made in a bank, its officers should be careful that no portion of it is paid out upon the check of any party but the depositor or depositors. The proper and only safe rule for the bank to adopt is to require the signature to be identical in terms with the credit on its books.^ Thus if the credit be simply to A. B., let the check be signed simply A. B. ; and if it be to "A. B., trustee," or "A. B., trustee for C. D.," let the signature be i7i totidem verbis? So if several persons not partners make a deposit to their joint credit, the signa- ture of each one should be required. But if it be to their joint and several credit, the check of any one may be hon ored.^ Where one or more of the joint depositors abscond, equity will relieve the others.* § 161 2«. If a deposit be made in bank to the credit of a certain person as agent or trustee, the use of such terms would charge the bank with notice that the funds were there in a fiduciary relation ; it would have no lien upon them for the private debts of the depositor, and if it per- mitted them to be used for his private purposes in transac- tions with the bank it would be bound.^ § 1 61 3. In the case of a partnership deposit it should, as a rule, be paid out only upon a check signed in the copart- ■ Tryon v. Okley, 3 G. Greene (Iowa), 289. " Innes v. Stephenson, i M. & R., 145 ; Stone v. Marsh, Ryan & M., 364 ; Sloman v. Bank of England, 14 Sim., 459 ; 9 Jur., 243 ; Dixen's Case, 2 Lewin Cr. Gas., 178. ' Morse on Banking, 266. '^ Ex parte Hunter, 2 Rose, 382 ; ex parte Collins, 2 Cox, 427. ' Central N. B. v. Connecticut Mut. Ins. Co., U. S. S. C, Nov., 1881 ; Morri- son's Transcript, vol. 3, No. i, 53 ; Pannell v. Hurley, 2 Collyer New Cas., 24I. See also Duncan v. Jaudon, 15 Wall., 165 ; Bailey v. Finch, L. R., 7 O. B., 34 , ex parte Kingston ; in re. Gross, 6 Ch. App. L. R., 632 ; Bundy v. Town of Monticello, S. C. Ind., Feb., 1882 ; Cent. L. J., Mch. 3, 1882, p. 177 (Vol. 14, No. 9). § 1615. WHOSE CHECKS SHOULD BE PAID BY THE BANK. 625 nership name. But any one of the firm is empowered to make such signature. If there are dormant partners, the bank is not bound to pay a check signed by one of them in the partnership name, unless it knew or should have known the fact that the signer was a member of the copartnership ; for otherwise its refusal to pay would be legal and proper.^ Whether or not a copartner could bind the firm by signing the names of the several partners has been questioned. It would seem that he could. ^ And where a check was sisrned by one partner "for A. B. C. and D. C.,"^ and another "A. & Co., per procuration of A.,"'* they were each held sufficient as copartnership checks. §1614. It is lawful for a bank to show that a deposit standing in the name of an individual partner was really a partnership deposit ; but it would be necessary to go further and show that it was really paid in on partnership account, and was designed to constitute, or at least ought rightfully to have been designed to constitute, a fund for partnership purposes, in order to warrant the bank to pay out to part- nership checks.^ If two distinct firms unite in their capac- ities as such to form a third, payment upon the check of either firm would be valid.^ § 161 5. As to personal representatives and trustees. — Where a deposit is made to the credit of several executors or administrators, the check of any one may be honored, for the reason that each one is competent in law to control the estate in hand.''' But the rule respecting trustees is different. * Cook V. Seeley, 2 Exch., 749, ' Norton v. Seymour, 3 C. B., 792 ; Grant on Banking, 32 ; Morse, Id., 274. 3 Ex parte Buckley, 14 Mees. & W., 469 ; overruling Hall v. Smith, i Barn. & C, 407. * Williamson v. Johnson, i Barn. & C, 149. * Sims V. Bond, 5 Barn. & Ad., 389. * Duff V. East India Co., 15 Vesey, Jr., 198. "Pond V. Underwood, 2 Lord Raym., 1210; Gaunt v. Taylor, 2 Hare. 413; ex pa7'te Rigby, 19 Ves., 462 ; Allen v. Dundas, 3 T. R., 125 ; Can v. Read, 3 Atk., 695. Vol. II. — 40 626 CHECKS. § 1616 They act under a joint power, and the signature of all is, generally speaking, necessary to the validity of the check.^ But in an English case, where there w^ere five trustees of a small trust fund, and they were widely apart from each other, the Court of Chancery ordered that payment might be made " to them, or any of them," to save expense.^ In the event of the death of an executor, to wiiose credit a deposit stands, the bank should pay thereafter to the check of the administrator de bonis non of the estate of the prior deceased, and not that of his own personal repre- sentative.^ § 1 6 1 6. In the case of deposits by corporations, the bank should ascertain, by examination of the corporate charter and by-laws, what officers are competent to draw checks. If the corporation should furnish to the bank the name of the party authorized to draw checks, it would undoubtedly be justified in paying, and should pay, checks drawn by such party.'* But otherwise, the check should purport on its face to be the corporate act. And in England, where three railroad directors were empowered to draw checks, and the three persons who were in fact directors signed their individual names to a check without styling themselves directors, it was held that the check did not sufficiently purport to be the check of the company, although it bore the impression of a stamp of the corporate name, and would not bind it even in the hands of a bona fide holder for value.^ But in cases where the money has been paid out by the bank on such checks, if it can be traced to the corporation and proved to have been actually received by it, the bank will be entitled to charge the amount in account against the corporation.^ ' Morse on Banking, 267. "^ Shortbridge's Case, 12 Vesey, Jr., 28. ' Alleghany Bank's Appeal, 48 Penn. St., 328 ; Farmers', etc.. Bank v. King, 57 Penn. St., 364. * Fulton Bank v. N. Y, & Sharon Canal Co., 4 Paige, 127. ' Serrell v. Derbyshire R.R. Co., 9 C. B., 811 ; 19 L. J. C. P., 377. • In re. Norwich Town Co., 22 Beav., 143. § idiya. WHAT checks should be paid by the bank. 627 § i6i6a. The usage of a corporation in drawing its checks, and customary manner of conducting its business, may justify the payment of checks drawn according to such course of business even when the proper officers dc not sign the checks. And it has been recently held by the United States Supreme Court that where checks had been drawn by the president and secretary of a corporation on a bank which acted as its treasurer during a long period, and without objection, the bank had a right to assume their authority to draw checks, or over-checks, and to assume also that the money was obtained and used by the corpora- tion ; and that the fact that such officers were illegally elected would not affect the validity of their transactions in the premises.^ SECTION VL WHAT CHECKS SHOULD BE PAID BY THE BANK. § 161 7. When a check is presented to the bank, all that the holder can require of the bank is its payment ; he can not require its certification or acceptance, for although the bank may consent to the holder's request to certify it, if it so pleases, it is by no means compellable to do so.'"^ § 1617^. Checks are payable according to priority of presentment. — But the holder has a right to demand pay- ment on presentment of the check, and if a number of checks be presented during the day, it is the duty of the bank to pay them according to priority in the time of pre- sentment at its counter, and not according to their priority in date. It has no right to distribute a fund pro rata amongst several check holders when it has not sufficient * Mahoney Mining Co. v. Anglo California Bank, Morrison's Transcript, 3d vol., No. 2, p. 180. See also same case in vol. 3, No. 5, p. 785. ' Bradford v. Fox, 39 Barb., 203 ; ante, § 1601. 628 CHECKS. § 1618. funds to pay all ; nor has it a right to pay a check subse- quently presented, to the exclusion of one previously pre- sented.^ The rule for it to follow is, " first come first served," and a departure from it renders it responsible to the first comer.^ When a number of checks are presented at once, and their gross amount is beyond the funds of the drawer, it would seem that the bank is not bound to pay any of them ;^ but it has been said that in such a case, " if the bank choose to pay the first in date, it would be diffi- cult to see on what ground either the drawer or the holders of the others could complain." ■* And it seems but right to let priority of date decide when there is no priority in presentment. § 1 6 1 8. Bank may require proof of payee's identity, and may have reasoitable time to ascertain gen2iineness of in- dorsers signature. — The bank should not pay the check drawn upon it save to the actual payee, or to his order ; and if it mistakes the payee's identity when the check is unin- dorsed, it is responsible.^ It is also entitled to a reasonable time to ascertain the genuineness of an indorser's signature when the check is payable to order.^ Yet if the bank should pay an unindorsed check payable to a certain person or order, to the real assignee thereof, the payment would be good, the money having reached the hands of the party actually entitled to receive it.'' § i6i8<^. The bank should not pay a check after 7iotice of its loss or before maturity.^ — " Payment of the check by the bank before it is due will not be a discharge, unless * Matter of Brown, 2 Story, 502 ; 2 Parsons N. & B., 78 ; Morse on Banking, 248, 249. " Morse on Banking, 248, 249. ' Dykers v. Leather Man. Bank, 1 1 Paige, 611. * 2 Parsons N. & B., 'jZ. ' Dodge V. National Exchange Bank, 30 Ohio St., i ; Risley v. Phoenix Bank, 18 N. Y. S. C. (II Hun), 484. * Robarts v. Tucker, 4 E. L. & Eq., 236 ; ante, % 1571. ' Freund v. Importers' & Traders' N. B., 76 N. Y., 352. * Godin V. Bank of Commonwealth, 6 Duer, 76 ; Morse on Banking, 260. § l6lS5. WHAT CHECKS SHOULD BE PAID BY THE BANK. 629 made to the real proprietor of it ; and, therefore, where a banker, contrary to usage, paid the check before it bore date, which had been lost by the payee, it was held that he was liable to repay the amount to the person losing it. In this case, although the holder had the legal title arising from the possession of the check, yet he was not dona fide the holder, with authority to collect, and as the banker paid it out of the usual course of business, he paid it at the risk of being obliged to pay it again, if the party presenting it had not just right to receive it." ^ The bank can not charge the check against the depositor's account, unless it makes payment of it in the usual course of business. On this principle it was held, in Connecticut, that, where the plain- tiffs who received the check from a third party payable to their order, indorsed it to the order of the bank cashier, enclosed it in an envelope, and sent it to the bank for de- posit by a messenger whom they knew to be untrustworthy, and the latter removed the envelope, received payment of the bank, and then absconded with the amount — the plain- tiffs were entitled to recover the amount of the bank.^ § 161 8<$. Whether death of drawer revokes check. — The death of a drawer of a check, as is stated by many authori- ties, operates as a revocation of the authority of the bank or banker upon which it is drawn to pay it ; and though it is conceded that if the bank or banker pay the check be- fore notice of the death, the payment is valid,^ otherwise, it has been considered, it is not.'' This view has been gener- ally based upon the decision in the English case of Tate v. ' Wheeler v. Gould, 20 Pick., 545, Shaw, C. J., citing Da Silva v. Fuller from Chitty on Bills. ' Bristol Knife Co, v. First Nat. Bank, 41 Conn., 421. Phelps, J., and Foster, J., dissenting. ' Byles on Bills (Sharswood's ed.), 24; Chitty on Bills (13 Am. ed.), 429; 2 Parsons N. & B., 82. * Ibid. Morse on Banking, 260, where it is said : " At the instant of his (the drawer's) death, the title to his balance vests in his legal representatives, and his own order is no longer competent to withdraw any part of that which is no longer his property." 6^0 CHECKS. § l6lS5. Hilbert/ where it was held that the gift of a common check on a banker payable to bearer was not a valid donatio mor- tis causa, or an appointment or disposition in the nature of it. It is quite true that authority to an agent is revoked as a general rule by death of the principal ; ^ but this doc- trine is qualified by the equally well-settled principle, that if the authority be coupled with an interest in the thing vested in the agent, the death of the principal operates no revocation.^ Now where a check is given to the payee for a valuable consideration (and the check imparts value), the authority to the payee to collect the amount from the bank is coupled with a vested interest in the check. He can sue the drawer upon the check if it be dishonored.'* The draw- ing of the check without funds to meet it is a fraud,^ and the English case above referred to does not determine, as has been supposed, that when the check is given for value, the authority of the banker to pay it is revoked. The death of the drawer of an ordinary bill of exchange does not revoke it,^ and we can discern no principle of law which allows the death of the drawer to affect the rights of a check holder who has given value for it.^ The idea that the death of the drawer of a check given to the payee for value, operates a revocation, is, as it seems to us, a total misconception of the law. For a check is a negotiable in- strument as often, if not more frequently, given for value, than any other species of commercial paper. The drawer is deemed the principal debtor;^ and it is anomalous to * 2 Vesey, Jr., ii8 (1793) ; 4 Brown Ch. Cas., 286; Chitty, Jr., on Bills, 510. "" Story on Agency, § 488. ' Story on Agency, §§ 488, 489. « Ante, §§ 1 587, 1 588, 1 589. ' §§ 1 596 et seq. « Seea;z/^, §498; Chitty on Bills, 282, 287 ; Cutts v. Perkins, 12 Mass., 206; Edwards on Bills, 454 ; 2 Parsons N. & B., 287. ' In Thomson on Bills, 244, it is said : " It has been held in England that a check on a banker is revoked by the grantor's death, so that payment of it by the banker will not be good unless it is made before he hears of the drawer's death. It seems to be considered as a kind of mandate. In Scotland, such a check, being an assignment of the funds in the banker's hands, might be com- pleted by presentment to him even after the drawer's death." Morse, 260. * Atite, § 1 587, and cases cited. 5 l6l8i$. WHAT CHECKS SHOULD BE PAID BY THE BANK. 63 1 hold that his death in anywise lessens his obligations, or the right of the bank to pay it, when given for valuc.^ ' Burke v. Bishop, 27 La. An., 465 (1875) ; 21 Am., Rep., 567, seems to sus- tain these views, though it was declared, as is conceded : " If it had been a check drawn by Hampton Elliott, and he had died before it was presented, and the check was a donation, the check would have been worthless, because by de- mise of the donor, his mandate to his agent, the bank, was revoked." In an article published in the Bankers' Magazine, of New York city, for February, 1879, p. 619, the author has amplified the views which are here presented in the text ; and from that article the following extract is made : " It is an entire mis- conception of the nature of a check, as we think, to look upon it as a mere mandate. It imports that the payee has given value for the right to draw the funds from the banker, and to hold that it is a mere mandate to the banker to pay the amount it calls for, is to lose sight of its higher and more comprehen- sive character, that of a negotiable instrument, employed as a necessary instru- ment of commerce, circulating from hand to hand almost as freely as money; and is to allow the greater to be swallowed up in the less. If it is to be re- garded as an authority to the banker to pay the amount, it ought also to be re- garded as an authority to the payee, or other holder, to receive the amount. Being presumably given to the payee for value, the authority to him to receive the amount is presumably an authority coupled with an interest. Then it is a double mandate. In so far as it is an authority coupled with an interest, it is ir- revocable. No citation of authority is needful for this universally recognized doctrine. If the banker's authority to pay be revoked by the drawer's death, we are driven to this paradoxical conclusion : that an authority coupled with an in- terest may be practically revoked and annulled by the revocation of another au- thority not coupled with an interest ; and the law would appear in this state of self-stultification that the authority to collect the amount continues, and is irre- vocable, while the authority to pay, which is necessary to its exercise, ceases by revocation ! Is not this reductzo ad absurduin? According to the view which we have elsewhere taken of a check, it operates as an assignment of the fund upon which it is drawn, as between the drawer and the payee, or holder, and the assignment binds the bank as soon as it is notified thereof by the presentment of the check. See Daniel on Negotiable Instruments, § 1643. But we acknowl- edge that this is not the predominant view, and that the numerical weight of authority is agamst it. Be this as it may, it is universally conceded that the check operates as an assignment of the fund pro tanto, as soon as the bank consents to it by certification or payment. This being the case — the assignment depending not upon the drawer who has by the act of drawing given his con- sent, and not upon the act of the banker — we can not see how the death of the party who has consented can annul the right of another to acquiesce and con- cur in his act. Professor Parsons, in a note to his text, takes this view. Says he: 'The right on the part of the drawee to complete the assignment would seem to be a privilege of his own, and it is somewhat difficult to see how the death of the drawer can affect it. The drawer has given the holder a written instrument authorizing the latter to apply to the drawee for the assignment of certain funds. The holder of the bill who has received it for a sufficient con- sideration has an interest in this authority — not merely in the proceeds of the bill, but in the bill itself; and the rule is, that an authority coupled with an in- terest is irrevocable.' 2 Parsons N. & B., 287, note. This language is used in respect to an ordinary bill ; but the author evidently regards it as equally appli- cable to a check. We concede that if the check were a gift to the payee, and the banker knew that fact, the death of the drawer would operate as a revoca- tion of the banker's authority to pay it. In such a case the authority to the donee to collect, as well as that of the banker to pay, is not coupled with such an interest as to continue them in force. ' If it had been a check drawn by 632 CHECKS. § 1 6 19. § 1 619. Bank may take time to ascertain if there are f tends to meet check. — If the bank is not in funds to pay the check at the time it is presented, it should at once re- fuse payment. If there is a doubt whether or not it is in funds, the bank may take time to examine or run up its Hampton Elliott, and he had died before the check was presented, and the check was a donation, the check would have been worthless, because, by the demise ot the donor, his mandate to his agent, the bank, was revoked,' is the language ot the Supreme Court of Louisiana, in Burke v. Bishop, 27 La. An., 465 (1875). In such a case all that is said in Tate v. Hilbert would apply. But the banker is not to presume that a check is a donation. To require such a presumption on his part, is to make him presume what in ninety-nine cases out of a hundred is not the fact, is to make him presume contrarj- to what a purchaser may presume ; is to except a check from the universally accepted rule of the law merchant that negotiable instruments import value ; and is to attach one presumption to the check while the drawer is alive, and another to the same paper upon his demise. In the case of Cutts v. Perkins, 12 Mass., 206, a master of a ship in London bound to the U. S., having goods on board consigned to a Boston merchant, and being indebted to a London merchant, drew a^bill on the consignee in favor of the London merchant for the amount of the freight money. Before the bill was presented the master died, and it was contended that his death operated as a revocation of the bill. Putnam, J., delivering the opinion of the court, said : ' Upon the delivery of a bill of exchange to the payee the liability of the drawer becomes complete. Some writers have holden that where the indorsement was intended as a mere authority to enable one to receive the money for the use ot the indorser, the death of the indorser should operate as a revocation of the authority. But the law is clearly otherwise, when the authority is coupled with an interest, and in such case the death of the drawer will not be a revocation of the request on the drawee to accept.' This case, as we think, correctly states the law. If the death of the drawer revokes the drawee's right to accept and pay the bill, then an indorser's death must also revoke it, for he is regarded as a new drawer, and thus confusion and uncertainty are introduced into the law merchant in respect to instruments which of all others should be most sure and stable. In Billing v. De Vaux, 3 Man & Gr., 565, a bill drawn in favor of the plaintiffs was accepted by letter after the drawer's death. The payee sued the acceptor, and he was held liable. Tindal, C. J., said : ' I am not aware of any principle of law by which, upon the death of the drawer of the bill, the right and liabilities of the parties thereto were at all varied.' Coltman, J., said : ' The other circumstance relied on is that Mersing, the drawer, was dead at the time the letter was written to him, and, therefore, that it is to be considered as mere waste paper. Possibly that might be the case were its effects confined to the parties themselves. But here the bill had been put in circulation.' The bill was in the hands of the payee. Maule, J., said : ' The letter (of acceptance) operates for the benefit of Mers'ing's (the drawer's) estate, for his death could not vary the rights and liabilities of third parties.' We think this case direct authority as against the inferences which have been drawn from Tate v. Hilbert. Rights accrue upon the delivery of a bill or check to the payee. They are not varied by the subsequent death of the drawer. The drawee of the bill may accept and pay it ; the drawee of the check may also honor it ; for it is presumably given for consideration, and its payment operates for the benefit of the estate of the deceased, which, upon its dishonor, would be bound for its payment out of gen- eral assets. It is to be hoped that the erroneous doctrines of the text writers may soon be brushed away, and that the clear principles which apply to this im- portant question may be universally recognized and adopted." § 1619. WHAT CHECKS SHOULD BE PAID BY THE BANK. 633 account in order to ascertain, but it should be careful not to detain the check an unreasonable time. It has been held that, according to the usage of trade, a check drawn on a banker in the city of London " may be retained by the banker on whom it is drawn until five o'clock p.m. of the day on which it is presented, and if there be no assets, it may then be returned to the person presenting it, and that too althouijh it has been in the first instance cancelled by mistake, as intended to be honored." * This privilege of retention of checks until five o'clock is applicable by cus- tom only to the city of London ; but it has been held in the United States that a bank might return a check at any time within twenty-four hours, on discovering that there were no funds to meet it, without being estopped by its detention for that period from showing that fact.^ ' ^lorse on Banking, 251. * Overman v. Hoboken City Bank, 31 N. J. L. R. (2 Vroom), 563. In this case the check was presented to the Hoboken City Bank between tweh-e and one o'clock on October 31st. On the following day, about twelve o'clock, noon, that bank returned it to the Ocean Bank, from which it was received, marked " not good." It was held that the retention of the check for this period, a little less than twenty-four hours, was not implied acceptance, and created no obligation on the Hoboken Bank to pay it. Beasley, C. J., saying: "There can be no doubt that the drawee of a bill of exchange or check can so deal with it that, although he make no express acceptance, the law, with an eye to the public inter- est, will infer an acceptance on his part. Thus, if such drawee were to return the bill in his possession contrary to the usual mode of intercourse between himselt and the holder, and under such circumstances as to induce a reasonable belief that it had been honored, such conduct might amount in law to a constructive acceptance. But no case was cited upon the argument, and none has been found in which it was ruled that a mere retention of the bill by the drawee, such retention being unqualitied by any adventitious circumstance, such as a usage of trade, cr an understood mode of intercourse between the parties, will, by intend- ment of law, be considered equivalent to an acceptance of such bill. Treating the subject on principle, we must arrive at the opposite result. It is the business of the holder of the bill of exchange or check to present it for acceptance or payment. Upon such presentation, the drawee has a reasonable time to inspect his accounts and ascertain whether he is in funds to meet the demand ; and it has been said that such reasonable time is the space of tw^enty-four hours (Bellasis v. Hester, i Ld. Raym., 280). After the lapse of this reasonable time, whatever period that may be, the holder of the bill has a right to know whether the bill is accepted or dishonored. But it is his duty to wait upon the drawee to ascertain this. If, therefore, in ttie ordinary course of commercial l)usiness, a holder of a bill leave it with the drawee, or send it to him by mail, and such holder do not, after the efflux of a reasonable time, call for such bill, so as to ascertain whether it has been accepted or not, there is nothing in such a trans- action upon which to raise or imply an engagement to accept, or a contract ol acceptance, in the same manner, if a check, instead of being presented at the 634 CHECKS. § 1620. § 1620. In the next place, as to part paymeiit of checks. — If the bank refuses to pay the check in full, the holder is clearly not bound to receive part payment thereof ; for he has an order for so much money, and any less amount fails to meet its demands. And, on the other hand, it is fre- quently said, that a bank not having full funds to pay the check, is not bound to pay it in part, as it is entitled to possession of the check as its voucher against the drawer for payment.^ Whether, indeed, it would be justified in making part payment, if so inclined to do, has been ques- tioned, and a late writer has observed that "the better rule, perhaps, would be, to save misunderstandings and compli- cations, that if a bank can not pay in full, it not only may not, but must not pay at all."^ counter of a bank by the holder or his agent, should be forwarded by mail, such bank, it is conceived, in the absence of any established course of dealing between itself and such holder, would be under no obligation to return such check, but could safely wait in silence the further action of such holder. In the case of Jeune v. Ward, 2 Stark., 326, the bill had been retained by the drawee over a month, and Lord Ellenborough, at Nisi Prius, had permitted a recovery as on an acceptance, having put the case to the jur}^ on the broad ground that it was the duty of the drawee to return the bill to the holder. But the Court of King's Bench, considering this a misdirection, granted a new trial, and Mr. Jus- tice Bayley, in his opinion delivered on that occasion, thus expresses his view of the law : ' Where a bill of exchange is left for acceptance in the ordinary course of commercial transactions, it is the duty of the party to call for it within a reasonable time, in order to ascertain whether it has been accepted or not, unless, as in one of the cases cited, some other and peculiar course of dealing has been established between the parties.' The same rule is laid down by Chitty in these words : ' But it would seem that the mere detention of a bill for an unreasonable time by the drawee will not amount to an acceptance, although the drawee disfigure, cancel, or destroy the bill. And, by the usage of trade in London, a check may be retained by a banker on whom it was drawn, till five o'clock in the afternoon of the day on which it is presented for payment, and then returned, though it has been previously cancelled by mistake. And con- structive acceptances ought to be watched with the utmost care, for when a party puts his name on a bill, he knows what he does, and that he thereby enters into a contract ; but it is laying down a very loose and dangerous rule when any degree of latitude is given to these constructive acceptances. The cases which have been determined in favor of these constructive acceptances have all been decided on very special circumstances' (Chitty on Bills, 175). Equally clear and explicit is the language of Prof Parsons. He says : ' We think, however, both on authority and reason, that mere detention or delay should not, of itself and alone, be considered as the equivalent of acceptance ' " (2 Pars, on Bills and Notes, 284). See § 492, vol. i. ' Matter of Brown, 2 Story, 502 ; St. John v. Homans, 8 Mo.. 382 ; Murray v. Judah, 6 Cow., 490. ^ Morse on Banking, 257. The author continues : " The drawer has not re- quested the bank to make a part payment. He has demanded that it do a § l620. WHAT CHECKS SHOULD BE PAID LY THE BANK. 635 It is quite clear, we think, that unless the holder will sur- render the check, the bank is not obliged to pay it in part, for it is entitled to the check as a voucher. But if the holder offers to give up the check on receiving part pay- ment, we can not perceive that the bank would be warranted in refusing such part payment ; and so, likewise, if the holder would place a sufficient sum to the drawer's credit, to make the check good before drawing out the amount. This view is sustained in a well-considered nisi p ruts case,* and was previously intimated by Professor Parsons, at least to the extent that the drawer would have no right to com- plain of the part payment."^ Therefore, we should say, as certain act, to wit, pay a certain sum of money on his account. If it will not do this act according- to the terms of the authority embodied in the request, it by no means follows that it is authorized to substitute for it a partial performance, or in fact a materially different act. Power to pay only a part of a sum is not necessarily implied in an order expressed without alternative to pay that specific sum." * Bromley v. Commercial National Bank (Court of Common Pleas of Philadel- phia), reported in American Law Times for November and December, 1872, vol. V, p. 219. In this nisi priiis case it appeared that the payee of a check for $725 presented it to the bank for payment. The teller, when about to pay it, discovered that there was but $229.92 to the drawer's credit. The payee then demanded the payment of this balance to him, which the bank refused. The plaintiff then offered to deposit to the drawer's credit a sufficient sum to make the check good, if the bank would then pay it. This it also refused. The court held that the payee w'as entitled to the balance in the bank. * 2 Parsons N. & B., 78, 79. In i Parsons N. & B., 552, it is said : " In our chapter on Checks we consider the law of presentment in regard to them ; here we will only say, that the exception should be construed more liberally with re- gard to checks, at least where the check is drawn on a public banking corpora- tion. These corporations do not receive goods on consignment, therefore there can be no reason to expect that the check will be honored on any such grounds as this. There would seem to be scarcely any reasonable grounds to expect payment, and consequently any right to draw a check, unless the bank had suf ficient funds to pay it." In a note subjoined to the foregoing observations, the learned author acids : " We are not aware of any authority for this. In Edwards V. Moses, 2 Nott & McC, 433, all the facts that appeared were, at the time when the check should have been presented, the drawer had withdrawn all his funds. Richardson, J., said that it was a mere case of overdrawing, and due present- ment and notice were held necessary. But we doubt the authority of this case. In Cruger v. Armstrong, 3 Johns' Cas., 5, the check was drawn for $2,500. On the day of its date the bank paid out checks of the drawer to the amount of $3,500, and at the close of banking hours a balance was left of S400. Present- ment was held necessar}\ Lewis, C. J., dissenting. The authority of this case may be somewhat doubtful. Radcliffe, J., said that presentment was necessary, though notice might not have been, and founds his opinion on this, which is clearly incorrect. Kent, J., said : ' In the present case Uiere is no such demand proved, nor is there anything in this case to take it out of the general rule. It can not be considered as a check fraudulently drawn without effects in the 636 CHECKS. § 162I. the holder consents, the bank would have no right to re- fuse it. § 162 1. In the fourth place, as to what i$ payment by the bank. — Where a check drawn upon a bank is presented to it by the holder, for deposit to his credit, and the amount is credited to the holder, the legal effect is precisely the same as though the money were first paid out to him, and then by him deposited in the bank. It is the right of the bank to refuse to pay it, or it may reject it conditionally.* But if it accepts the check as valid, and pays out the money (or what, as some authorities hold, is the same thing, cred- its it to the holder's account), it can not at any time there- after, even on the same day, returfi the check on discover- ing that there were no funds to meet it, and cancel the transaction,^ for the collection is then treated as accom- plished. But if the check holder merely requested the check to be placed to his account, and the bank does not debit the drawer, or credit the holder with the amount, or cancel the check, it may return the check on discovering that it was an overdraft, provided it does so in time to give the holder due notice of dishonor. " If," says Lord Denman, C. J., in an English case, " on delivering the check, he (the holder) had said at once, 'cash on this check,' or 'give me credit for it,' he must have drawn from Reader (the bank clerk) a distinct answer ; but by merely saying, ' place this to my account,' he leaves it upon the usual terms, and sub- hands of the banker. The presumption is that the check would have been paid if diligently presented ; at least, there is not sufficient evidence to justify a resort to the drawer without having made the experiment.' The answer to this may perhaps be, that the drawer is bound to know what his balance in bank is, and, as the holder is not bound to present a check in any case until the next day, and as there were checks outstanding, the amount of which added to that of the check in suit exceeded his balance, the presumption of payment would have been slight." » Pratt V. Foote, 9 N. Y., 463 ; Oddie v. National City Bank, 45 N. Y., 735 ; Morse on Banking, 320, 321. ^ Oddie V. National City Bank, 45 N. Y., 735 (1871). See Irving Bank v. Wetherald, 36 N. Y., 337. ^ 1623. PAYMENTS BY CHECKS. 637 ject to the contingencies to which bills or checks so paid in are liable; and if he received notice of dishonor in proper time, it was sufficient."^ § 1622. Mr. Morse observes that "if the bank, as prob- ably happens in the great majority of cases, simply takes the check without especial remark, and notes it on the de- positor's bank-book, thus treating it in every respect as if it were a check upon any other bank instead of upon itself, these facts do not create a payment or render the bank liable for the amount to the depositor. The officers, hav- ing dealt with the check in the ordinary form, have placed the bank only under the ordinary obligation, to wit, that of collecting the check in due course of business for the bene- fit of the depositor."^ In California it is considered that if the depositor hands the bank officer a check on another bank, and it is credited on his bank-book, it is to be re- garded as received for collection, and if not paid may be returned and cancelled ; and that the same rule applies even though thfe check be on the same bank where the depositor has it credited on his account.^ SECTION VII. PAYMENTS BY CHECKS. § 1623. In respect to payment by checks, a creditor may, if he pleases, accept a check in absolute discharge of the debt ; but where a check is received by the creditor, there is no presumption that he takes it in payment, but, on the contrary, the implication is that it is only to be regarded as payment if cashed.'' And so strong is this implication, the 'Boyd V. Emmerson, 2 Ad. & El. 184. See Oddie v. Nat. Bank, supra. '' See Morse on Banking, 320. See posf, § 1623. * Nat. Gold Bank v. McDonald, 51 Cal., 65. ^Currie v. Misa, L. R., 10 Exch., 153 (1S75); 12 Moak Eng. R., 592; The People V. Baker, 20 Wend., 602 ; Small v. Franklin Mining Co., 99 Mass., 277 ; Ocean Tow Boat Co. v. Ship Ophelia, 11 La. Ann., 28 ; Smith v. Miller, 43 N. 638 CHECKS. § 1623. check being- presumptively drawn upon a fund deposited to meet it, that more evidence is required to prove that a check given to take up a note is received in satisfaction and discharge than is demanded when one note is given for another.^ Certainly the holder of a bill or note is not bound to give it up on receipt of a check until the latter is paid.^ In Massachusetts, the law on this subject has been well expressed, the court saying : " A check is merely evidence of a debt due from the drawer. Whether it shall operate as payment or not depends upon two facts : first, that the drawer has funds to his credit in the bank on which it is drawn ; and second, that the bank is solvent, or, in other words, pays its bills and the checks duly drawn upon it, on demand. The receipt of a check, therefore, before presentment, if there is no laches on the part of the holder, is not payment of the debt for which it is delivered. But if the party receiving it is guilty of laches in presenting it, and the bank in the meantime suspends payment, he thereby makes it his own, and it shall operate as payment of his debt, the drawer having funds in the bank at the time of drawing the check, and not having withdrawn them."^ In Virginia, the Supreme Court of Ap- peals says, Burks, J., giving the opinion : " The giving of a check for an antecedent debt is not an absolute payment and extinguishment of the debt in the absence of an agree- ment giving it that effect. Ordinarily, it is only a means of payment, and the debt will not be extinguished unless Y., 171 (1870), 52 N. Y., 546 (1S73) ; Bradford v. Fox. 38 N. Y., 289 ; Sweet v. Titus, 1 1 N. Y. S. C. (4 Hun), 639 ; Davison v. City Bank, 57 N. Y., 82 ; Phil- lips V. Bullard, 58 Ga., 256 ; Everett v. Collins, 2 Camp., 515 ; Tapley v. Mars- tens, 8 T. R., 451 ; Heartt v. Rhodes, 66 111., 351. Check may by agreement be taken as absolute payment, and whether so taken or not is question of fact for the jury. Blair & Hoge v. Wilson, 28 Grat., 165. ' Olcott V. Rathbone, 5 Wend., 590 ; 2 Parsons N. & B., 86. ^ The People v. Baker, 20 Wend., 602 ; Barnet v. Smith, 10 Fost., 256 ; Hans- ard V. Robinson, 7 B. & C, 90 ; Moore v. Barthrop, i B. & C, 5 ; Pearce v, Davis, I Moody & R., 365; Ward v. Evans, 12 Mod., 521. 3 Taylor v, Williams, 1 1 Mete, 44 ; Sweet v. Titus, 1 1 N. Y. S. C. (4 Hun) 639. 5 1 624- PAYMENTS BY CHECKS. 639 and until the check be paid, or unless loss be sustained by the drawer in consequence of the laches of the holder, in which case the debt will be discharged in proportion to the loss sustained."^ When checks deposited with a bank, and credited in the depositor's pass-book, are taken, in the ab- sence of any special agreement, they are deemed to be taken for collection, and not as cash. They may be after- ward returned and the credit annulled if there are no funds to meet them ; and this is so whether the check is drawn on the same bank or another.^ § 1624. Whether agent for collection may receive check in payincnt. — It is frequently the case that a bank or other agent for collection of a bill or note receives the check of a debtor and surrenders up the bill or note to him. This practice was sustained in an English case, where it was held that a banker in London, to whom bills of exchange had been sent for collection, was not guilty of negligence toward his correspondent in surrendering them up on re- ceipt of checks drawn upon a banker in London, though the checks were dishonored for want of funds. This de- cision was based upon the ordinary course of trade and business of bankers.^ But Mr. Chitty observes : " That doctrine may now be questionable, and most of the London bankers, on presenting a bill for payment in the morning, leave a ticket where it lies due, and declaring that ' in con- sequence of great injury having arisen from the non-pay- ment of drafts taken for bills, no drafts can in future be received for bills, but that the parties may address them for payment to their bankers, or attach a draft to the bill when presented.'"* And Mr. Byles considers that the practice ' Blair & Hoge v. Wilson, 28 Grat., 171 (1877). " National Gold Bank, etc., v. McDonald, 51 Cal.,64 (1875) ; Morse on Banks. 320, 321. ' Russell V. Hankey, 6 T. R., 12 (i794)- « Chitty on Bills (13 Am. ed.) [*369], 41 5- 640 CHECKS. § 1625. is no longer usual In London, and doubts if it would be protected.^ § 1625. In United States agent for collection shotild 7toi receive check i7t payinent. — In the United States it is quite certain that a banker or other agent, holding a bill or note for collection, would act at his peril in delivering it up on receipt of a check for the amount ; and that if the debtor did not pay the amount in money, and the drawer or in- dorsers were not duly notified, they would be discharged, and the loss would fall upon the collecting agent.^ If, in- deed, on the same day that the bill or note was due the agent received a check for the amount and delivered up the bill or note, but on presentment of the check at the bank, and refusal of payment that very day, it had been returned, the bill or note reclaimed and protested, and the drawer or indorsers duly notified, then no right would be forfeited, but the liability of all preserved.^ But if the agent neg- lected to present the check until the next day, it would then be too late to preserve recourse against the drawer, if a foreign bill, by making protest ; and if in the meantime the bank had failed, the loss would fall upon the agent. And in New York, the Court of Appeals would seem to have gone further than this, and to hold that in all cases the agent must present the check on the very day he receives it, or he would be liable for any re- sulting loss. This seems to us the correct doctrine, for the agent exceeds authority in taking the check, and therefore acts at his peril.'* And while it may be, and ' Byles (Sharswood's ed.) [*24], 100. = Whitney v. Esson, 99 Mass., no; Turner v. Bank of Fox Lake, 3 Keyes, 425 ; Smith v. Miller, 43 N. Y., 171 ; 52 N. Y., 546 ; Rathbun v. Citizens' Steam- boat Co., 76 N. Y., 376. 3 Turner v. Bank of Fox Lake, 3 Keyes, 425 ; Smith v. Miller, 43 N. Y., 171. * Smith V. Miller, 43 N. Y., 171 (1870), Allen, J., saying : " If the check were worthless when given, or became w^orthless before it could have been, with rea- sonable diligence, presented for payment, the loss would have fallen upon the defendants, and they would not have been discharged from their liability, unless the plaintiffs had omitted to notify them in due time of the non-payment of the bill. There would, in such case, be no loss resulting from negligence 5 1626. PAYMENTS BY CHECKS. 64 1 as a general rule undoubtedly is, the practice of creditors, in mercantile communities, to take checks in the collection of debts, and frequently to surrender other instruments on receiving them, such a practice, on the part of the principal, falls far short of a usage which would permit the agent to do likewise.^ If, however, the principal received the check from the agent for collection, who took it instead of money, without objection, he would waive his right to hold the agent responsible, and ratify the transaction.^ § 1626. Whether receiving certified check is paymc?it. — It not infrequently happens that a depositor intending to offer his checks to creditors, procures their certifica- tion by the bank before he delivers them to the payees ; and the questions then arise whether or not such certified checks, when taken for debts, are to be regarded as so When a check is taken instead of money, by one acting for others, as was done by the plaintiffs, a delay of presentment for a day, or for any time beyond that within which, with proper and reasonable diligence, it can be presented, is at the peril of the party thus retaining the check and postponing presentment. It a custom can exist in law, and does exist in fact, authorizing such delay at the risk of the absent principal, it must be shown ; it can not be presumed to exist without evidence. The undisputed evidence in this case shows a practice, if not inconsistent with the existence of any such custom, at least more in harmony with the relative rights and obligations of the parties as recognized by law ; and which, had it been adopted by the plaintiffs, would have prevented all loss. The proof is, that the account of the drawers of the check was good at the bank during all business hours of the day on which it was drawn ; that the amount to their credit, and subject to their draft, was more than sufficient to pay all out- standing checks ; and if this check had been presented it would have been paid, or certified as good, which would have been equivalent to payment. The plain- tiffs had two full hours for presenting the check It was the duty of the plaintiffs to present the check at the bank at least during the day on which they received it, and obtain either the money or a certificate, or cause the same to be protested for non-payment ; and not having done so they were chargeable with negligence and the consequent loss." See S. C, 52 N. Y., 546 (1S73). ' Whitney v. Esson, 99 Mass., 1 10. ' Rathbun v. Citizens' Steamboat Co., 76 N. Y., 376 (distinguishing Walker v. Walker, 5 Heiskell, 425), Church, C. J., saying: "The circumstances here are capable of but one construction, according to the mode and habits of business, and that is, that the plaintiffs adopted and ratified the act of the carrier (in taking the check) by the unqualified acceptance of the check The case of Walker v. Walker, 5 Heiskell's R., 425, gives some countenance to the conten- tion of the plaintiff," but Chief-Justice Church explains the difference between that case and the one under consideration, showing that in the Tennessee case the drawer of the check failed before the principal received it from his agent ; and that as the principal did not know that intervening fact he was not regarded as ratifying the transaction. Vol. II.— 41 642 CHECKS. § 1627. much cash taken in absolute payment, or are, notwithstand- ino- the certificate of the bank, still mere checks, with the usual characteristics of such instruments ; and whether or not the holder must exercise any extraordinary diligence in presenting them. Both upon reason and authority it may be stated, that although it be the fact that certified checks pass from hand to hand, as cash, they are not cash, or cur- rency, in the legal sense of those terms, but they do not lose, by the fact that they are certified when delivered, any of the characteristics which attach to uncertified checks ; nor do they impose any greater diligence upon the holder, who has the same time in which to present them as if they were uncertified.-^ § 1627. The only effect of the certification of the check ^.s to give it additional currency, by carrying with it the evidence that it was drawn in good faith, on funds to meet its payment, and lending to it the credit of the bank in ad- dition to the credit of the drawer. Beyond this it does not differ from an uncertified check, nor does it make any dif- ference whether the drawer is actually charged on the books of the bank or not with the amount of the check when it is certified as "good." According to general usage the bank, when it makes such certificate, expects to pay the check out of the drawer's funds in its hands, and makes some memorandum, or takes some other course, by which it will not permit the amount necessary to meet the check to be anticipated ; and this both drawer and payee understand. So the practical effect of certifying the check is the same, whether the drawer is actually charged on the books or not, as in either case that amount of his funds is withdrawn from his control until the payment of the check is refused.^ ^Bickiord v. First Nat. Bank, 42 111, 238; Rounds v. Smith, 42 111., 245 Brown v. Leckie, 43 111., 497. * Brown v. Leckie, 43 111., 501. <^ 1629. OVER-CHFXKS. 643 § 1628. Bank can not offset amount due by holder against check. — A bank upon which a check is drawn, it has been held, can not plead, as offset, an amount due the holder of the check against him, because a check is only conditional payment, the holder being the mere agent of the drawer to procure the money which is demanded by the check, and to apply the same when received in pay- ment of the debt due by the drawer to him.^ Especially does this rule apply when the holder of the check is to receive the amount for the benefit of another. Vast amounts of property are sold by agents, brokers, and com- mission men for their principals, and it would be unreason- able and unjust when they received a check, as the means of procuring the money of their principals, to permit the bank to set off an amount due by them individually.^ SECTION VIII. OVER-CHECKS. § 1629. We have already seen that it is a fraud for a person to draw a check upon a bank when he has no funds on deposit to meet it.^ It is in effect a representation to the payee that there are funds to meet it, and the holder is de- ceived and misled if such be not the case. But further than this, the overchecking a deposit has been regarded as a most improper act on the part of the depositor, and even fraudu- lent, unless done by arrangement with the bank ; for its of- ficers, naturally relying on the good faith of their customer, are apt to pay his check without scrutiny, and the bank may thus be defrauded of its money.'' Certainly it is a bad practice to overdraw, and one that should not be tolerated ; • Brown v. Leckie, 43 111., 501. ' Brown v. Leckie, 43 111., 501- ' See a7ite, § 1 596. * True V. Thomas, 16 Me., 36; Morse on Banking, 318. 644 CHECKS. § 1630. but it is too severe to regard an over-check as in all cases prima Jacie a fraud and imposture in a criminal point of view. § 1630. Over-checks may be authorized by the ba7ik. — It is undoubtedly in the power of the bank to authorize over- checks, or checks without any funds whatever, upon ne- gotiations with the drawer. Such dealing would be in the nature of a loan ; and the bank would be bound, if the arrangement were consummated, upon a legal contract. But mere permission to overdraw, not communicated to the check holder, would certainly be of no avail in legal effect. And such permission would not warrant a drawer in stating absolutely, solely on the faith thereof, that his check was "good."^ In a case before the U. S. Supreme Court, in which it appeared that a mining corporation had legal authority " to enter into any obligations or contracts es- sential to the transaction of its ordinary affairs, or for the purposes for which it was created," could enter legally into an arrangement with a bank to pay its over-checks ; and where such checks were customarily drawn by its president and secretary without objection, the bank had a regret to assume that they were authorized to draw them.^ § 1630^. Bank officer paying over-check without au- thority is bound. — The officers of the bank should be careful to pay no over-check without distinct authority from the bank ; for such over-check would be chargeable against them, and its payment would be a grave departure from official duty. And no payee or holder should receive a check, knowing that the drawer had no funds to meet it, as he would thus join in an attempt to mislead the bank ; and if he got the money on such a check he could be com- pelled by suit to return it.^ ' Ballard v. Fuller, 32 Barb., 68. ^ Mahoney Mining Co. v. Anglo Californian Bank, U. S. S. C, January, 1882 ; Morrison's Transcript, vol. 3, No. 5, p. 785. See also vol. 3, No. 2, p. 180. 3 Martin v. Morgan, Gow., 123 ; i B. & B., 289; 3 Moore, 635, S. C, Byles CSharsvvood's ed) [*i6], 88 ; Morse on Banking, 254. ^ 1632. CANCELLED, DISHONORED, AND STALE CHECKS. 645 SECTION IX. CANCELLED, DISHONORED, AND STALE CHECKS. § 163 1. When a check is presented to a bank for pay ment, or is offered in a business transaction, the bank or the party negotiating for it should examine it carefully and ob- serve whether or not it bears upon it any marks indicating that it has been cancelled, or has grown stale. And the party to whom the holder offers to transfer it, should ob- serve whether or not there are any marks of dishonor about it. For if the check bear upon it indications that it has been cancelled — as, for instance, if it appears to have been torn to pieces and pasted together — the bank will be liable to the drawer, if it turn out that it had been cancelled by the drawer, as its appearance was sufficient to excite its sus- picions, and to have led to a refusal of payment.^ So if the check bear marks of its dishonor, a transferee would be entitled to stand in no better position than his transferrer, as it would then have (like any other negotiable instrument so marred) "a death wound apparent on it."^ § 1632. Bank sJiould not pay long outstanding check. —A check is payable instantly on demand ; and as here- tofore set forth, it should be presented within a day when the payee receives it in the place where drawn, and forwarded by the next day, wiien forwarding is neces- sary, in order to preserve the payee's recourse against the drawer, in the event of a failure of the bank.^ But if the bank remains solvent the holder may retain the check as long as he pleases, and hold the drawer liable until the time for suit is ended by the statute of limitations.'* But the pavee acts unwisely if he delays to present ' Scholey v. Ramsbottom, 2 Camp., 185. ' See Goodman v. Harvey, 4 Ad. & El., 870 ; §§ 724, 732, 788, vol. i. • See atiic, §§ 1590 et seq. * Thomson on Bills, 1 18. 646 CHECKS. § 1633. a check, as the bank and the drawer may both fail. And it is not advisable for a bank to pay a check which has been long outstanding, or for any one to receive it by transfer, without inquiry. For while age can not invalidate a good check (unless the limitation has applied), and the fact that it was dishonored when transferred, and that presentment was delayed does not lessen the drawer's liability,^ unless he has suffered loss ; ^ yet the lapse of a long period from its date before its payment, is a circumstance so out of the ordinary course of business that it ought to arouse sus- picions and excite inquiry. And the bank paying, or the party receiving such a check, acts at his peril. § 1633. When check is deemed stale. — No precise period of time can be specified at which a check would be deemed so stale as to subject the receiver to equitable defences, or a bank to loss, in the event that such defences arose, or the liability of the drawer had ceased. In Pennsylvania, where at the time the check was drawn the drawer had no effects in the bank, nor provided any afterward, and a year and a day after the day named for payment it was presented to and paid by the bank, and it appeared that the debt was discharged by the drawer after the check was drawn, it was held that the circumstance of its age was sufficient " to put the bank on inquiry," and its negligence precluded it from relief against the drawer.^ So the lapse of two and a half years, especially when the check contained a mark indicat- ing that it was a memorandum check, has been held to open the check to equities."* And in another case, the lapse of five months.^ In an English case, where the owner lost a check, and it was paid five days after its date to a shop- keeper by the bank, it was held that the shopkeeper should refund to the true owner, having taken the check overdue, * Cowing V. Altman, 79 N. Y., 168. ' See § 1590. ' Lancaster Bank v. Woodward, 18 Penn. St., 357. * Skillman v. Titus, 32 New Jersey L. R. (3 Vroom), 96. * First Nat. Bank v. Needham, 29 Iowa, 249 (1870). § 1634. CANCELLED, DISHONORED, AND STALE CHECKS. 647 unless, indeed, he were protected by the title of his assignor, and the burden of proof to that effect lay on him. Hol- royd, J., said: "A check is payable immediately, the holder of it takes it at his peril, and a person taking it after it is due takes it also at his peril." ^ In New York, where the check was transferred fourteen months after its date, the lapse of time was held sufficient to put the trans- ferrer on inquiry ; but it being proved that the check was de- livered long after its date, and was on the same day trans- ferred to the holder, it was decided to be valid in his hands, notwithstanding there was a good defence as be- tween the drawer and payee.^ § 1634. On the other hand, the fact that the holder received the check one day,^ four days,^ six days,*^ eight days,^ or ten days,'^ or nearly a month^ after date has been considered in- sufficient to subject him to equitable defences, though taken in connection wnth other circumstances, its being somewhat stale might be evidence of bad faith.^ And if by the drawer's fault the bank pays an altered, forged, or otherwise ' Down V. Hailing, 4 B. & C, 330 (17 E. C. L. R.) ; 6 D. & R., 445 ; 2 C. & P., 1 1. But this case is explained in London, etc., Bankv.Groome, cited in note, § 1634. ' Cowing V. Altman, 71 N. Y., 436, overruling s. C, 5 Hun, 556. ^ Himmelman v. Hotaling, 40 Cal., in. '' First Nat. Bank v. Harris, 108 Mass., 514. In this case, "a check on a bank in Boston was sent from Boston by mail to Rochester, in New York, and there bought lour days after its date, and was presented for payment two days afterward. Ne/ii, that the buyer was not subject to equities existing between the original parties, of which he had no notice, either on the ground tliat the lapse of time between the date of the check and his purchase of it should have put iiim upon inquiry, or on the ground of unreasonable delay in making pre- sentment." ' Rothschild v. Corney, 9 B. & C, 388. ' London and County Bank v. Groome, English High Court, Q. B. D., Dec. 19, 1881 ; Central L. J., April 28, 1882, Vol. 14, No. 17, explaining Down v. Hailing, supra. ' Ames V. Meriam, 98 Mass., 294, the court saying : " A holder who takes a check in good faith and for value several days after it is drawn, receives it with- out being subject to defences of which he has no notice before or at the time his title accrues." ' Lester v. Given, 8 Bush (Ky.), 357. ' Bank of Bengal v. Fagan, 7 Moore P. C, 72 ; London, etc., Bank v. Groome, supra. 648 CHECKS. § 1634^. invalid check, the bank will not be liable to him.^ And where the drawer himself delayed nine months to issue the check, he could not object against the holder .who received it from him the circumstance of its staleness.^ Without any circumstances of this kind arising, the certain age at which a check may be said to be stale is as uncertain as the fixing of the day on which a young lady becomes an old maid. Mr. Morse says that its age "must be something so extraordinary as to be inconsistent with the ordinary course of business in order to give the bank the right to demand delay. "^ Another writer regards a check as " never over- due,"* but this is going too far. 1634(2. Excuses for want of presentment and notice. — A declaration by the drawer of a check before maturity that it would not be paid, would excuse want of presentment or notice,^ and a part payment before maturity would waive the necessity of presentment and notice, as it would be the presumed intention of the parties that it should not be presented.'' SECTION X. RIGHT OF HOLDER OF UNCERTIFIED CHECKS TO SUE THE BANK, § 1635. The question whether or not the holder of a check may sue the bank holding funds of the drawer, upon its refusal to pay it, has divided the opinions of courts and jurists, and no little perplexed the legal profession. And it has been observed by a discriminating writer that " when one comes to examine the authorities which range them- selves on either side, and to investigate the chains of reason- ing by which these authorities respectively seek ^o support themselves, the tale of the two honorable knights who fought ' Lickbarrow v. Mason, 2 T. R., 63. "" Boehm v. Sterling-, 7 T. R., 423. ' Morse on Banking, 264. ^ Tiiomson on Bills, 118. ' Minturn v. Fisher, 7 Cal, 573. See ante, §§ 1596, 1598. ' Levy V. Teters, 9 Sergt. & R., 125. § 1636. RIGHT OF HOLDER OF UNCERTIFIED CHECKS. 649 about the question of whether the shield between them was golden or silvern, is forcibly brought to mind. Each line of arsfument in its turn seems the more correct and the more satisfactorily backed by respectable vouchers."^ But this writer concludes that the weight of authority is in favor of the check holder's right of action, and expresses his own judgment to the like effect.^ We shall first review the au- thorities, and then state our own conclusions. § 1636. The doctrine that check holder can not sue the bank. — There are a series of cases in which it is declared that the check holder can not sue the bank unless the check has been certified, or otherwise accepted ; cases, however, in which no question respecting checks was presented, the in- strument in suit being either an order or a bill of exchange. These cases are often cited in support of the proposition that the check holder can not sue the bank without accept- ance ; but really they are not authority for that doctrine, as a check is necessarily drawn upon a bank, and differs from an order or a bill of exchange, which need not be.^ There are also a number of cases in which the opinion has been expressed, or the decision has been pertinently made to the like effect that the check holder can not sue the bank. They proceed upon the ground that there is no privity of contract between the holder of the check and the bank, unless the latter does some act by which it is created ; that while it may be an appropriation of the fund, in whole or in part, as between the drawer and the holder, until the bank consents to it, it is in nowise bound to pay the amount to the holder ; that especially is this the case when the check is for part of a deposit, as one cause of action might thus be split up into many ; and that the only remedy which * Morse on Banking, 459. * Id., 473. » M;indeville v. Welch, 5 Wheat., 277 (case of a bill of exchange) ; Cowper- thvvaite v. Sheffield. 3 Corns., 243 (1850). (bill of exchange) ; New York Bank v. G/bsoM, 5 Duer, 574 (1856), (bill of exchange) ; Grinnell v. Suydam, 3 Sandf., 133 (b.ll of exchange) ; Luff v. Pope, 5 Hill, 413 (order on individual— not a bankJ • Dana v. Third Nat. Bank, 13 Allen, 445 (bill of exchange). 650 CHECKS. § 1636^. exists for a wrongful refusal of the bank to pay the amount deposited to meet the check, is a suit by the drawer, or the holder in tort, for the wrong done ; or suit by the drawer for damages for breach of the implied contract to pay it.^ S 1636^. Views of U. S. Supreme Court — exception to general rule. — The Supreme Court of the United States has unanimously adopted the view, that ordinarily a check holder can not, sue the bank;^ but it has qualified its opinion by remarking : " It may be, if it could be shown that the bank had charged the check on its books against the drawer, and settled with him on that basis, that the plaintiff could recover on the count for money had and received, on the ground that the rule ex cequo et bono would be applicable, as the bank having assented to the order, and communicated its assent to the paymaster (the drawer), would be considered as holding the money to the plaintiff's use ; and therefore under an implied promise to pay it on demand." ^ And in Pennsylvania the exception thus sug- gested is established.* 'Bank of Republic v. Millard, 10 Wall., 152 (1869) ; Chapman v. White, 2 Seld., 412 (1852). The instrument in suit was called a bill, but was really a reo-ular check drawn by one bank upon another. Carr v. Nat. Security Bank, lo'; Mass., 45 (1871) ; ^tna Nat. Bank v. Fourth Nat. Bank, 46 N. Y., 82 (187 1) ; Van Men v. American Nat. Bank, 52 N. Y., 4 (1873) : Duncan v. Berlm, 60 N. Y., 151 (1875) ; Tyler v. Gould, 48 N. Y., 682 ; Planters' Bank v. Merrit, 7 Heisk., 117; Planters' Bank v. Kesee, Id., 200; National Bank v. Second National Bank, 69 Ind., 579 ; Rosenthal v. Martin Bank, U. S. C. C, Southern Dist. of N. Y., Nov., 1879 ; 34 Am. Rep., 238 ; Essex Bank v. Bank of Montreal, 7 Biss., 193 ; BuUard v. Randall, i Gray, 605 ; Moses v. Franklin Bank, 34 Md., 580 (1 87 1), Alvey, J. : " It is certainly a general rule that the drawee who re- fuses to accept a bill of exchange can not be held liable on the bill itself; nor to the holder for the refusal, except it be upon the ground of fraud and loss to the latter. A bank upon which a check is drawn occupies in this respect a similar position to that of a drawee of a bill of exchange. It is but the agent of the depositor, holding his funds upon an implied contract to honor and take up his checks to the extent of the funds deposited. The obligation of the bank to ac- cept and pay is not to the holder, but to the drawer." Bellamy v. Majonbanks, 8 El. & Eq., 523 (1851), Parke, B. ; Purcell v. Allemong, 22 Grat., 742 (1872), Anderson, J., obiter ; 2 Parsons N. & B., 61, 62. St&post, §§ 1644, 1645. = Bank of Republic v. Millard, 10 Wall., 152 ; First Nat. Bank v. Whitman, 94 U. S. (4 Otto), 343- = Bank of Republic v. Millard, 10 Wall., 152. « Seventh Nat. Bank v. Cook, 73 Penn. St., 485- In the more recent case of Saylor v. Bushong, not yet reported, but referred to in the Public Ledger of 5» 1637. RIGHT OF HOLDER OF UNCERTIFIED CHECKS. 65 1 § 1636^. Ill England a check has been held to consti- tute no equitable assignment of the fund, although the drawer instructed the banker by letter to place the amount to the drawer's credit, Sir G. Jcssel, Master of tlic Rolls, saying : " A check is clearly not an assignment of money in the hands of a banker ; it is a bill of exchange payable at a banker's."^ And again, where, under the act of 36 & 2)"] Victoria, whereby the assignee of a chose in action may sue in his own name, the holder of a check sought to charge the bank, the attempt failed, and Brett, J., said : " The bank has made a contract with the drawer that they will honor his checks to the amount of his account. They break that contract. How can that give a right of action to a third person ? The check is but an order to pay, and not an absolute assignment of anything."^ § 1637. The opposing view that the check holder may sue the bank as soon as it wrongfully refuses to pay the check has been taken in a number of cases which were well con- sidered, and rests upon conceptions of the relations of the parties which are consistent with and favorable to the usages of trade, and are difficult to be successfully combated. Thus it has been decided in South Carolina, that the check holder had a right of action in assumpsit against the bank, if it refused to pay the check, when it had funds of the drawer available for doing so, upon the implied promise which the law raises in his behalf.^ A similar view seems to have been taken in Louisiana.* It has been directly and April 15, 1882, the Supreme Court of Pennsylvania, per Trunkey, J., says : " If the bank expressly or impliedly promises the drawer to pay the check the holder may sue (the bank) if payment be refused, When a depositor settles his account with the bank and leaves' the exact amount of an outstanding check expressly for its payment, and the bank tacitly retains the money and settles on that basis, it is liable to the holder on the implied acceptance." » Hopkinson v. Foster, 19 Equity Cas. L. R., 74 (1874) ; see also Whartsn v. Walker, 4 B. & C, 163 ; Yates v. Bell, 3 B. & Al., 643 ; Warwick v. Rogers, 5 M. & G., 374- « Schroeder v. Central Bank, 34 L. T. R., 735 ; ~-\ W. R., ']\. ' Fogarties v. State Bank, 12 Rich. Law, 518. * Van Bibber v. La. Bank, 14 La. An., 481, but this was overruled in Case v. Henderson, 23 La. An., 49. 652 CHECKS. , § 1638. distinctly so decided in Illinois,^ lowa,^ Missouri,^ Kentucky, and in Illinois has been held that the right to sue the bank passes by transfer to each successive holder.^ . The learned editor of Byles on Bills ^ seems to be of this opinion. And in Kentucky it has been held that where the drawer of the check notified the bank by letter, the holder could sue the bank ;' but the check is itself notifi- cation, and we can not see how a letter from the same hand could add to its effect. If the money is deposited as the check holder's, although in the drawer's name, and the fact is communicated to the bank before any other right has at- tached to the fund, it would clearly be in equity the prop- erty of the holder, and he might recover it of the bank.^ § 1638. True principles applicable to rights of check holder. — Our own views on this question may be expressed as follows : There are four distinct parties who may be im- mediately interested in the effect of a check drawn upon a deposit — (1) the drawer; (2) the holder; (3) the bank; and (4) a stranger — claiming the amount under a subse- quent check, assignment, or levy. (i) Now, as between the drawer and the payee (or holder), there is no doubt that the delivery of the check con- ' Chicago Marine, etc., Ins. Co. v, Stanford, 28 111., 168 ; Brown v. Leckie, 43 III., 500; Munn V. Burch, 25 111., 35 (1861) ; Union Nat. Bank v. Oceana Co. Bank, 80 111., 212. * Roberts v. Austin, 26 Iowa, 316 (1868). ^ Senter v. Continental Bank, 7 Mo. Ap., 532 (1879) ; McGrade v. German Sav. Inst., 4 Mo. Ap., 330 (1877) ; Zelle v. German Sav. Inst., 4 Mo. Ap., 401 (1877). * Lester v. Given, 8 Bush (Ky.), 358 (1871). * Union Nat. Bank v. Oceana County Bank, 80 111., 212. « In Byles on Bills (Sharswood's ed.) [*2i], 96, note i, it is said by the learned American editor : " A bill of exchange is not an equitable assignment or appro- priation, but the cases treat a check on a banker as such ; and if the holder is a holder for value, as to whom the drawer can not revoke rightfully the power whicli he holds, coupled with an interest, why should not the banker upon dis- tinct claim and notice be held bound by the equity ? " ' Lesler v. Given, 8 Bush (Ky.), 361 ; see Weinstock v. Bellvvood, 12 Bush (Ky.), 140. « Allen V. American Nat. Bank, 3 Lans., 517 (187 1) ; seeHopkinson v. Foster 18 Eq. Cas. L. R., 74 (1874), and ajite, § 1636. ^ 1638. RIGHT OF HOLDER OF UNCERTIFIED CHECKS. 653 stitutes an assignment of the amount ;^ and as we have al- ready seen, it is a fraud to give the check without having a corresponding amount to meet it.** But as yet the drawer and payee (or holder) are the only parties whose rights are affected by the check. Something more is necessary to affect the bank, or a stranger holding another check. As soon as the payee (or holder) presents the check to the bank and demands payment, we think that thing is done.' For the bank is then notified of the appropriation of the amount to the holder. If a subsequent check is presented, drawn on the same fund, it would be a fraud upon the holder to pay that, and thus deprive him of his precedence. If a subsequent assignment, in a different form, were made of the fund by the drawer, it would be valid against the drawer if communicated to, and a(ited upon by, the bank before presentation of the check. For otherwise the bank would suffer from a wrong committed by the drawer in which it had no participation. The objection to the check holder's suing the bank, on the ground that there is no privity between him and the bank, seems to us utterly untenable. It is true there is no ^ Matter of Brown, 2 Story, 502 ; Bell v. Alexander, 21 Grat., 6 ; Bank of Re- public V. Millard, 10 Wall., 152 ; Morrison v. Bailey, 5 Ohio St., 13 ; Robinson V. Hawks, 9 Q. B., 52 ; German Sav. Inst. v. Adae, 8 Federal R., 106. In Keene V. Beard, 8 C. B. N. S., 372, Byles, J., said : " In one thing a check differs from a bill of exchange ; it is an appropriation of so much money of the drawer's in the hands of the banker upon whom it is drawn, for the purpose of discharging a debt or liability of the drawer to a third person ; whereas it is not necessary that there should be money of the drawer's in the hands of a drawee of a bill of exchange." But it has been remarked, touching this expression of Byles, J., by Sir G. jessel, Master of the Rolls, in Hopkinson v. Forster, 19 Eq. Cas. L. R., 74 (1874) : " I do not understand the expressions attributed to Mr. Justice Byles, in Keene v. Baird ; but I am quite sure that learned judge never meant to lay down, that a banker who dishonors a check is liable to a suit in equity by the holder." • See a7ite, § 1 596. * In Morse on Banking, 471, it is said : " It is true — and it is all that the cited cases decide — that before demand for payment no assignment exists, no obliga- tion has been created, no privity has grown up, and the very right of the bank to pay may be taken away by any one of a great number of occurrences. But the act of presentment and demand, made before any one of these occurrences has taken place, is the act which creates at once, by usage of business and under- standing of all concerned, the obligation, the privity, and the appropriation, or at least the right to claim an appropriation." 654 CHECKS. § 1638. privity before the presentment of the check, but by that very act they are brought in privity, and the check holder's right to sue the bank completed. The sole motive often, if not generally, inducing the de- positor to place his funds in bank is the desire to have them in safety, where they may be checked on at conven- ience. The bank receives its reward in the use of the money, and in the business attracted in checking it out. And it is the universal understanding between banks and depositors, arising from the customs of trade, that the check of the latter is to be paid upon presentment.^ The United States Supreme .Court so declares in a recent opinion, though as yet it has not followed that declaration to its 1 Roberts v. Austin, 26 Iowa, 324. " As to the objection of want of privity, although at one time there was some conflict of opinion, it is now laid down by text writers to be settled, that in cases of simple contract, if one person makes a promise to another for the benefit of a third, the latter may maintain an action upon it, though the consideration did not move from him. 2 Greenl. on Ev., § 109, and authorities cited in note i. Nor does it make any difference in prin- ciple that the beneficiary or party suing upon the promise was unknown to the promisor. This want of knowledge by the promisor as to who will be the party enforcing the promise exists in the case of every negotiable instrument. The promisor having made his promise upon sufficient consideration, whether it is in writing, verbal, or implied, may and ought to be required to perform it ac- cording to the tenor of it, and not otherwise, to the party becoming entitled thereto." " As to the objection of liability to several parties who may hold the checks, instead of to the one depositor, it should be remembered that, by the custom of merchants and bankers everywhere, alike well known to farmers, mechanics, merchants, bankers, and courts, the party receiving the deposit does so upon either an express or implied promise to pay the same upon presentation of the checks of the depositor, by whomsoever presented. If, therefore, he is made liable to numberless parties, it is because of his promise made for their benefit, and known to them, and which he has failed to perform." Munn y. Burch et al., 25 111., 35. And if it be true, as it doubtless is, that the banker is liable to the depositor for the damages resulting to him by reason of the failure to pay his checks, this liability ought not, upon principle, to exempt him from the performance of his promise or undertaking to pay the checks ; the holder may enforce the promise, while the depositor recovers nominal or special dam- ages for the breach of it, Rolin v. Stewart, 14 C. B., 595. Parties are often liable to two actions at law, by different suitors, for one and the same wrongful act. A trespasser upon real estate may be liable, for one trespass, to two actions — one by the tenant, the other by the reversioner. So a party promising to dis- charge an incumbrance, and failing to do so, may be liable to an action by the promisee, and also to an action by the party holding the incumbrance. These are but illustrations of a large class of cases, both in tort and upon contract, where a party may be liable to two actions by different parties for the same wrong, or upon a breach of the same promise." See post, § 1643, "^ote 5, and § 1644 and notes. § 1640. RIGHT OF HOLDER OF UNXERTIFIED CHECKS. 655 logical sequence.^ The drawer of the check makes the de- posit, and draws the check with this understanding. The bank receives the money with the like understanding, and so the holder receives the check. And the mutual under- standing of the parties, although they have not individually concerted together, creates an implied privity, and com- pletes the contract between them. § 1639. But it is again objected, that if the holder could sue the bank for the amount, it would be liable to a suit from two different persons for the same thing, as the de- positor could sue it also.^ But while the depositor could sue the bank for the wrong done in refusing to pay his check, and recover any consequential damages,^ he could not, we should say, sue it for the amount of the check after its presentment. For then the assignment is com- pleted as against the bank — its assent has been obtained by its reception of the deposit, the right of the depositor parted with, and of the holder perfected. And while both depositor and holder could sue the bank, their causes of ac- tion would be as distinct as a tort is from a contract.^ § 1640. Check holder s remedies. — From these views our conclusion is, that the check holder has two remedies : First : He may sue the drawer of the check and the bank in one action — the former as drawer, and the latter as an implied acceptor. For as an acceptance of a bill may be implied, so may the acceptance of a check. And as a promise to accept will operate as an acceptance to the » Central N. B. v. Connecticut Mut. Life Ins. Co., U. S. S. C, Nov, 7, 18S1 ; Morrison's Transcript, vol. 3, No. i, p. 62, Mathews, J. : " The contract be- tween the bank and the depositor is, that the former will pay according to the checks of the latter." = Bank of Republic v. Millard, 10 Wall., 156, Davis, J.: "It is conceded that the depositor can bring assumpsit for the breach of the contract to honor his checks, and if the holder has a similar right, then the anomaly is presented ol a right of action upon one promise for the same thing, existing in two distinct persons at the same time." ' Morse on Banking, 234; 2 Parsons N. & B., 62 ; Hopkinson v. Forster, 18 Eq. Cas. L. R., 74. * See Roberts v. Austin, ante, p. 555. 656 CHECKS. § 1 64.1 holder who takes a bill on the faith thereof, so should it be as to a check. Now, by the very act of drawing a check, the drawer communicates to the payee the fact that the bank holds that amount to his credit, which it has agreed to pay on his check. By receiving the deposit, the bank has im- pliedly so agreed. And the holder receiving the check, in reliance' on this condition of things, should be sustained, provided the drawer has not deceived him by drawing with- out funds to meet the check, and allowed to proceed against both parties in the manner above indicated. It is no answer to these views to say that the holder of a bill can not sue the drawee unless it be accepted. The drawee of a bill does not receive money to be paid out on checks. And the distinction between the bank or banker on whom the check is drawn, and the ordinary drawee of a bill, is the very gist of the distinction between the rights of the holders of the different instruments. § 1 64 1. Second : The check holder may sue the drawer of the check on its dishonor, or sue the bank for money had and received to his use ; for, as we have said, the bank receiving a deposit receives it for the use of the depositor, and for the use of such persons as he may order it to be paid to by his checks. Assumpsit is an equitable action, and ex cequo et bono, the check holder should be entitled to recover from the bank the amount foi which he holds the depositor's order. § 1642. Damages for improper dishonor of check. — The depositor may always recover nominal damages from the bank improperly dishonoring his check, and a trader may recover substantial damages. If not a trader, the depositor would have to allege and prove special injury.^ An agent 1 Rolin V. Stewart, 14 C. B. (5 J. Scott), 607 (78 E. C. L. R.) Williams, J., said : " I think it can not be denied that if one who is not a trader were to bring an action against a banker for dishonoring a check at a time when he had funds of the customer in his hands sufficient to meet it, and special damage were al- leged and proved, the plaintiff would be entitled to recover substantial damages. And when it is alleged and proved that the plaintiff is a trader, I think it is § l643- HOW FAR A CHECK IS AN ASSIGNMENT. 657 who has put to his private account funds of an undisclosed principal, may recover damages from the bank for refusal to honor his check upon them, although he had improperly obtained them.^ SECTION XL HOW FAR A CHECK IS AN ASSIGNMENT OF THE FUND DRAWN UPON. § 1643. We have seen already that a check operates as an assignment of the fund on which it is drawn pro tanto, from the very time it is drawn and delivered, as between the drawer and the payee or holder.* And secondly, that the assignment binds the bank as soon as the check is pre- sented.^ Thirdly, that as between the drawer and holder on the one part, and a party claiming under a subsequent assisrnment on the other, that if the latter holds a check also, and first presents it, he thereby acquires priority over the check not previously presented.^ And any subsequent assignee to whom the bank had assented to pay the amount would, in like manner, acquire priority, as the bank would be bound to pay him in preference to the prior check hold- er who had not presented the check.^ But if the check were presented before any subsequent assignee had ob- tained the assent of the bank, and thus brought it in priv- ity of contract with it, we should say that by such present- ment the check holder acquired priority for the reasons that have been heretofore considered.^ And, therefore, a general assignment for the benefit of creditors would not defeat the check holder, although he had not presented the equally clear that the jury, in estimating the damages, may take into their con- sideration the natural and necessary consequences which must result to the plaintiff from the defendant's breach of contract ; just as in the case of an action for a slander of a person in the way of his trade, or in the case of an imputation of insolvency on a trader, the action lies without proof of special damage." > Tassell v. Cooper, 9 C. B., 509. ^Ante, § 1638. ^ Ante, § 1638. * Ante, §§ 1617, 1638. ^ Ante, % 1617. ^ Ante, § 1617. Contra, cases cited, § 1636. Vol. II. — 42 658 CHECKS. § 1644. check,^ nor would the appointment of a receiver to take possession of the funds of the drawee.^ There may be as- signment of a bank deposit by mere parol^ And these cases which insist that a check does not per se import an assignment pro tanto seem to us to give less weight to written than to verbal testimony. § 1644. Conjlict between attachment and garnishmeni process and assignment. — It is a principle of law that wherever there is a legal or equitable assignment of a debt or fund prior to service of attachment or garnishment proc- ess upon the debtor, the assignee is entitled to priority over the attachment or garnishment creditor, provided he makes it known to the court in time to intercept its judg- ment in favor of such creditor, even though the party owing the debt or holding the fund assigned should not have had notice of such assignment prior to the service of such proc- ess,"* and a fortiori does the rule apply where there is notice.^ ' German Sav. Inst. v. Adae, 8 Fed. R., 106 ; First N. B. v. Coates, 8 Fed. R., 540, Miller, J., held that check is an " equitable assignment " pro taiito. In Roberts v. Austin, 26 Iowa, 327, Cole, J., said: "The controversy then is simply this : Markell having received full consideration therefor, dravv^s his checks upon his banker, with whom he has funds on deposit for their payment. After- ward, and before their presentation, Markell (by his assignee) notifies the drawee to withhold payment. This is done without any claim of wrong on the part of the drawees, and without any pretence or suggestion against their just and equitable right to the money specified in the check. Now, as between Markell on the one hand, and the holders of these checks on the other, in whose favor are the equities ? No person could hesitate for a single moment in declaring that the money (which in effect has been brought into court for the benefit of the parly entitled thereto) should be paid to the holders of the checks, rather than to Markell, who has once received from them the money which the checks represent. If, as between Markell and the holders, the latter would be entitled to the money, then, since the assignee of Markell stands in his shoes and suc- ceeds only to his rights, the holders of the checks would be entitled to the money as against the assignee, and this, too, regardless of whether the holder of a check can maintain his action against the drawee, or whether a check op- erates as an assignment pro lanfo of the deposit, as hereinbefore discussed." Contra, Lunt v. Bank of North America, 49 Barb., 221. ''Merrill v. Anderson, 17 N. Y. S. C, (10 Hun), 606 (1877). See Duncan v. Berlin, § 1644, note. " Risley v. Phoenix Bank, 18 N. Y. S. C. (11 Hun), 484. * Anderson v. De Soer, 6 Grat., 364 ; Maher v. Brown, 2 La., 492 ; Giddings V.Coleman, 12 N. H., 153. 'Legro v. Staples, 16 Me., 252 ; United States v. Vaughan, 3 Bin., 394 ; Colt V. Ives, 31 Conn., 25 ; Nesmith v. Drum, 8 Watts & S., 9 ; Adams v. Robinson I Pick., 461. § 1646. CHECKS AS EVIDENCE. 659 And as a check is an assignment of the fund pro tanto, it would, upon this principle, defeat an attachment or gar- nishment, although not presented until after process was served upon the debtor.^ This doctrine rests upon the ground that the attachment or garnishment creditor ac- quires no rights but those subsisting in his debtor at the time that process is served on the garnishee, and is in effect a mere suitor for whatever his debtor might then have a right to recover. § 1645. In England it is held that there are some cases in which equity would regard a check as an assignment of the fund, as in the case of the death of the drawer, and the consequent revocation of the banker's authority (which is there held to be its effect), the holder may have relief in equity against the banker.* But, as a general rule, a check is not there regarded as an assignment* SECTION XII. CHECKS AS EVIDENCE. § 1646. In the hands of the payee, a simple check which is unpaid and has not been presented for payment, can not be used as evidence of any indebtedness from the drawer to 'See chapter I, §§ 15, 16, et seq., vol. i ; also Wheatly v. Strobe, 12 Cal., 98. But cofifra, that a check is not an assignment, and will not defeat an attach- ment, see Tyler v. Gould, 48 N. Y., 682 ; Loyd v. Caffrey, 46 Penn. St. ; Duncan V. Berlin, 60 N. Y., 151 (1875), Church, C. J. : "A check upon a bank does not operate as an assignment of the money deposited A parol acceptance is not valid (i R. S., 768). The promise did not bind the bank, and no action would lie upon it in favor of the holder. The case of Bullard v. Randall, i Gray, 605, was similar in its circumstances to this ; and the court held they would not avail against the lien of a trustee process served before the check act- ually reached the bank. When the attachment was ser\'ed, the check had neither been accepted, certified, nor paid, nor had it, in fact, been presented for payment." Held, that the attaching creditor had priority. See also Lunt v Bank of N. A., 49 Barbour, 221 ; Att'v Gen'l v. Continental L. I. Co., 71 N. Y.. 325 ; Risley v. Phoenix Bank, 18 N. Y.'S. C. (11 Hun), 484. ' Rodick V. Gandelle, 12 Beav., 325 ; i D. G, M. & G., 763. * Hopkinson v. Foster, L. R., 19 Eq., 74. 66o CHECKS. § 1646 the payee, for the drawer has only contracted that the bank should pay the amount on demand, and until demanded the drawer is not bound.^ But when this is done and shown, the check then imports a debt from the drawer to the payee, and it may be sued on without proving the consider- ation, value received being presumed.^ In the hands of an indorsee, the check, in like manner, is not sufficient evidence that the drawer owes the debt, un- less a demand upon the bank and refusal to pay be shown ;^ and as against the indorser, proof of notice of non-payment must be superadded.* The natural inference from the giving of a check is, that it was given in payment of a debt due the payee from the drawer, or that the payee gave cash for it when it was drawn, and in order to charge the payee as a debtor to the drawer, it must be shown that the check was in fact loaned him.^ Where the drawer's executor sued the payee of a paid check for the amount, charging that it was a loan. Lord Kenyon, C. J., said: "There is no evidence to estab- lish a debt. No evidence is offered of the circumstances under which the draft was given ; it might be in payment of a debt due by the testator, or the defendant might have given cash for it at the time."^ But when it is shown that cash was not given for the check, that it was not taken in payment of a debt, there is no presumption that it was in- tended as a gift ; and unless it were proved to have been so intended, the payee would be chargeable with the amount ' Flemming v. McClain, 13 Penn. St., 177 ; Pearce v. Davis, i Moo. & R., 36i„, 2 Parsons N. & B., 83. " See itifra, % 1652. Mr. Morse states that there must be " proof of the con- sideration on which the check was given." Morse on Banking, 290, 312. This is incorrect. See cases belov^, and see infra ^Anfe, §§ 1586 el seq. ' Ibid. ^ Terry v. Ragsdale, 33 Grat., 348; Huntzinger v. Jones, 60 Penn. St., 170; Connelly V. McKean, 64 Penn. St., 118; Patten v. Ash, 7 Serg. & R., 116; Graham v. Cox, 2 Car. & K., 702; Headley v. Reed, 2 Cal., 322 ; Thompson v. Pitman, i Fost. & F. N. P., 339 ; 2 Parsons N. & B., 84 ; Yates v. Shepardson. 39 Wise, 173. • Gary, Ex'r of Greatorex v. Gerish, 4 Esp., 9. ^ 1648. CHECKS AS EVIDENCE. 66 1 as a loan.^ And whenever a loan from the drawer to the payee is proved, the eheck may be given in evidence of the amount.* . § 1647. In the hands of the bank, a check drawn upon it imports that the bank held funds of the drawer upon deposit, and has paid, out of them, the amount of the check to the holder.^ And it does not import a loan from the bank to the drawer ; but if it appears that the check was paid without funds, an implied promise is raised that the drawer will refund the amount to the bank.* § 1648. hi the hands of the drawer, a check payable to a certain party or order, and bearing his indorsement, and which has been paid by the bank, is as good a receipt for money paid to the payee as the drawer could desire.^ But if the check were drawn payable to A. or bearer, or to bearer, which is the same in legal effect, it is not,/^r .r^, evidence in the drawer's hands, of payment to A. It must be proved that the party alleged to have been paid by the check re- ceived the money.^ And if the check be payable simply to A., it seems that mere payment of the check is not evidence that A. received the money, unless the check bear A.'s in- dorsement.'^ But it may be doubted if the bank can require his indorsement unless the check be payable to his order.* And clearly, it can not require the holder's indorsement when the check is payable to bearer.^ ' Baker v. Williamson, 4 Penn. St., 456 ; Huntzinger v. Jones, 60 Penn. St., 170. " Healy v. Gilman, i Bosw., 235. 'Lancaster Bank v. V^ooclward, 18 Penn. St., 361 ; Conway v. Case, 22 111., 127 ; Healy v. Gilman, i Bosw., 235 ; Fletcher v. Manning, 12 M. & W., 571. * Fletcher v. Manning, 12 M. & W., 571 ; Thurman v. Van Brunt, 19 Barb., 409; Morse on Banking, 290, 291. ■* Connelly v. McKean, 64 Penn. St., 113; Egg v. Barnett, 3 Esp., 196, Thompson v. Pitman, i Fost. & F. N. P., 339. " Patten v. Ash, 7 Serg. & R., 116; People v. Baker, 20 Wend., 602; People V. Howell, 4 Johns, 296 ; Mountford v. Harper, 16 M. & W., 825 ; Pearce v. Davis, I Mood. & R., 365 ; Lloyd v. Sandilands, Gow., 13. ^ Flemming v. McClain, 13 Penn. St., 177. * 2 Parsons N. & B., 83. ° Connelly v. McKean, 64 Penn. St., 113. 662 CHECKS. § 1649. Without proof of the particular consideration, a check is not evidence that it was paid upon a particular account.^ § 1649. It is almost, and indeed we suppose quite, the universal custom of banks which have paid the checks of their depositors, to cancel them by some mark indicating that they have been paid, and to return them in the de- positor's bank pass-book as vouchers for the amounts paid out from his funds on deposit. And, doubtless, an obli- gation to do this may be inferred in most cases from the usage of business, and the prior course of dealing between the bank and its depositor.^ When the bank pays the holder the amount of the check, it is clearly entitled to the possession of it as a voucher for the payment.^ 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 their permanent possession, as they are to him vouchers of payment of his debt to the • payee named in them ; and the bank, until it returns the checks, has been said to hold them only as agent of the drawer.^ In the case of over-checks, it would doubtless be different, for they might be the only conclusive evidence that the bank possessed of the advance to the drawer, and this it would not be just to require it to part with.^ § 1650. When a suit is brought for money lent by a check, it has been held that the statute of limitations runs from the time the money was paid by the drawee, and not from the time the check was drawn, as otherwise it would follow that if an action had been brought by the drawer for money lent, he would be able to recover the amount, although the check might be subsequently dishonored.* • Aubert v. Walsh, 4 Taunt., 293. =" Morse on Banking, 291 ; see Regina v. Watts, 2 Den. C. C, 14. ' Matter of Brown, 2 Story, 512. * Burton v. Payne, 2 Car. & P., 520 ; Grant on Banking, 72, 75 ; Morse, 291, * Grant on Banking, 73 ; INIorse on Banking, 293. • Garden v. Bruce, L. R., 3 C. P., 300. § 1652. NEGOTIABILITY AND TRANSFER OF CHECKS. 663 SECTION XIII. NEGOTIABILITY AND TRANSFER OF CHECKS. § 165 1. Negotiability of checks. — A check, like a bill or note, in order to be negotiable, must be payable absolutely and at all events to a certain person or order, or to bearer, in money. If expressed to be payable "in bank bills," or "in currency,"^ or if it lack words of negotiability,^ or be deficient in any of the characteristics which impart negotia bility to bills and notes, it will not be a negotiable instru ment. Checks are sometimes, although by no means usually, intended for temporary circulation ; but their principal object and purpose is to enable the holder to de- mand and receive immediately the amount called for. Ne- gotiability in its full sense is, therefore, not of their essence, but an optional quality.'^ § 1652. Whenever a check is negotiable, it is undoubtedly subject to the same principles which govern ordinary bills of exchange in respect to the rights of the holder. I n t\\t first place, it is evidence of a valuable consideration as between the immediate parties thereto, and between the plaintiff and the drawer when payable to bearer.^ In the second place, •.Bank of Mobile v. Brunn, 42 Ala., 108 ; Little v. Phoenix Bank, 2 Hill (N. Y.).425. ' Partridge v. Bank of England, 9 O. B., 396. In Virginia checks are regu- lated by the statutory provisions which apply alike to bills and notes, even as respecting protest, and negotiable, if payable (i) at a particular bank, or C2) at a particular place thereof, for discount or deposit, or (3) at the place of business of a savings institution or savings bank, or (4) at the place of business of a licensed broker. Code, chap. 144, § 7, Acts 1866, p. 149. * Mohawk Bank v. Broderick, 10 Wend., 304. * In Morse on Banking, p. 312, it is said : " Possession is prima facie proof of title ; but the plaintiff in a suit upon the check (payable to bearer) must show that he received it for value, and in the due course of business." The cases cited by the author do not sustain this proposition. On the contrary, they ac- cord with the text, which states correctly the doctrine which prevails in respect to checks whether payable to bearer or to order, and in respect to all other nego- tiable instruments. In Conroy v. Warren, 3 Johns' Cas., 259, the check was payable to " No. 912 or bearer." It was declared on as given by defendant to plaintiff. Thompson, J., said, in answer to the objection that where a check ig 664 CHECKS. § 1653. it may be transferred by indorsement, or by delivery with- out indorsement when payable to bearer.^ In the third place, when sued upon, the possession is priina facie evi- dence of title, and the plaintiff is presumed to be a bona fide holder for value without notice of any defence existing be- tween prior parties, and such defences can not be pleaded against him.^ In the fourth place, even when it is proved that the real owner parted with it, or that the drawer drew it without consideration, the burden of proving bona fide ownership for value without notice will not devolve upon the holder ;^ but when shown to have been drawn for an illes'al consideration, or to have been obtained from the drawer by fraud or theft, the burden of proof is thrown upon the holder, and he must show a bona fide title in or- der to recover.^ § 1653. Indorsement of checks payable to bearer — Eng- lish ciistom. — Even a check payable to bearer may be trans- ferred by indorsement, though such checks are more gen- payable to bearer it is incumbent on the holder to prove a valuable considera- tion : " I take it to be well settled that with respect to bills of exchange and promissory notes, they in this respect stand on the same footing with specialties, and /r/w«/^«V hnport a consideration The reason of the rule is equally applicable whether the bill or note be made payable to bearer or order, and I can see no good reason why it should not apply to bank checks." Hoyt v. Seeley, 18 Conn., 357, Waite, J. : " Here the plaintiff has declared upon this check as payable to bearer, and has averred that he is the lawful bearer thereof, and entitled to the payment of the money therein specified. This is enough to show a right of action in the plaintiff. The circumstances under which he be- came bearer are immaterial." Mauran v. Lamb, 7 Cow., 176. ' Conroy v. Warren, 3 Johns' Cas., 259 ; Merchants' Bank v. Spicer, 6 Wend., 445 ; Woods v. Schroeder, 4 Har. & J., 276 ; Hoyt v. Seeley, 18 Conn., 353 ; Keene v. Beard, 8 C. B. N. S., 380 (98 E. C. L. R.) ^ Cruger v. Armstrong, 3 Johns' Cas., 7. The check was payable to W. & J. C. or bearer. Radcliff, J., said : " The holder mnsi pr/ma facie be deemed the rightful owner, and it has accordingly been held that he need not prove a con- sideration, except where circumstances of suspicion appear." Murray v. Judah, 6 Cow., 484; Mauran v. Lamb, 7 Cow., 176; Harbeck v. Craft, 4 Duer, 131 ; Merchants' Nat. Bank v. New Brunswick Sav. Inst., 33 N. J. Law (4 Vrooin), 172 ; Kuhns v. Gettysburg Nat. Bank, 68 Penn. St., 445 ; Cecil Bank v. Heald, 25 Md., 563 ; Stewart v. Smith, 17 Ohio St., 82. = See chapter xxiv, section vil, §§ 810 et seq., vol. i. * Fuller V. Hatchings, 10 Cal, 523 ; Merchants' Nat. Bank v. New Brunswick Sav. Inst., 33 N. J. Law (4 Vroom), 172 ; Kuhns v. Gettysburg Nat. Bank, 68 Penn. St., 445, § 1 654- FORGERIES OF CHECKS. 665 erally passed by delivery merely. It is not, however, a necessary inference from the fact that a person has written his name on the back of a check payable to bearer that he intended to indorse it, as his name may have been written thereon for very different purposes. Thus it is customary in England for the holder of a check payable to bearer, upon receiving payment, to write his name on the back, and the usage of business gives to this simply the significa- tion of his receipt for the money.^ Such an indorsement creates no liability. And whenever a check payable to bearer has a party's name so written thereon, it has been held in England necessary to prove the animo indorsandi in order to bind him.'^ When this is done he is undoubt- edly bound as an indorser, and it was answered by Byles, J., in England, to counsel that argument to the contrary " would have been deserving of more attention if it had been addressed to the court a hundred years ago." ^ A bank is not subject to charge for interest on sums de- posited subject to check until payment is demanded, unless by special contract.* SECTION XIV. FORGERIES OF CHECKS. § 1654. In another portion of this volume we have treated of forgeries of bills and notes, and also of alterations, but it is desirable to keep distinct the various classes of commercial paper affected by such frauds, and checks are governed to some extent by principles peculiar to them alone. ' Morse on Banking, 312. "" Ancona v. Marks, 7 Hurlst. & N., 686 (1862). » Keene v. Beard, 8 C. B. N. S.. 372 (98 E. C. L. R.) * Parkersburg Nat. Bank v, Als, 5 West Va. (Hagans), 50. 666 CHECKS. § 1654^. § i654<2. Bank chargeable with knowledge of check- drawers signature. — We have seen that the drawee of a bill is bound to know the drawer's signature. In like man- ner, a bank is bound to know the signature of- a depositor who draws a check upon it ; and it has been said that the bank " is even more bound " to know such depositor's handwriting than a drawee is bound to know a drawer's.^ And this view is founded on reason, for, as a general rule, a deposit is made for the very purpose of being checked out, while a drawer has no right to require a drawee to accept or pay his drafts. But a bank is not bound to know more than the signa- ture of the drawer of the check ; for in the ordinary course of business the body of the check is as often as otherwise filled up by a clerk, and it is by no means a matter of suspicion that it is not filled up in the handwriting of the drawer.^ If the rule were otherwise, a bank could never safely pay a check filled up in a handwriting not the drawer's, until it had inquired of the drawer whether it was properly filled up. And to require this would greatly em- barrass commercial transactions.^ § 1655. As a bank must know its customer's signature, it has been held, and as a general rule the doctrine prevails, that if it pays out money on a forged check it can not re- cover back the amount from the party to whom it was paid;^ and unless the drawer whose name be forged is, by negligence or acquiescence, rightfully responsible, the » Smith V. Mercer, 6 Taunt., 76 ; see People's Sav. Bank v. Capps, 91 Penn. St., 315. s National Bank of Commerce v. National Mechanics' Banking Ass'n, 55 N. Y, 213; Bank of Commerce v. Union Bank, 3 Coms., 230; Redingion v. Wood, 45 Cal., 406 ; National Park Bank v. Ninth National Bank, 55 Barb., 124 ; 46 N. Y., ^^ ; Bigelow on Estoppel, 435, 436. ' Redington v. Wood, 45 Cal, 406. 'Levy V. Bank U. S., 4 Dall., 234; Bank U. S. v. Bank of Ga., 10 Wheat., 333; see chapter XLII, on Forger>-, § 1359; First National Bank v. Kicker, 71 111., 439. § l655^- FORGERIES OF CHECKS. ^^"J bank can not charge the amount paid in account against him.^ § 1655^. Right of bank to recover money paid o?i forged checks. — Ordinarily money paid under a mistake of fact may be recovered back, however negligent the party pay- ing.^ But that rule has not been generally deemed applica- ble in such cases as this, for, as is said, "the fact in this case is one in which the drawee has no right to mistake. The law refuses to hear him say he has mistaken it. The money is paid through the failure to fulfil his acknowl- edged duty, inasmuch as he has failed to detect this very non-existence of the merely supposed fact of signature by a certain person." ^ No doubt there are cases which bear out this view. But where the bank discovers the forgery immediately, and demands restitution, offering to return the check, before the holder has lost anything by regarding the matter as all right, we can not help thinking that it should be entitled to recover back the amount. Air. Chitty seems to have had the same opinion.* And Professor Parsons has expressed it in favorable terms.^ And the 'Hardy v. Chesapeake Bank, 51 Md., 562, Alvey, J.: " If the bank pays money on a forged check, no matter under what circumstances of caution, or however honest the belief in its genuineness, if the depositor himseU' be free of blame, and has done nothing to mislead the bank, all the loss must be borne by the bank, for it acts at its peril and pays out its own funds, and not those of the depositor. It is in view of this relation of the parties, and of their rights and obligations, that the principle is universally maintained, that banks and bankers are bound to know the signatures of their customers, and that they pay checks purporting to be drawn by them at their peril." * See vol. 2, § 1369. "Morse on Banking, 296. * Chitty on Bills (13 Am. ed.) [*43i], 485 ; see ante, chapter XLll, on Forgery, §§ 1 361 el seq. ; also Irving Bank v. Wetherald, 36 N. Y., 335. ^ 2 Parsons N. & B., 80, where it is said : " It is obvious that it (the bank) can reclaim the money from the payee, if the payee were in fault. But a more diffi- cult question arises where a bank pays a forged check to an innocent holder. The cases on this subject are few and indecisive ; but we think the law must be this : The bank can recover it from the payee, if the payee were in fault, or if an innocent payee will then be in no worse condition than if the bank had refused to pay it. Still, the bank, rather than the holder, is bound to know whether the signature be genuine ; and if by any change of accounts, by any consideration paid which might have been recovered had payment been refused, but can not be recovered now, or by any loss of opportunities to get security or indemnity from the transferrer which the holder would have had but for the payment to him, the payee can not be replaced in as good a position alter he returns the 668 . CHECKS. § 1656. better doctrine, as we think, is, that the bank should have the rio-ht to recover, unless the circumstances of the holder had been changed so as to render it unjust.^ Forgeries often deceive the eye of the most cautious and practiced expert ; and when a bank has been so deceived, it is a harsh rule which compels it to suffer, although no one has suffered by its being deceived. It is also a rule which tends to render those who trade for checks incautious, if by any means they can procure their payment by the bank. Parties often pronounce forgeries of their own signatures genuine.^ Why blame a third party so severely? And why make an exception to a rule so just in its universal application ? § 1656. The doctrine that a bank is bound to know its customer's signature has been very strictly applied by the Supreme Court of the United States. Where the plaintiff deposited in the bank a check purporting to be drawn by one of its customers, and it was at once passed to the plaintiff's credit on his cash book, but on the same day it was discovered by. the bank to be a forgery and instantly returned to him, the court held that the plaintiff was enti- tled to refuse to take it back, and hold the bank liable for the amount in account with him. And it was said : " It is our opinion that when the check was credited to the plaintiff as cash, it was the same thing as if it had been paid ; it is for the interest of the bank that it shall be so taken." ^ The case in which this view is taken has been quoted with ap- proval,^ but it does not commend itself, as we humbly think, to favor. money to the bank, then we say he is not bound to return it. Perliaps injury to the payee, by the demand of repayment, would be so far presumed, as matter of law, as to cast upon the bank the burden of proof." 'See chapter XLll, on Forgery, § 1361, and p. 358, note 3; see also Am, Re- view, April, 1S75, p. 433. ^ Morse on Banking, 310. ^ Levy V. Bank of U. S., 4 Dal., 234 ; I Bin., 27. It is not stated in the report that it was a customer's check, but this inferentially appears. ♦ Bank U. S. v. Bank of Georgia, 10 Wheat., 333. s V ^ 1657. FORGERIES OF CHECKS. 669 § 1657. Exceptions to rule holding bank responsible when it pays forged checks.— Y.vq^ where the general doctrine, that the bank has no remedy where it has certified or paid a forged check against the holder, is recognized as a fixed principle of law, there are some exceptions which are in- sisted upon as reasonable and just. As the responsibility of the bank is based upon the presumption that it has greater means, and better opportunities to become familiar with the handwriting of depositors than are afforded the holder, it is declared to be decisive alone when the party holding the check has in no way contributed to the success of the fraud. And if the loss can be traced to the fault or negligence of any party it will be fixed upon him.^ In the absence of actual fault or negligence on the part of the drawee bank, its constructive fault in not knowing the sig- nature of the drawer, and detecting the forgery, will not preclude its recovering back the amount, or recalling its certificate, as against one who has received the money, or taken the check with knowledge of the forgery ; or who took the check under circumstances of suspicion without proper precaution, or whose conduct has been such as to mislead the bank, or to induce payment or certification of the check, without the usual scrutiny or precautions against mistake or fraud.^ Accordingly, it has been held, that where a bank paid a check on which its depositor's name was forged, and which was presented by another bank, to which it was paid in ac- cordance with a custom to rely upon the bank holding the check to assure its genuineness, the amount might be recov- ered back.3 ^^^ SQ where the payees took from a stranger a check payable to their order, and put it in circulation with their indorsement thereon, thus giving it currency and credit, ' Gloucester Bank v. Salem Bank, 17 Mass., 33, 42. " National Bank of N. A. v. Bangs, 106 Mass., 445 ; Ellis v. Ohio Ins.. etc., Co., 4 Ohio St., 628 ; First National Bank v. Kicker, 71 111., 439. ' Ellis V. Ohio Life Ins., etc., Co., 4 Ohio St., 628 ; see chapter XLII. on For- gery, § 1 361. 670 CHECKS. § 1657 it was likewise held that the amount might be recovered back.^ So where the holder of a check havinsf reason to question its genuineness, presented it to the drawee bank and demanded payment without disclosing his suspicions, and the bank teller, doubting its genuineness, refused to pay it unless the holder indorsed it, — it was held that on discovering that it was a forgery of the drawer's name, the bank might recover back the amount paid from the party who presented it for payment.^ The payee or indorsee of a check whose indorsement is forged upon it, and upon which forged indorsement the bank has paid the check, may recover the amount of the check from the bank, which is regarded in judgment of law as holding it for the lawful owners ; and it can not exonerate itself from its obligation by showing that it paid the amount to others, who. had not been authorized to receive it.^ ' National Bank of N. A. v. Bangs, 106 Mass., 444, Wells, J., saying : " In the present case the check had not gone into circulation, and could not get into cir- culation until it was indorsed by the defendants. Their indorsement would cer- tify to the public, that is, to every one who should take it, the genuineness of the drawer's signature. Without it the check could not properly be paid by the plaintiffs. Their indorsement tended to divert the plaintiffs from inquir}^ and scrutiny, as it gave to the check the appearance of a genuine transaction, to the inception of which the defendants were parties. Their names upon the check were apparently inconsistent with any suspicion of a forgery of the drawer's name. But to the defendants, the presentation, by a stranger or third party, of a check purporting to be drawn to their own order, which such third party proposed to negotiate for them for value, was a transaction which should have aroused their suspicions. It ought to have put them on inquiry for explana- tions ; and if inquiry had been properly made it would have disclosed the fraud and prevented its success. The case finds that they acted in good faith. But that does not exclude such omission of due precautions, as to deprive them of the right to throw the loss upon another party who acted in like good faith, and also without fault or want of due care. It is possible that the defendants m.iy have received the check under circumstances which would exonerate them from the imputation of any actual fault or neglect. But the agreed statement fails to disclose any such explanation. A majority of the court are therefore of opinion that judgment must be for the plaintiffs, for the amount of the check and inter- est from the time it was paid," See Carpenter v. Northborough National Bank, 123 Mass., 69. ^ First National Bank v. Ricker, 71 111., 439. ^Johnson v. First National Bank, 13 N. Y. S. C. (6 Hun), 126. See also Talbot v. Bank of Rochester, i Hill, 295. ^ 1658. ALTERATIONS OF CHECKS AFTER ISSUE. 67 1 SECTION XV. ALTERATIONS OF CHECKS AFTER ISSUE. § 1658. The general principles as to alteration which ap- ply to bills and notes, and which have been hereinbefore discussed, apply as well to checks. It was not long since seriously argued in the English Court of Appeal, Exchequer Division, that the alteration of the date of a check from the " 2d " to the " 26th "of March was not material, and that it was valid in the hands of a bona fide holder without notice, and who had been guilty of no negligence in taking it, and the inferior court had so held. The Court of Appeal over- ruled this decision and held the check vitiated.^ It not in- frequently happens that a check genuine in its inception is altered after it leaves the hands of the drawer to a much larger amount ; and that the bank, relying on the genuine- ness of the signature, pays such increased amount to the holder, and charges up the check in account with the drawer. The questions then arise: First, When and under what cir- cumstances may the bank credit the drawer with the entire amount ? and second, when may it recover back the amount in excess of the original and genuine amount from the party to whom it was paid ? As to t\-\Q first question, as a general rule the bank can only charge the original amount against the drawer, for that limits the extent of his authority to it to pay out his de- posit ;2 and if his check has been altered by any party, such alteration is a forgery of his name, for which he is by no 'Vance v. Lowther, i Exchequer Division, 176 (1876); 16 Moak's Enelish Rep.. 583. ^ ^ Robarts v. Tucker, 16 Q. B., 560; Smith v. Mercer, 6 Taunt., 76; Hall v. i-uller, 5 B. & C, 750, Bayley, J., said : " If. unfortunately, he (the banker) pays money belonging to the customer upon an order which is not genuine, he must sutler ; and to justify the payment he must show that the order is genuine, not in signature only, but in every respect." Byles (Sharswood's ed.) \*\2x\, 400: Chitty (13 Am. ed.) ^430], 485. ; L J jj. 4yv, 672 CHECKS. § 1659. means responsible, provided he afforded no opportunity for its commission.^ § 1659. When checks carelessly drawn afford opportu n ity for alteration. — But when the drawer has drawn his check in such a careless or incomplete manner that a material altera- tion may be readily accomplished without leaving a percepti- ble mark, or giving the instrument a suspicious appearance, he himself prepares the way for fraud, and then, if it is com- mitted, he and not the bank should suffer. Thus, a depositor on leaving home gave his wife several checks signed in blank ; and she filled up one for fifty-two pounds, two shillings, but began the word " fifty " with a small " f," and wrote it in the middle of a blank line ; and also in writing the mar- ginal figures, left a considerable space between the " £ " mark and the figures " 52." The check in this form was handed to her husband's clerk to get the money, and he, after inserting " three hundred " before the word " fifty," and "3" before the figures "52," presented it and drew three hundred and fifty-two pounds. It was held that the whole amount was chargeable against the drawer, as the careless drawing of the check had made the forgery easy and simple.^ It has been thought that if the body of the check had been in the drawer's handwriting, and the addi- tions had been made in a stranger's, the bank would have been put upon inquiry.^ But the two different hands appearing in the case cited, the wife's and the clerk's, were not con- sidered to have that effect ; and it has been held in the United States that the difference in handwriting does not alter the question.^ 'Anie, § 1344. ^ Young V. Grote, 4 Bing., 253. The case of Bank of Commerce v. Union Bank, 3 Corns., 230, might seem to conflict with this, but the alteration there was in words, and was not attributable to the drawer's negligence. The criti- cism upon this latter case made in Redfield & Bigelow's Lead. Cas., 62, was af- terward corrected in Bigelow on Estoppel, 435, note 2. ° Grant on Banking, 17, 18 ; Morse on Banking, 303. * Bank of Commerce v. Union Bank, 3 Coras., 230; anie, § 1654. § I 66 I. ALTERATIONS OF CHECKS AFTER ISSUE. 673 § 1660. Sometimes the check is altered in other respects than in the amount after it has been issued by the drawer ; as, for instance, in the name of the payee. In such cases the bank is not entitled to charge the check against the drawer, unless he drew the check so caielessly as to afford an opportunity for the fraud. Thus, in Massachusetts, two checks were filled up by the plaintiffs, payable to the order of two payees, and after being examined by the book- keeper, they were sent to the post-office by a clerk in sealed envelopes, addressed to the payees respectively. The clerk opened the envelopes, withdrew the checks, cancelled the words "or order" in lead pencil, and inserted the words "or bearer" in ink, and then obtained the money for them from the bank. The court held that the depositors were clearly entitled to recover their deposit from the bank which had paid it out on the altered checks.^ Thus, it seems that unless the drawer has made open the way for an alteration, the bank takes an altered check, whether the al- teration be openly done, as in this case, or skilfully con- cealed, as in others, at its peril. The words "or order" are frequently replaced by the words "or bearer," and the reverse. And the lesson of caution and prudence on the part of the bank can not be too well learned or too closely followed. Its only safeguard is to scrutinize checks severe- ly, and never to pay one at all mutilated in its appearance until after inquiry. § 1 66 1. As to recovery of excess paid by the bank upon ail altered check. — Where money is paid by the bank upon a "raised " or altered check by mistake, the general rule is that it may be recovered back from the party to whom it was paid, as having been paid without considera- tion ; but if either party has been guilty of negligence or carelessness, by which the other has been injured, the neg- ligent party must bear the loss. This doctrine is clear, and ' Belknap v. Nat. Bank of N. A., 100 Mass., 379. Vol. 11.-4; 674 CHECKS. § 1662. is sustained by authority. The bank is not bound to know anything more than the drawer's signature, and in the ab- sence of any circumstance which inflicts injury upon an- other party, there is no reason why the bank should not be reimbursed.^ Its certification of the check does not pre- clude it from showing an alteration ; ^ nor does its teller's declaration, after he has examined it, that it is right in every particular.^ § 1662. In the transfer of bills, notes, and checks by the holder to another party, the very act of transfer makes the transferrer an implied warrantor of the genuineness of the instrument ; and the transferee may recover on the instru- ment against the transferrer, as an indorser, if he indorses it ; or may recover back the consideration, if he transferred it without indorsement.^ But when the bank takes a forged check, its right of recovery does not seem to depend on any indorsement by the holder. It is its duty to know the drawer's signature. And if he takes a forged check from the holder (and he is not himself involved in the fraud), its right to recover back the amount is regarded as turning solely on the question whether or not the holder would be placed in a worse position than if -payment had been re- fused. Such at least is the result of the authorities which recognize the right of the bank to recover.^ § 1663. Bank not bonnd to know indorser s signature.^ A bank is not bound to know the signature of an indorser. And besides, the holder of the check, whether he indorses it or not, warrants the genuineness of all prior indorse- ' Espy V. Bank of Cincinnati, 18 Wall., 614; Reddington v. Wood, 45 Gal., 406; Nat. Park Bank v. Ninth Nat. Bank, 46 N. Y., ^^ ; 55 Barb., 124; Bank of Commerce v. Union Bank, 3 Corns., 230 ; Marine Nat. Bank v. Nat. City Bank, 55 N. Y., 211 ; 59 N. Y., 67 ; Third Nat. Bank v. Allen, 59 Mo. ; Parker V. Roser, 67 Ind., 500. " Marine Nat. Bank v. Nat. City Bank, 59 N. Y., 67. See a7tte, § 1606, Secu- rity Nat. Bank v. Nat. Bank, 67 N. Y., 461. ' Security National Bank v. National Bank, 67 N. Y., 461. * See §§ 672, 673, 731, 732, vol. I. ' Ante, § 1655. § 1663. ALTERATIONS OF CHECKS AFTER ISSUE. 675 ments. Therefore, if the bank pay a check upon which the name of a prior indorser is forged, it may recover back the amount from the party to whom rt was paid, or from any party who indorsed it subsequent to the forgery.^ When the bank is in doubt as to the genuineness of an indorser's signature, it is entitled to demand a reasonable time for inquiry before making payment.^ There is no doubt that if the bank pays a check upon the forged indorsement of the payee's or special indorsee's name, the payee or such indorsee may recover back the amount, if the check had been delivered to him ; and the drawer may recover it back if he had not issued it.^ ' Morse on Banking, 308, 310. See also Canal Bank v. Bank of Albany, i Hill, 287 (a bill). See ante, § 538, vol. i. ^ Robarts v. Tucker, 4 Eng. L. & Eq., 236, Maule, J. : "I conceive that if a bill were presented to a banker by a stranger, with an indorsement on it of a person necessary to make out the title, but unknown to the banker, the banker would be justified in refusing to pay at once." Parke, B. : " Probably, in such a case, the obligation would be to pay in a reasonable time." ' Morgan v. Bank, i Duer, 434 ; i Kern, 404 ; Dodge v. Nat. Exchange Bank, 20 Ohio N. S., 246 ; Seventh Nat. Bank v. Cook, 73 Penn. St., 483. CHAPTER L. BANK NOTES. SECTION I. DEFINITION, NATURE, AND FORMAL ELEMENTS OF BANK NOTES. § 1664. Bank notes or bank bills (as they are equally as often called) are the promissory notes of incorporated banks, designed to circulate like money, and payable to bearer on demand.^ The terms " bank notes " and " bank bills " are of the like signification, and for the purposes of interpretation, both in criminal and civil jurisprudence, are equivalent and inter- changeable.^ In form and substance they are promissory notes, and they are governed by very many of the principles which apply to the negotiable notes of individuals given in the course of trade. But they are designed to constitute a cir- culating medium, and this circumstance imparts to them peculiar characteristics, and essentially varies the rules which govern promissory notes in general. A bank bill may be described, in an indictment for utter- ing forged and counterfeit paper, as a promissory note.^ § 1665. Bank bills are usually made payable to bearer, though sometimes expressed to be payable to a certain per- son or bearer. But in effect the two forms are identical, and though the person named be incompetent to sue in one of ' See 2 Parsons N. & B., 88. " Eastman v. Commonwealth, 4 Gray, 416. ° Commonwealth v. Simonds, 14 Gray, 59 ; Commonwealth v. Thomas, 10 Gray, 483. (676) § 1669. DEFINITION, NATURE, AND iOKMAL ELEMENTS. 6"] J the Federal courts of the United States, yet, if the bearer be competent he may sue ; for a note payable to bearer is payable to anybody, and unaffected by the disabilities of the nominal payee. ^ § 1666. Banknotes are invariably payable on demand. — It is essential to enable them to circulate as currency, that they be redeemable in money at any time, and therefore they are made payable whenever demanded. Banks have often issued their notes payable at a future day, but such instru- ments are called " post-notes," and are not bank notes in the accepted use of the term. § 1667. Style of execution. — It would matter not upon what kind of paper the bank note was executed, or whether it were printed or written. But, being designed to circulate as money, they are generally printed on paper of fine fabric, and elaborated with vignettes and fanciful lettering, which, besides being ornamental, subserves the principal purpose of rendering counterfeits difficult. And private marks are often inserted in the texture of the paper, which enhance the facility of identification and the difficulties of forgery. § 1668. Issuing notes a cojnmon law right. — The privilege of issuing bank notes was, prior to the national banking act, regulated by statutes of the several States, and generally was confined to incorporated institutions, or per- sons acting under a general banking law ; and none but such companies or persons could issue notes designed for the purposes of a circulating medium. But this restriction was purely statutory ; for, in the absence of a statute, the right of banking pertains to every private citizen, and any one may issue his obligations in whatsoever form he pleases.^ § 1669. How signed. — The execution of bank notes should conform to the provisions of the statute authorizing ' Bank of Kentucky v. W^ister, 2 Pet., 318. '^ Morse on Banking, i. 6^^ BANK NOTES. § 167O. their. issue. They are usually required to be signed by the president and cashier of the bank, and when this is requisite, no note will be valid unless so signed. Where bank notes prepared for the official signatures were stolen from the bank's possession, and the signatures forged, it was contended that the negligence of the bank should render it liable for their payment. But it was held otherwise, because the crime had been committed after the notes had left the bank. Had they been complete when they were stolen, it would have been different.^ If signed, but incomplete, at the time of the theft, it is conceived that they would not be binding on the bank.^ The date of bank notes is not evidence of the time they were issued, because they are often held by the bank for a long time after being prepared for circulation, and are con- stantly paid into the bank and reissued ; and the date in- dicates rather the series to which the notes belong than the actual day of issue.^ § 1670. Bankers' cash notes are the promissory notes of bankers, and they were formerly called goldsmiths' notes, because the goldsmiths acted as bankers and gave these notes for money deposited with them. They are drawn like bank notes, payable to bearer on demand ; and they generally pass as cash, and are legal tender, unless objected to. The use of checks upon deposits has to a great extent superseded them in England. They are so far like ordinary promissory notes that they may be indorsed, and then operate like bills drawn upon the bank. They are not money, like Bank of England notes ; and if the bank has stopped payment when they are transferred, the loss is thrown upon the transferrer, unless the transferee, by laches, - Gloucester Bank v. Salem Bank, 17 Mass., i ; Id., 33. ^ See §§ 839, 840, 841, 842, vol. I, and notes. ' F. & M. Bank v. White, 2 Sneed, 482 ; Greer v. Perkins, 5 Humph., 588 ; Wrig-ht V. Douglas, 3 Barb., 554; Selfridge v. Northampton Bank, 8 Watts & S., 320 ; Long v. Bank, 81 N. C, 46. § 1672. HOW FAR BANK NOTES ARE SIMILAR TO MONEY. 679 fails to present them, or to notify the transferrer that they are bad.^ § 1 67 1. T\\t post notes of a bank are promissory notes, payable on time, and yet designed to circulate as money. A bank authorized to issue paper for circulation may issue them ; ^ and being issued for the purpose of circulating like money, they are subject to the rules which govern ordinary bank notes payable on demand, rather than to those which govern negotiable promissory notes ;^ and the rules of de- mand and notice do not apply to them."* But it seems that they are entitled to grace like other promissory notes.* SECTION II. now FAR BANK NOTES ARE SIMILAR TO MONEY. § 1672. In an early case, it was said by Lord Mansfield, that bank notes " are not goods, nor securities, nor docu- ments for debts, nor are so esteemed, but are treated as money — as cash in the ordinary course and transaction of business — by the general consent of mankind, which gives them the credit and currency of money to all intents and purposes. They are as much money as guineas themselves are, or any other current coin that is used in common pay- ment as money oi" cash, .... and are never considered as securities for money, but as money itself. On payment of them, whenever a receipt is required, the receipts are always given as for money, not as for securities or notes." * ' See on this subject Chitty on Bills [*522], 591. ^ Campbell v. Mississippi Union Bank, 6 How. (Miss.), 625. ' Fulton Bank v. Phoenix Bank, i Hall, 562. * Key V, Knott, 9 Gill & J., 342. ' Sturdy v. Henderson, 4 B. & Aid., 592 ; Chitty, Jr., 11 10 ; Staples v. Franklin Bank, i Met., 43 ; Perkins v. Franklin Bank, 21 Pick., 483 ; Edwards on Bills, 522. ' Miller v. Race, l Burr., 452 ; Tancil v. Seaton, 28 Grat., 605. 68o BANK NOTES. § 1672a; These remarks, however, could only apply in their full sig- nificance to Bank of England notes, which, by statute, take the place of coin ; for other bank notes, while in the ordi- nary transactions of business, take the place of, and are treated as, cash or money,^ are nevertheless essentially dis- tinguishable from it. But they are so far money, in the usual acceptance of the word in common parlance, that they will pass by will be- queathing testator's money or cash ;^ and it has been said that a sheriff may receive them when current in discharge of an execution.^ But this does not seem correct ; and the officer who takes this responsibility acts at his own risk.'* In short, bank notes are not, legally speaking, money, but in a popular sense are often spoken of as money, and are conventionally used in its stead with the like effect. § 16^ 2a. Bank notes not legal tender if objected to. — Thus, it is a settled principle that current bank notes are a lawful tender in payment of debts, unless objected to be- cause they are not money. But if, when tendered in dis- charge of any contract for the payment of money, the cred- itor objects to receiving them, because they are not money, the tender is unavailable, and he may insist on payment in the current coin,^ And w^hen judgment has been obtained for the payment of money, bank notes are not ordinarily so far cash or legal tender that they may be brought into court and tendered in satisfaction.^ ' Morrill v. Brown, 15 Pick., 173 ; Pierson v. Wallace, 2 Eng. (Ark.), 282 ; \ d- munds v. Digges, i Grat., 359 ; Bullard v. Bell, i Mason, 243 ; Bayard v. Shu.ik, I Watts & S., 92 ; U. S. Bank v. Bank of Georgia, 10 Wheat., 333 ; Bradley v. Hunt, 5 Gill & J., 58. ^ Stuart V. Bute, 11 Ves., 662 ; Miller v. Race, i Burr., 457. ^ Scott V. Commonwealth, 5 J. J. Marsh, 643 ; Governor v. Carter, 3 Hawks, 3 «S. * Armsworth v. Scotten, 29 Ind., 495. ^Jefferson Co. Bank v. Chapman, 19 Johns, 322; Thomas v. Todd, 6 Hdl, 340; Morse on Banking, 397; Wright v. Reed, 3 T. R., 554; Owenscn v. Morse, 7 T. R., 64; Codman v. Lubbock, 5 Dowl. & R., 289; Chitty on Bills [*523], 524. * Armsworth v. Scotten, 29 Ind., 495 ; Hallowell, etc.. Bank v. Howard, 13 Mass., 235; Coxe v. State Bank, 3 Halst., 172. 6 I 6 74- IIO^^' FAR BANK NOTES ARE SIMILAR TO MONEY. 68 1 § 1673. Instruments payable in bank notes not negotiable. — The difference between bank notes and money is again observable in the cases which maintain that a bill or note payable in bank notes is not negotiable, for its medium of payment has no fixed value.^ In England, it has been held that a promissory note is not negotiable, even though it be payable in Bank of England notes ; but in the United States a note payable in legal tender notes would doubtless be considered negotiable.^ § 1673^. May be taken in execution. — By statute in Eng- land, and in most of the United States, bank notes may be taken in execution. At common law they could not be ; but by custom in this country, it would seem that the common law has been changed, and that they may be taken in execution, or on attachment or garnishee process.^ § 1674. Bank notes are negotiable like money , ^iwA pass from hand to hand by delivery, possession in itself being sufficient evidence of title. This doctrine was established in the leading case of Miller v. Race,** where a bank note, payable to bearer, was stolen from the mail, and on the next day was acquired by the plaintiff for full value, in the usual course of business, and without any notice of the cir- cumstance. The bank clerk detained the note when pre- sented for payment ; and it was held that the plaintiff could recover it, because such notes were universally treated as cash, and it was necessary for the purposes of commerce that their currency should be established and secured. These views are now universally entertained. It may be observed also, that while the finder of a bank note ac- quires no title as against the owner, he has such a posses- sory interest in it, as to enable him to recover it from a de- ' See chapter I, §§ 55 et seq., vol. i. 'See ante, § 57, vol. i. 'Spencer v. Blaisdell, 4 N. H., 198 ; Morrill v. Brouii, 15 Pick., 173 ; Wildes V. Nahant Bank, 20 Pick., 352 ; Lovejoy v. Lee, 35 Vt., 430. *■ I Burr., 452. 6S2 BANK NOTES. § 1 675. positary, to whom he has confided its care, in the absence of any claim by the rightful owner ; but he must show its genuineness, and the value claimed.^ SECTION III. LIABILITY OF TRANSFERRER OF BANK NOTES. § 1675. Transfer warrants genuineitess, but not sol- vency. — Bank notes being payable to bearer are transferred by mere delivery ; and although it has been thought that the transferrer may indorse them, with like effect as the in- dorsement of other negotiate promissory notes,^ it would be exceedingly singular to do so, for bank notes are in their nature designed to circulate like money, not upon the credit of the transferrer, but upon their own credit as obli- gations redeemable in money at any time. Being used as money, it is quite clear and well settled that the person who transfers a bank note in payment of a debt, or other- wise for value in the course of business, warrants it, in like manner as his transfer imports a warranty of current coin, that is. that it is genuine, and not counterfeit. If it be counterfeit and spurious, it is not what his very act of trans- fer represents it to be. It is a mere nullity, instead of money or cash ; and the debt remains undischarged.^ But the party who receives counterfeit bank notes is not without a duty on his part. In order to recover the debt for which they were given in payment, or receive genuine 'Tancil v. Seaton, 28 Grat., 601 (1877). See also New York, etc., R.R. Co. V. Haws, 56 N. Y., 175 (1874) ; Bridges v. Hawkesworth, 7 E. C. L. & Eq. R., 424. ^ Corbet v. Bank of Smyrna, 2 Harr. (Del.), 235 ; Thomson on Bills (Wilson's ed.), 123. 'Pindall V. N. W. Bank, 7 Leigh, 617 ; Ramsdale v. Horton, 3 Penn. St., 330; Young V. Adams, 6 Mass., 182; Markle v. Hatfield, 2 Johns, 455 ; Mudd v. Reeves, 2 H. & J., 368 ; Edmunds v. Digges, i Grat., 359 ; Eagle Bank v. Smith, 5 Conn., 71 ; Jones v. Ryde, 5 Taunt., 488 ; see §§ 731 ei seq., vol. I. ) 16/6. LIABILITY OF TRANSFERRER OF BANK NOTES. 683 notes in their stead, he must exercise diligence, by giving notice that they are counterfeit, and offering to return them within a reasonable time.^ And what such reasonable time is must depend upon all the facts and circumstances of each particular case.^ If the forgery be discovered immediately, the transferrer should be notified immediately ; for he may have recourse against some antecedent transferrer, and lose his opportunity of asserting it by delay. A delay by the transferee for six months, after discovering that bank notes were counterfeit, to give notice, has been held unreason- able, and to forfeit his right of restitution ; ^ and so a delay from "Slay 25th to the 4th of July following;'' so a delay for four months, where the parties resided within one hundred miles from each other ;^ and even as short a delay as fifteen days, where a bank received its own notes upon which the name of its president was forged.*^ § 1676. As to the warranty of solvency of the bank, by the transferrer of its notes, a more difficult question is pre- sented. The parties may, of course, bind themselves by any express agreement which they may choose to make. If the transferrer represents or warrants that the notes are worth par, he is responsible if it turn out otherwise ; ''' and if the transferee stipulates that the risk shall be taken by himself, he can not recover of the transferrer, if they turn out to be worthless.^ But when bank notes are offered and received in payment of a prior debt, or in exchange for goods, or other notes, the courts differ as to the implied contract of the parties. ' See anfe, §1371. ' Simms v. Clark, 1 1 111., 137. ^Raymond v. Baar, 13 Sergt. & R., 318. ♦Thomas v. Todd, 6 Hill, 340. 'Pindall v. N. W. Bank, 7 Leigh, 617. " Gloucester Bank v. Salem Bank, 17 Mass., 44. ' Commonwealth v. Stone, 4 Mete, 43 ; Corbet v. Bank of Smyrna, 2 Harr. (Del.), 235 ; Oilman v. Peck, 11 Vt., 516 ; Aldrich v. Jackson, 5 R. L, 218 ; Hel- Jings V. Hamilton, 4 Watts & S., 462; Wainwright v. Weber, 11 Vt., 1576; Frontier Bank v. Morse, 22 Me., 88. * Story on Promissory Notes, § 389. 684 BANK NOTES. § 1676^. § 16 J 6a. View that ti^ansfei'rer warrants solvency of the bank. — Many- judges and jurists hold that the risk of the solvency of the bank lies upon the transferrer, upon the ground that the transfer imports that the notes ^re redeem- able on demand at the bank ; and that if thev are not re- deemed because of the bank's insolvency, the transferrer should redeem them himself. And also upon the ground that it is equitable for the loss to fall on the party who held the notes when the loss occurred.^ § 1677. View that transferrer does not warrant solvency of the bank. — On the other hand, high authorities consider that the transferrer warrants nothing but the genuineness of the bank notes, and that the risk of their value is upon the transferee.^ And this seems to us the correct view, whether they are transferred in payment of a prior debt,^ ' Lightbody v. Ontario Bank, 11 Wend., 9 ; 13 Id., loi ; Houghton v. Adams, 18 Barb., 545 ; Harley v. Thornton, 2 Hill (S. C), 509 ; Fogg v. Sawyer, 9 N. H., 365 ; Gilman v. Peck, 11 Vt., 516 ; Thomas v. Todd, 6 Hill, 340 ; Westfall V. Braley, 10 Ohio St., 188 ; Frontier Bank v. Morse, 22 Me., 88 ; Townsends v. Bank of Racine, 7 Wise, 185 ; 2 Parsons N. & B., 102-105, 191-195, 197 ; Wil- liams V. Smith, 2 Barn. & Aid., 496 ; as to English rule, see § 1679(2. - Bayard v. Shunk, i Watts & S., 92 ; Edmunds v. Digges, i Grat., 359 ; Lowery v. Murrell, 2 Port. (Ala.), 286 ; Corbet v. Bank of Smyrna, 2 Harr. (Del.), 235; Ware v. Street, 3 Head, 609; Scruggs v. Gass, 8 Yerg., 175; Morse on Banking, 421, 422 ; see ante, §§ 737 et seq., vol. i. ^ Bayard v. Shunk, i Watts & S., 92. In this case the plaintiff's attorney received bank notes in payment of a judginent, both parties being ignorant of the failure of the bank which occurred several days previous. The notes were worthless, but the payment was held good, Gibson, C. J., saying : " The asser- tion that it is always an original and subsisting part of the agreement that a bank note shall turn out to have been good when it was paid away, can be con- ceded no further than regards its genuineness. That genuine notes are sup- posed to be equal to coin is disproved by daily experience, which shows thj^t they circulate by the consent of the whole communities at their nominal value when notoriously below it. But why hold a payor responsible for a failure ui the bank only when it has been ascertained at the time of the payment, and not for insolvency ending in an ascertained failure afterward ? As the bank may have been actually insolvent before it chose to let the world know it, we must carry his responsibility back beyond the time when it ceased to redeem its notes, if we carry it back at all. Were it not for the conventional principle that the purchaser of a chattel takes it with its defects, the purchaser of a horse, with the seeds of mortal disease in him, might refuse to pay for him, though his vigor and usefulness were yet unimpaired ; and if we strip a payment in bank notes of the analogous cash principle, why not treat it as a nullity, by showing that the bank was actually, although not ostensibly, insolvent at the time of the transac- tion ? It is no answer to say the note of an unbroken bank may be instantly converted into coin by presenting it at the counter. To do that may require a § 1 6/ 7- LIABILITY OF TRANSFERRER OF BANK NOTES. 685 or contemporaneously in exchange for goods or other bank notes.^ When they are offered in payment, they are offered journey from Boston to New Orleans, or between places still further apart, and the bank may have stopped in the meantime ; or it may stop at the instant of presentation, when situated at the place where the holder resides. And it may do so even when it is not solvent at all, but perfectly able eventually to pay the last shilling. This distinction between previous and subsequent failure, evinced by stoi)ping before the time of the transaction or after it, is an arbitrary and im- practicable one. To such a payment we must api)iy the cash principle entire, or we must treat it as a transfer of negotiable paper, imposing on the transferee no more than the ordinary mercantile responsibility in regard to presentation and notice of dishonor. There is no middle ground. But to treat a bank note as an ordinary promissory note would introduce endless confusion, and a most dis- tressing state of litigation. We should have reclamations through hundreds of hands, and the inconvenience of having a chain of disputes between successive receivers would more than counterbalance the good to be done by hindering the crafty man from putting off his worthless note to an unsuspecting creditor. No contrivance can prevent the accomplishment of fraud, and rules devised for the suppression of petty mischiefs have usually introduced greater ones. The case of a counterfeit bank note is entirely different. The laws of trade extend to it only to prohibit the circulation of it. They leave it, in all besides, to what is the rule both of the common and the civil law, which requires a thing parted with for a price to have an actual, or at least a potential, existence (2 Kent, 468), and a forged note, destitute as it is of the quality of legitimate being, is a non- entity. It is no more a bank note than a dead horse is a living one ; and it is an elementary principle that what has no existence can not be the subject of a contract. But it can not be said that the genuine note of an insolvent bank has not an actual and legitimate existence, though it be little worth ; or that the re- ceiver of it has not got the thing he expected. It ceases not to be genuine by the bank's insolvency ; its legal obligation as a contract is undissolved ; and it remains a promise to pay, though the promisor's ability to perform it be impaired or destroyed. But as the stockholders of a broken bank are the last to be paid, it is seldom unable in the end to pay its note holders and depositors ; and even where nothing is left for them, its notes may be parted with at a moderate dis- count to those who are indebted to it. We seldom meet with so bad a case as the present, in which everything like effects, and even the vestiges of the bank, disappeared in a few hours after the first symptoms of its failure. But, inde- pendent of that, the difference between forgery and insolvency in relation to the transfer of a bank note, is as distinctly marked as the difference between title and quality in relation to the sale of a chattel." Lowrey v. Murrell, 2 Port. (Ala.), 280. ' In Edmunds v. Digges, I Grat., 359, it appeared that Digges, the sheriff of Fauquier Countv, Virginia, was starting to Richmond to deposit $400 in notes of the Virginia banks, when Edmunds applied to him to e;:change them for the same amount in notes of the Mechanics' Bank of Alexandria. Digges first ob- jected, but finally consented. On that very day the Mechanics' Bank stopped payment. It was held that Digges could not recover from Edmunds, but must bear the loss, and said Baldwin, J. : " The court is of opinion that there is no implied warranty of the value of the current money of the country, passing Irom hand to hand in the course of trade, commerce, and business. This is true, not only of the money made by law a good tender in the payment of debts, and per- formance of contracts, but is equally so in regard to the notes of banks and bankers, payable to bearer, and circulated by delivery. These are not merely the representative of money, but in the course of business and by common usage are substantially employed and treated by most persons as actual money or cash Those who circulate them are not understood as thereby giving 686 BANK NOTES. § 1 678. (and if received, receipted for) as money or cash. And the transferee takes them of his own free will, and with his eyes open. If he does not choose to take them, he may re- fuse to do so, or he may require that their payment shall be guaranteed. And if, under such circumstances, he re- ceives them unconditionally, we can perceive no more pro- priety in allowing him to return them, if the bank is totally or partially insolvent, than in allowing the purchaser of goods to return them, and demand back his money or cash, when it turns out that their market price was much less than the price he paid, or that they were in fact without any market value at all. § 1678. Exception to general rule. — ^There is properly excepted from these conclusions all cases in which the trans- ferrer knows of the insolvency of the bank at the time of the transfer, and the transferee does not. And this excep- tion does not arise from the contract of the parties, but is rather referable to considerations of fraud. To conceal from the transferee that the notes are wholly or partially worthless, when they are passed as money, would be in violation of good faith and fair dealing, and the transferee . would justly be entitled to recover against the transferrer.^ But in all other cases, the conclusion that the risk is upon the transferee seems to us clearly logical, and any other in- volves inextricable complications. The bank may be deemed insolvent, and yet may finally redeem its notes at par ; or it may be only partially insolvent, and redeem them in part. Such cases differ essentially from the transfer of forged notes and counterfeit coin, which are nullities ; for while it is true that the metal of counterfeit coin has, as has been any assurance of the credit, punctuality, or solvency of the makers, in regard to all of which the receiver exercises his own judgment, or relies upon that of others in whom he has confidence. There is but a single guaranty which those who circulate the money of that or any other kind can be understood to give, to wit, that it is what it purports to be, genuine, and not counterfeit." ' Thomson on Bills (Wilson's ed.), 123 ; Camidge v. Allenby, 6 B. & C, 373 ; 9 Dow. & R., 391 ; Penn v. Harrison, 3 T. R., 759 ; see chapter XXII, on Trans- fer by Assignment, § 736, vol. i. § I 679- LIABILITY OF TRANSFERRER OF BANK NOTES. 68/ suggested, some value, ^ such bogus currency never has any legal value as currency, whereas all genuine bank notes generally have some value as bank notes.^ Nor is payment in bank notes analogous to payment in the promissory notes of an individual payable in future. The latter, when passed without indorsement for an antecedent debt, are regarded by some authorities as conditional payment only, and if not paid, they hold that the debt revives. Even if this be cor- rect (and we think otherwise),^ it is because they are not offered as cash, or its representative.* But bank notes are presumed to be offered as cash, and are legal tender unless objected to ; and for this reason the very opposite pre- sumption, that they were received in absolute payment, would arise. § 1679. DiLty of transfei^ee when ti'ansferi'er war- rants solvency of baiik. — Where the view obtains that the transferrer warrants the solvency of the bank which issued the note, that warranty is not regarded as so absolute and unconditional as to require no duty on the part of the transferee. If, for instance, the note would have been paid if punctually presented after the transfer, but the holder neglected for a con- siderable time to present it, and when he finally did so, the bank had failed, the loss would then fall on the trans- feree, who, by diligence, might have prevented it. The principle is, that the transferee must either put the note in circulation, or he must present it within a reasonable time at the counter of the bank, and notify the transferrer within a reasonable time if, by reason of insolvency, it is not paid ; and what is "reasonable time " is a question for the court to determine under all the circumstances of the case.'^ ' Fogg V. Sawyer, 9 N. H., 365, Parker, C. J. ; 2 Parsons N. &: B., 193, note m. ' Bayard v. Shunk, i Watts & S., 92, Gibson, C. J. ^ See § 740, vol. I. * Ibid. ^ Camidge v. Allenby, 6 B. & C, 373; 6 Dow. & R., 39, Bayley, J., saying: ' Then the question is, what was it the duty of the plaintiff to do in order to ob- 688 BANK NOTES. § 1679^^. § 1679^. Rule in England. — In England, the view is taken thiat if the bank be insolvent at the time of transfer, the loss is upon the transferrer ; but the transferee must, in order to recover, present the notes at the bank immediately, or pass them off in circulation.^ SECTION IV. RIGHTS, DUTIES, AND REMEDIES OF THE HOLDER OR OWNER OF BANK NOTES. § 1680. Mere possession being sufficient prima facie evidence of bona fide ownership for value of a bank note, the holder may enforce its payment, unless his position as tain payment of these notes (bankers' cash notes) ? They were intended for cir- culation. But I think that he was not bound immediately to circulate them, or send them into the bank for payment ; but he was bound, within a reasonable time after he had received them, either to circulate them or to present them for payment. Now here it is conceded that, if there had not been any insolvency ot the bankers, the notes should have been circulated or presented for payment on Monday" (the next business day after they were received) "If pre- sentment was unnecessary, he (the holder) had another duty to perform The law requires that the party on whom the loss is to be thrown shall have no- tice of non-payment, in order to enable him to exercise his judgment whether he will take legal measures against other parties to the bill or note." 2 Parsons N. & B., 197. 1 Owenson v. Morse, 7 T. R., 64 ; Beeching v.<}ower. Holt N. P., 313; Ward V. Evans, 12 Mod., 521 ; Camidge v. Allenbv, 6 B. & C, 373 ; Williams v. Smith, 2 Barn. & Aid., 496 ; Timmins v. Gibbons, 18 O. B., 722 ; 14 E. L. & Eq., 64 ; Rogers v. Langford, i Cromp. & M., 637 ; Turner v. Stones, i Dow. & L., 122. The plaintiff in this case changed, late on Saturday, a £i) note for defendant. The bank had then virtually stopped payment. Held, that the loss was the transferrer's. In England, this question has been presented in cases of bankers' cash notes, which differ from ordinary bank notes ; and a distinction has been taken by Bayley, J., in Camidge v. AUenby, 6 B. & C, 373. between prior and contemporaneous debts. Corn was sold to defendant on the morning of Septem- ber loth ; and in the afternoon the bankers' cash notes were delivered, and proved bad, the bank having stopped payment. Bayley, J., said : " If the notes had been given to the plaintiff at the time when the corn was sold, he could have no remedv upon them against the defendant. The plaintiff might have insisted on payment in money. But if he consented to receive them as money, they would have been taken by him at his peril. Here the notes were given to liim in payment subsequently, and the question is whether they operate as a dis- charge of' the debt due to the plaintiff." The case seems to have been decided on the ground of laches in reporting that the notes were bad. But this distinc- tion was not assented to. The other judges considering that, if the notes were § l68o. RIGHTS, DUTIES, AND REMEDIES OF HOLDER. 689 a bona fide holder be successfully combated. It will not be a sufficient defence to show that the holder was neirli- gent in inquiry when he received it, and that he took it under circumstances which would excite the suspicions of a man of ordinary prudence.^ In the cases of bills of ex- change and negotiable promissory notes the same principle prevails ; but when it is shown that such a bill or note was lost or stolen, or obtained by fraud or felony, the burden of proof is shifted upon the holder, who must show in an- swer that he acquired it bona fide in the usual course of business, and without notice.^ But in favor of the holder of a bank note the law goes a step further, and to exonerate him from any such burden. And he can rest secure in its possession, as the evidence of his right to rpcover, until the defendant shows that he was in privity with the fraud, or acquired the note mala fide, or with notice. This distinction between bank notes and other neofotia- ble instruments is not admitted in England;^ but in the United States it is upheld by high authority,* and seems to us clearly the correct doctrine. Bank notes pass as cash, and are seldom identified by any peculiar earmarks ; and it is next to impossible for a trader to remember where, or w^hen, or from w^hom, or for what consideration, he received money, they were payment ; if common promissory notes, there was negligence. And Littledale, J., said: "I think that there is no guaranty implied by law in the party passing a note payable on demand to bearer that the maker is solvent at the time when it is so passed." Lord Campbell, in Timmins v. Gibbons, 18 O. B., 722, says he could never see any distinction between the cases of prior and contemporaneous debts, for even in payments over the counter some time must elapse between the debt and payment, which makes the debt a precedent one. ' Raphael v. Bank of England, 17 C. B., 161 ; 33 E. L. & Eq., 276 ; Solomons V. Bank of England, 13 East., 135 ; Lowndes v. Anderson, 13 East., 130 ; City Bank v. Farmers' Bank, Taney C. C., Dec, 119. " See §§ 810 ^/ seq., vol. i. ' De La Chaumette v. Bank of England, 9 B. & C, 208, where it was held that the holder of a bank note which had been stolen must show that he had given value for it. See also Solomons v. Bank of England, 13 East., 135. * Worcester Co. Bank v. Dorchester, etc.. Bank, 10 Cush., 488 ; Wyer v. Dor- chester, etc.. Bank, 11 Cush., 51 ; Louisiana Bank v. Bank U. S., 9 Mart. (La.), 398. See Crawford v. Royal Bank, Ross Lead. Cas., 229 ; Morse on Banking, 416; 2 Parsons N. & B., 93, 281-283. Vol. 1 1. — 44 690 BANK NOTES. § l68o<^. any particular bank notes in his cash drawer. And to re^ quire him to do so would be an intolerable burden. § 1 6Soa. The holder is, in fact, regarded as in effect the original promisee of the bank, and not as^ taking by as- signment only the title of the transferrer ; and a payment to him by the bank will discharge the debt, unless it knows, or has reason to know, that he acquired the note by fraud,^ or with notice of fraud on the part of his transferrer, which equally impeaches his title.* § 168 1. Usual course of business. — The bill holder, in order to enjoy the full privileges of a bona fide holder for value, must have acquired the bills in the usual course of business ; and if they have been pledged to him as collat- eral security by the bank, with the understanding that they are not to be put in circulation, tliey are not currency, and the holder stands merely in the position of an ordinary creditor.^ The holders of bank notes have no preference to the assets of the bank over other creditors, unless it be accord- ed them by statute ; * but this is sometimes done in order to stimulate their credit as a circulating medium.^ But, in other cases, statutes specially provide that all creditors not having specific liens shall stand on the same footing and share the assets ratably.^ § 1682. Amou7itof recovery. — The holder is entitled to recover of the bank the full amount of the bank note, or to receive a proportionate share of its assets, without regard to the amount which he gave for it.'' Such seems to be ' New Hope, etc., Bridge Co. v. Perry, 1 1 111., 467- " Olmstead v. Winstead Bank, 32 Conn., 278. * Davenport v. City Bank, 9 Paige, 12. * Cochituate Bank v. Colt, i Gray, 382. * Morse on Banking, 418. « Robinson v. Gardiner, 18 Grat., 509; Exchange Bank v. Knox, 19 Grat., 739. ' Robinson v. Beall, 26 Ga., 17 ; Morse on Banking, 398. ^ 16S3. RIGHTS, DUTIES, AND REMEDIES OF HOLDER. 69 1 the accepted doctrine and true principle uf the question, in the absence of any statutory provision. But the view has been taken, in allotting the assets of an insolvent bank, that the bill holders should receive amounts proportioned to the sums actually paid for the bills.^ The holder may also be entitled to recover interest. But interest does not run upon bank notes from their date,* which we have already seen is not a true index of the time at which they were issued ; but only from the time at which demand of payment was made at the banking- house, or other place, if it were specified. For then alone did the bank become in default.^ Such is the current of authority, and it matters not that the note is not expressed to be payable " with interest 'V but it has been held that in- terest runs from the date of suspense of specie payments when a bank has failed.^ Incidental damages arc not al- lowed.® § 1683. Bank notes do not become overdice. — Bank notes do not grow stale by mere lapse of time, as do other species of negotiable instruments. Indeed, it is generally to the in- terest of the bank that they should remain in circulation, and they are designed for the very purpose of being a con- tinuing circulating medium. Therefore, they do not be- come overdue or liable to any equities between the bank and subsequent holders, but the bank is absolutely bound to pay them on presentment by the bearer at any distance of time.'^ They are not barred (in general) like ordinary promissory notes, by statutes of limitation.^ And they are » Griffin v. Central Bank, 3 Kelly, 371 ; Collins v. Central Bank, i Kelly, 435. ' Ringo V. Trustees, 8 Eng., 583. ' Bank of Kentucky v. Thornsberry, 3 B. Mon., 519; Bank Commissioners v. Lafayette Bank, 4 Edw. Ch., 287. * Estate Bank of Pennsylvania, 60 Penn. St., 471. * Atwood V. Bank of Chillicothe, 10 Ohio, 526. " Bank of St. Mary's v. St. John, 25 Ala., 566. ^ Bullard v. Bell, i Mason, 243 ; Solomons v. Bank of England, 13 East., 135. * 2 Parsons N. & B., 95 ; Morse on Banking, 402. 692 BANK NOTES. § 1 684. not fimcti officio when once redeemed by the bank, but, unhke ordinary promissory notes, are designed to be re- issued again and again. ^ These seem to us correct doctrines, and are sustained by the authorities cited. But it has been 'held that bank notes may be protested for non-payment, and that a party acquiring them after dishonor, whether he knows of the dishonor or not, is subject to equities.^ § 1684. How far statutes of limitation are applicable to. — While the general rule is that statutes of limitation do not apply to bank bills, because they are by the consent of mankind and course of business considered as money, and that their date is no evidence of the time when they were issued, as they are being continually returned to and re- issued by the bank ; yet if the bills have ceased to circulate as currency, and have ceased to be taken in and reissued by the banks, they no longer have that distinctive character from other contracts, which excepts them from the opera- tion of the statutes of limitation.^ § 1685. Presentment and demand. — Ordinarily the debt- or must seek his creditor, and pay the debt ; and if he does not, the latter may sue without any previous demand, the suit being deemed in itself a demand. The same principle (as has been held) prevails as to bank notes, which are generally made payable at the counter of the bank, or some one of its branches, at specified places ; but if the bank tenders the amount in court, and shows that it was ready and wiUing to have paid at the place named, then it is not liable for interest or costs.* There is authority, however, for the doctrine that demand at the place named must be averred and proved to sustain a suit on a bank note.^ And ' 2 Parsons N. & B., 95. ^ Burroughs v. Bank of Charlotte, 70 N. C, 284. ' Kimbro v. Bank of Fulton, 49 Ga., 419. ^Haxtun v. Bishop, 3 Wend., 13; Bank of Niagara v. McCracken, 18 Johns, 495 (qualified in Jefferson Bank v. Chapman, 19 Johns, 322) ; Br>'ant v. Damariscotta Bank, 18 Me., 240; Caldwell v. Cassidy, 8 Cow., 271; State Bank v. Van Horn, i South., 382; Greer v. Perkins, 5 Humph., 588. "Doughty V. Western Bank, 13 Ga., 287 ; Hinsdale v. Larned, 16 Mass., 68 (semble) ; tower v. Appleton Bank, 3 Allen, 387 (semble) ; Bank of Memphis v. § 1 686. RIGHTS, DUTIES, AND REMEDIES OF HOLDER. 693 this doctrine is certainly reasonable and well founded, as is shown in a recent work on Bills and Notes.^ When no place of payment is specified in the bank note, the demand should be made at the bank, where it is to be presumed that provision has been made for its payment ; but if another place be specified, demand should be made there, and not at the bank.^ Demand should be made during the usual hours of busi- ness, according to the custom of banks ; for at their ter- mination the bank has a right to close its doors. But if bills were presented just before the end of business hours for redemption, the bank could not excuse itself by show- ing that there were so many that the transaction could not have been completed before the closing hour arrived.'^ § 1686. Each bank note being a separate debt, the bank may treat it as such in determining in what description and denominations of coin payment may be legally tendered ; ■* but the notes may be presented in packages by the holder, it not being- necessary that he should make separate pre- sentment of each note.^ The demand being made, it is the duty of the bank to respond to it with reasonable prompt- ness, without employing devices, such as the slow and mi- nute inspection of each bill, or other unnecessary formalities, White, 2 Sneed, 482 ; Thurston v. Wolfborough Bank, 18 N. H., 391 ; Wilks v. Robinson, 3 Rich., 182. In Kentucky it must be made, but need not be averred. Bank of Ky. v. Mickey, 4 Littell, 225. 'In 2 Ames B. & N., 6r, it is said : "It is a noteworthy fact that the notion that negotiable paper, payable on demand, is payable without a demand, is traceable to the decisions in Capp v. Lancaster, Cro. Eliz., 548 ; Rumball v. Ball, 10 Mod., 38; Collins v. Denning, 3 Salk., 227, in which cases, however, the instruments declared on were not negotiable, and where, accordingly, the rule that the debtor must seek the creditor was properly applied. The absurditv of applying this rule to any negotiable paper is sufficiently obvious, and in the case of bank notes is so glaring that the courts have felt obliged to make an ex- ception to the rule, and to hold that a bank note is not payable without a de- mand." 'King V. Dedham Bank, 15 Mass., 447 ; Ware v. Street, 2 Head, 609. ' Suffolk Bank v. Lincoln Bank, 3 Mason, i ; People v. State Treasurer, 24 111., 433- *Boatmans' Sav. Inst. v. Bank of Missouri, 33 Mo., 497. ' Reapers' Bank v. Williard, 24 111., 433. 694 BANK NOTES. § 1 68 7. to secure delay ; and if it be evident that such means are used to delay or evade payment, the bank will be regarded as having refused payment.^ § 1687. Remedies against Jinder. — Trover will lie against the finder of bank notes by the owner.^ But assumpsit will not lie against the finder for money had and received, un- less the bank notes found have been turned into money.^ In England it has been held that assumpsit will lie for country bank notes and checks even, which have been treated like money.* And when money may be presumed to have been actually received upon negotiable notes, or other securities, the action of assumpsit may in general be maintained.'^ The identity of the note must be clearly made out.^ If the finder has passed the note to a bona fide transferee for value, the owner can not recover against such transferee.'*' § 1688. Bank receiving its own cotmterfeit notes. — If a bank receive in payment or on deposit counterfeit bank notes purporting to be of its own issue, the person who innocently pays or deposits them is not liable.^ " The true rule is that the party receiving such notes must examine them as soon as he has opportunity, and return them im- mediately. If he does not, he is negligent, and negligence ' Ibid. ; People v. State Treasurer, 4 Mich., 27 ; Suffolk Bank v. Lincoln Bank, 3 Mason, i. ''Noyes v. Price, Chitty on Bills [*S24], 593 ; Mason v. Warte, 17 Mass., 560; 2 Parsons N. & B., 93, note. ^ Ainslie v. Wilson, 7 Cow., 662 ; Kellogg- v. Budlong, 7 How. (Miss.), 340 ; Houx V. Russell, 10 Mo., 246 ; Muir v. Rand, 2 Ind., 291 ; Murray v. Pate, 6 Dana, 335 ; Mason v. Waite, 17 Mass., 560 ; Arms v. Ashley, 4 Pick,, 71. *Spratt V. Hobhouse, 4 Bing., 173 ; 12 J. B. Moore, 395 ; Pickard v. Bankes, 13 East., 20. Perhaps the receipt of their value may be presumed. Longchamp V. Denny, i Doug., 137. ' Spratt V. Hobhouse, supra ; M'Lachlan v. Evans, i Yonge & J., 380 ; Hatten v. Robinson, 4 Blackf., 479; Tuttle v. Mayo, 7 Johns, 132; Muir v. Rand, 2 Ind., 291. * Miller v. Race, i Burr., 452. 'Miller v. Race, i Burr., 452 ; Anon., I Salkeld, 162. * U. S. Bank v. Bank of Georgia, 10 Wheat., 333. § 1689. PAYMENT IN BANK NOTES, AND SET-OFF. 695 will defeat his right of action. This principle will apply to all cases where forged notes have been received, but cer- tainly with more strength when the party receiving them is the one purporting to be bound to pay. For he knows better than any other, whether they are his notes or not ; and if he pays them or receives them in payment, and con- tinues silent after he has sufficient opportunity to examine them, he should be considered as having adopted them as his own." ^ SECTION V. PAYMENT IN BANK NOTES, AND SET-OFF. § 1689. Nothing but money being a positive legal" ten- der, bank notes are not by the common law a valid tender, even in payment of debts due to the bank itself, by their holder.^ But by statute in many of the States, the banks are required to receive their own notes in payment.^ But although a statute may require that the bank shall receive its notes in payment of debts due to it, yet if the bank make an assignment to trustees of all its debts and assets for the equal benefit of its creditors, the weight of author- ity is to the effect that bank notes acquired after and with notice of the assignment, are not a valid tender to the as- signee. The statute, as it is said, no longer applies, for the debt is then not due to the bank, but to the assignee.* But the contrary view has been taken in some cases, and im- ' Gloucester Bank v. Salem Bank, 17 Mass., 133. ' Coxe V. State Bank, 3 Halst., 172; Hallowell, etc.. Bank v. Howard, 13 Mass., 235 ; Suffolk Bank v. Lincoln Bank, 3 Mason, i ; Morse on Banking, 397 ; 2 Parsons N. & B., 91. ' Exchange Bank v. Knox, 19 Grat., 746 ; Niagara Bank v. Roosevelt, 9 Cow., 409; Moise V. Chapman, 24 Geo., 249; Dunlap v. Smith, 12 111., 399; Union Bank v. Ellicott, 6 Gill & J., 363. * Exchange Bank v. Knox, 19 Grat., 746; Housum v. Rogers, 40 Penn. ; Saunders v. White, 20 Grat., 327 ; Farmers' Bank v. Goddin, 19 Grat., 739. 696 BANK NOTES. § 169O. pressed with a force of logic which seems to us unanswer- able.^ § 1690. The time when the bank is compellable to re- ceive its own notes in payment, or to allow them as assets, ceases, according to the view of Mr. Morse, a discriminating writer,^ when the note ceases to pass as current money, and are only subjects of traffic on special terms. And this cri- terion is supported by strong considerations ; for the holder who receives them under such circumstances is conscious, from the mere fact of their depreciated value, that the bank is not regarded as solvent. Where the bank has closed its doors, and suspended business altogether, it is clear that the taker of its notes, with knowledge of such circumstances, could not avail of them as tender or as offsets ; ^ but it has been held that the mere suspension of specie payments would not have the like effect, as it might indicate a mere temporary embarrassment, and not an absolute deficiency of assets."* When there has been an assignment made by the bank to trustees, the taker, with knowledge thereof, could not, as we have already seen by some authorities, plead the notes as offsets, or tender them in payment.^ ' Blount V. Windley, 68 N. C, 2 (1873). In 1866, the assets of the Bank of Washington were placed by order of court in the hands of a commissioner for the benefit of creditors. The commissioner Blount obtained judgment against Reddett, and Windley, as his surety, for Si,735-5o. and execution issued. Wind- lev, subsequent to issue of execution, obtained bills of the bank, and tendered them in payment. It was held a good tender ; that the bank was bound by the very fact of issuing a currency to receive it in payment ; that the legislature could not' deprive the holder of this right, which was part of the obligation of the con- tract of the bank, nor could the bank deprive him of it by an assignment of its effects. The court said, in the course of its opinion, per Pearson, C. J., that it would not " enter into a consideration of the point in respect to the law of set- off, whether the defendant must hold the ' mutual demand,' at the time of the assignment, or at the commencement of the action, or at the time of plea pleaded, or at the trial ; for ours is not a question of set-off, but a question as to the right of a bill holder to use the bills of the bank as a legal tender, equivalent to gold and silver coin, in satisfaction of a debt due to the bank." " The neglect of ad- vertence to those diversities is the cause, as it seems to us, of the obscurity and confusion in which the question is involved in many of the cases. See Exchange Bank of Virginia, for Camp, Trustee v. Knox, 19 Grat., 739; 3 Wend., 13; 8 Watts & Serg., 311 ; I Ohio, 381. It certainly is the main fallacy ot the very labored argument of the plaintiff's counsel in this case." Bank of Charlotte v Hart, 67 N. C, 264; Exchange Bank v. Tiddy, 67 N. C, 169. - Morse on Banking, 401, 402. ' Diven v. Phelps, 34 Barb., 224. * Jefferson Co, Bank v. Chapman, 19 Johns, 322. " Ante, § 1689. } 1 69 1. PAYMENT IN BANK NOTES, AND SET-OFF. 697 § 1 69 1. As long as a bank is solvent there is no doubt that a debtor is entitled to plead as offsets any of its notes of which he is the holder, according to principle, and to the weight of adjudicated cases,^ although the contrary view has been taken in Massachusetts, where it has been held that the debtor must get a judgment against the bank on his bills before he can avail himself of them as set-off.^ When the bank is insolvent, the note holder can set off the amount of notes held by him for their full face value, pro- vided he came into possession of them prior to the insol- vency.^ And it is said that he may do this as long as the bank has control of its assets. As a general rule, how- ever, it is considered that when a bank has become insol- vent, and especially if it has made an assignment to trustees for the benefit of all its creditors, or a receiver has been appointed by court to take them in charge, its assets are regarded as being appropriated iox prorata distribution amongst them ; and bank notes acquired after such assign- ment, or appointment of a receiver, can not be pleaded as offsets, for the reason that the assignees are bona fide holders of the subject in controversy for the purpose of making such distribution, and to allow offsets would create preferences.^ * Exchange Bank v. Knox, 19 Grat., 746. * Hallowell, etc.. Bank v. Howard, 13 Mass., 235. 'Exchange Bank v. Knox, 19 Grat., 746; Diven v. Phelps, 34 Barb., 224; Haxtun v. Bishop, 3 Wend., 13 ; Bruyn v. Receiver, 9 Cow., 413, note ; Clarke V. Hawkins, 5 R. I., 219; a7ite, § 1689. ^ Finney v. Bennett, 27 Grat., 379 ; Exchange Bank v. Knox, 19 Grat., 746. In this case it appeared that by act of the Virginia General Assembly of Feb- ruary 1 2th, 1866, the banks of the State being insolvent, were required to go into liquidation and to execute deeds conveying all their property, including debts, to trustees for the payment of their debts. It was held (i) that the act forbade all preferences of creditors ; (2) that although the charters of the banks required them to take their notes in payment of debts due them, this did not authorize debtors of the bank to pay their debts with notes of the bank bought up after execution, and the recordation of the deeds ; and (3) that a debtor of the bank could not set oft notes of the bank bought up by him after execution, and recordation of the deed, and notice thereof to the creditor. Christian, J., delivering the opinion of the court, said : " It must not be forgotten that when, in conformity with the act of February, 1866, those banks executed their re- spective deeds of assignment, they had ceased to exist for the purposes for which 698 BANK NOTES. § 1 692 § 1692. When the note is payable in bank bills, the holder is entitled to recover its face value ;^ but judgment and execution should express the fact that a payment in the notes of the bank will discharge it, inasmuch as process for money could not be so satisfied.^ SECTION VI. LOST OR DESTROYED BANK NOTES. § 1693. When the whole or part of a bank note has been lost or destroyed, the rights of the owner are purely of an they were created. A resumption of their operations as banks was simply impossible. The stockholders had no longer any interest in them. It only remained to wind them up for the benefit of their creditors. Robinson v. Gard- iner, 18 Grat,, 509. In this view the grantees in said deeds were not trustees for the banks, but for the creditors only. Haxtun v. Bishop, 3 Wend., 13 ; Diven v. Phelps, 34 Barb., 224. The true principle I conceive to be this : These corpora- tions being insolvent under the statute, and the deeds made in pursuance thereof, the rights of all the creditors attach equally to all their assets, and whoever takes their bills afterward (being indebted to such corporations) takes them subject to the right of all the creditors to share equally in their assets. His claim is upon the assets for his proportionate share. The statute, as well as the deeds of assignment, virtually secures to the creditors collectively the entire and exclusive right to all the assets. The debtor, therefore, must pay his debt and take his dividend for his claim arising from his ownership of the bills acquired under such circumstances. It is true that a bank, as long as it is solvent, or rather as long as it has control of its assets, is bound to take its own bills in payment of debts due to it. But when it becomes insolvent and goes into liquidation, making an assignment of all its assets for the benefit of its creditors, the rights of all its creditors attach equally, and a debtor then takes the bills of the bank subject to the rights of other creditors to enforce his obligation against him for the equal benefit of all. Diven v. Phelps, 34 Barb., 224 ; 9 Cow., 408, notes; i Paige, 585 ; 3 Wend., 13. But independently of the act of February 12th, 1866, the obligation enforced, and the rights established under it, according to the construction I have given it, it must be conceded on general principles, that these notes of the banks, acquired after notice of the assignment, can not be pleaded as set-offs in actions brought by the assignees of banks, unless the cases are taken out of the operation of the general and well-settled principles of law, in consequence of the provisions of the charters of these corporations, or of the general law regulating them. To this question I shall advert presently. It is a principle of law, too well settled to admit of doubt or argument now, that a set- off, as between original parties, acquired after the assignment for 2, bona fide purpose of the subject in controversy and notice thereof, can not be set off against a holder for value." See also Farmers' Bank v. Goddin, 19 Grat., 739; Saun- ders v. White, 20 Grat,, 327 ; Finney v. Bennett, 27 Grat., 379 ; Haxtun v. Bishop, 3 Wend., 1 3 ; Bank of Niagara v. Roosevelt, 9 Cow., 409 ; i Hopk Ch., 579. ' Abbott v. Agricultural Bank, 11 Smedes & M., 401;. ' Morse on Banking, 403. § 1 694* LOST OR DESTROYED BANK NOTES. 699 equitable nature. The contract of the bank is to pay the amount upon surrender of the note, and when the rightful owner can not comply with that condition, his claim can only address itself to equitable considerations. And in order to do justice, the courts will only permit him to re- cover when he can assure the bank against the possibility of a demand of payment by some one else, as securely as if he himself were to surrender the note. (i) When the whole note has been lost, it is obvious that the owner can not place himself within this rule. It is payable to bearer on demand, and passing by delivery, it may at once be found by some one else, and be again put in circulation. The owner can not frame a clearly sufficient indemnity against its payment by the bank ; for even though he be able to identify it by its number or other mark, the bank would still be bound to pay it to a bona fide holder who gave value for it, without notice of the loss. And a notice of the loss, even though published in the newspapers, would be unlikely to reach the general public ; and it would be difficult, indeed next to impossible, to show that it reached a particular person. For these reasons, one who loses the whole of a bank note must bear the loss, and is without remedy against the bank.* § 1694. (2) When the whole note has been destroyed, it is obvious that the bank incurs no danger, as in the case of its loss, of paying it to another party. And, therefore, when the true owner produces clear proof of the destruction of a particular bank note, he is permitted to recover the amount of the original indebtedness from the bank. It will be necessary, however, that the owner should accurately identify the particular notes destroyed. It will not do to show that notes of a certain amount were destroyed, for this would not identify them, or enable the bank to protect ' Hinsdale v. Bank of Orange, 6 Wend., 378. But see, contra, Waters v. Bank of Georgia, Charlt., 193; Robinson v. Bank of Darien, 18 Ga., 65. See also 2 Parsons N. & B., 308. 700 BANK NOTES. ^ 1 695. itself by taking a bond of indemnity against their future appearance, in the event that the destruction was not fully accomplished.^ This bond of indemnity is usually require"d, even where there is distinct proof of destruction of specific notes, out of an abundance of caution to prevent imposition upon banks, which generally are without the means of disprov- ing the destruction of the notes.^ But there is authority to the effect that in such cases it is needless.^ § 1695. Whe7i part of a bank note has been lost. — It has been held, in a number of cases, that when half of a bank note has been lost, no action at law can be maintained upon the returned half, but that suit must be brought in equity to establish the facts ; and that then a bond of indemnity " to secure the bank against future loss from the appear- ance and setting up of the other half of such note."* And Judge Story concurs in this view.^ In others, it has been held that action at law may be maintained, the court having power to require a bond of indemnity, which, in such a case, is deemed necessary.^ But Prof. Parsons says, as to the view that an indemnity is necessary, " From this conclu- sion, unless it be so directed by statute provision, we must dissent. For the payor will never be liable again, since the holder takes the missing half with notice of prior equities, and, therefore, no indemnity should be required."' Of course, if no indemnity were requisite, there could be no objection to an action at law. Payment in such an ac- tion would be a good plea against an action on the other 1 Tower v. Appleton, 3 Allen, 387 ; Carey v. Green, 7 Ga., 79. "" Wade V. N. O. Canal, etc., Co., 8 Rob. (La.), 142 (1844) ; Morse on Bank- ing, 410. The same rule is applied to a certificate of deposit. Welton v. Adams, 4 Cal., 38. ^ Bank of Mobile v. Meagher, 33 Ala., 622. * Bank of Virginia v. Ward, 6 Munf., 169 (1818) ; Farmers' Bank v. Reynolds, 4 Rand., 186 (1826). ' Story on Bills, §448. * Commercial Bank v. Benedict, 18 B. Mon., 311 ^ 2 Parsons N. «& B., 313. See Byles (Sharswood's ed.) [*365], 543. § 1696. LOST OR DESTROYED BANK NOTES. 7OI half, as the holder would take it subject to any such de- fence ; and the cases sustahiing Prof. Parsons' view, which are quoted below, seem to us correct.^ Lord Ellenborough held the contrary doctrine ; ^ but his decision has been criticised as "an Homeric nod."^ § 1696. To guard against the loss of bank notes sent by mail, the sender often cuts them in halves, and transmits the halves by different mails. This plan is practiced both in England and the United States, and, according to the principles of the text, is one which secures the true owner against loss.* He is entitled to recover when he shows himself entitled to both halves ; and the bank can not es- cape its responsibility by publishing notice that it will not be liable upon severed notes. It has been said of such a notice : " It is as extraordinary as it is novel, and is probably the first instance of a debtor's undertaking to prescribe terms to his creditors." ° ' Union Bank v. Warren, 4 Sneed, 171 (1856) ; Hinsdale v. Bank of Orange, 6 Wend., 379 (1831) ; Patten v. State Bank, 2 Nott & M'Cord, 464 (1820). In Bullet V. Bank of Pennsylvania, 2 Wash. C. C. R., 172 (1808), there was an ac- tion at law on half of a bank note, the other half being- lost. The plaintiff offered indemnity. The court held that, as the holder of the other half would take it subject to equities, the recovery could be had, taking no notice in its opinion of the indemnity offered. This view was reaffirmed in Martin v. Bank of U. S., 4 Wash. C. C. R., 253 (182 1), and applied, although the bank had given notice previously that, in such cases, they would not pay unless both parts were pro- duced. See an^c, § 1479. " Mayor v, Johnson, 3 Camp., 325 (18 12), Nisi Prius. ' Bank U. S. V. Sill, 5 Conn., 1 12 (1823). In this case action at law was brought on a half note, the other halt having been lost. It does not appear that any indemnity was offered. Peters, J., said : " The case of Mayor v. Johnson, 3 Camp., 324, is directly in point. In that case judgment was rendered for the de- fendant, by Lord Ellenborough, on the ground that the lost half of a bank bill was negotiable, and would enable a bona fide holder to recover of the bank ; which, with all due deference to an illustrious Judge, I am bound to say, is not law. As well might a vignette, or any other fragment torn from a bill, be con- sidered negotiable. The only apology I can make for his lordship is, that he was on the circuit, where business is done in haste, without time and means for investigation and consideration, and where the greatest judges frequently err. ' Quandoque bonus dor mz tat Homerus.' " * Chitty on Bills 1*259], 294; Morse on Banking, 415; 2 Parsons N. & B., 314; Williams v. Smith, 2 B. & Aid., 496 ; Commercial Bank v. Benedict, 18 B. Mon., 307 ; Redmayne v. Burton, 9 C. B. N. S., quoted in 2 Parsons N. & B., 313, note k. " U. S. Bank v. Sill, 5 Conn., 106 ; Martin v. Bank U. S., 4 Wash. C. C, 253 2 Parsons N, & B., 314. 702 BANK NOTES. § 1 697. But courts of equity, notwithstanding the plaintiff may have an action at law, still entertain jurisdiction of suits on half bank notes/ § 1697. The owner in these cases, it has Seen said, "does not recover in consequence of holding the half merely ; but he must also satisfy the bank of the verity of the facts nec- essary to his case, that is, of the severance, the transmission by mail, and the loss, or else he must estabhsh them by a judgment of the court. And, furthermore, the half notes sued on must be specifically and satisfactorily identified as the counterpart of the halves transmitted, or no recovery will be had. "2 ' Allen V, State Bank, I Dev. & Bat. Eq., 3 (1734), Gaston, J. See ante, % 1479- * 2 Parsons N. & B., 313 ; Bank of Va. v. Ward, 6 Munf., 166. CHAPTER LI. CERTIFICATES OF DEPOSIT. SECTION I. DEFINITION, ORIGIN, AND NATURE OF CERTIFICATES OF DE. POSIT. § 1698. Definition. — A certificate of deposit is a receipt of a bank or banker for a certain sum of money received upon deposit, and it is generally framed in such a form as to constitute a promissory note, payable to the depositor, or to the depositor or order, or to bearer. § \6<^Za. Origi^i and natiLve. — It appears to have been at an early day the practice of the goldsmiths in England, who generally engaged in the business of banking, to give receipts to their customers for moneys deposited with them, in the form of promissory notes payable to the bearer on demand, or to the depositor or order.^ And the statute of Anne placed them, as other promissory notes, on the same footing as bills of exchange.^ Thus originated the instru- ment now so commonly used, and called a certificate of deposit, which is, in short, generally a promissory note for the payment of an amount which it certifies to be deposited in bank. Such at least is our idea of its origin. Certainly it closely resembles the receipt given by the goldsmiths to their customers, and which was called a banker's cash note. Mr. Chitty says of such receipts : " They appear originally ' Nicholson v. Sedgwick, i Ld. Raym., 180 ; 3 Salk., 67 (1698) ; Thomson on Bills (Wilson's ed.), 124; Chitty (13 Am. ed.) [*522], 591 ; Byles [*io], 81. * 3 & 4 Anne, ch. IX. (703) 704 CERTIFICATES OF DEPOSIT. § 1 699. to have been given by bankers to their customers, as ac- knowledgments for having received money for their use,' and that " in point of form they are similar to common promissory notes, and are stated in pleading as such." Also he says, "At present cash notes are seldom made ex- cept by country bankers, their use having been superseded by the introduction of checks." Now, when the depositor desires to have his funds ready to check on at any moment, he takes no certificate of de- posit, but uses his own check as the mode of transfer. But when he wishes his funds to be running on interest, and to remain for any extended period in bank, he usually takes a certificate of deposit, which is the bank's receipt, payable at a future day, or on demand, or upon ten days' notice, as the case may be. The very nature of the instru- ment and the ordinary modes of business show that a cer- tificate of deposit, like a deposit credited in a pass-book, is intended to represent moneys actually left with the bank for safe keeping, which are to be retained until the deposi- tor actually demands them. And it is not dishonored until presented. V § 1699. Power of banks to issue certificates of deposit. — As to the power of banks to issue certificates of deposit, it is observed by Mr. Morse that " if a bank can not issue its negotiable promissory note, neither can it issue a nego- tiable certificate of deposit of this description" — that is, payable otherwise than on demand. " If the note would be void, so likewise is the certificate. If, however, the bank is empowered to issue promissory notes, subject only to the restriction that it shall issue none which are designed to pass into circulation as currency, but only such as be- come necessary in the ordinary course and conduct of its affairs, and are strictly business paper, then it may issue cer- - National Bank of Fort Edward v. Washington County National Bank, 12 N. Y. S. C. (5 Hun). 605. <$. I/OI. DEFINITION, ORIGIN, AND NATURE. 705 tificates of deposit, whether payable on demand or other- wise, subject only to the same restrictions."^ In New York, where the statute law pronounced a draft or note issued by a bank payable at a certain time after date to be void, it was held thaf a certificate of deposit payable to the order of a particular person six months after date came within its prohibition and was void.*^ And it would not be valid even in the hands of a bona fide holder.^ If the president of the bank give to the depositor his personal certificate, instead of that of the bank, parol proof is ad- missible to show the true state of facts and to bind the bank.'' § 1 700. A bank is chargeable with knowledge of its de- positor's signature, and if it issue a certificate of deposit payable to his order, and his name be forged as indorser, and the bank pays the amount to a bona fide holder, it has been held that it can not recover back such amount from him.^ The fact that a certificate is signed by the bank president in his own name does not preclude the depositor from showing that the bank itself is bound. ^ § 1 701. A certificate of deposit of a bank, if passed for a debt, is presumably conditional payment only ; and if re- fused payment the creditor may resort to the original con- sideration.''' But if the party receiving the certificate makes use of it for his own purposes, not punctually requiring payment, it might be different. In a Maryland case it appeared that on the i6th of Oc- ' Morse on Banking, 53. ^Bank of Orleans v. Merrill, 2 Hill, 295 ; Edwards on Bills, 348. " Bank of Chillicothe v. Dodge, 8 Barb., 233. * Coleman v. First Nat. Bk., 53 N. Y., 388. * Stout v. Benoist, 39 Mo., 277. " Coleman v. First Nat. Bk., 53 N. Y., 388. ' Lindsey v. McClelland, 18 Wis., 481. In Johnson v. Barney, i Clarke (Iowa), 531, where A., being indebted to B., inclosed him C."D.'s certificate of deposit for $945, and said in his letter, " please collect and place amount to my credit," it was held that B. received it only as agent for collection, and therefore was not an indorsee, save in that limited sense. Vol. II.— 45 706 CERTIFICATES OF DEPOSIT. § IJ02. tober, i860, Hoffman of Baltimore, being indebted to Bower of Cincinnati, deposited in a banking house in Baltimore the amount due ($206,31), and took a certificate of deposit run- ning : " Received on deposit from V. Hoffman, Esq., $206,31, payable to the order of G. Bower, Esq., indorsed herein. (Signed) Josiah Lee & Co." Bower received acknowledged receipt of the certificate on i8th of October, i860, and then transferred it to other parties, who demanded payment on the 20th of November, i860. Two days previous Josiah Lee & Co. had failed in business, and it was sought to make Hoffman liable for the amount. But the court said : " Though the money deposited by Hoffman was not de- posited by the authority of Bower, or with his previous knowledge, yet upon his acknowledgment of receipt of the certificate, he sanctioned the deposit as a payment to him- self, especially as he made use of the certificate for his own purposes, and thus made Josiah Lee & Co. his agents to hold the fund subject to his order. Bower thus assuming control of the fund, it must be regarded as a payment of the debt due to him by Hoffman."^ SECTION II. THE TRANSFER AND NEGOTIABILITY OF CERTIFICATES OF DEPOSIT. § 1702. As to the transfer of certificates of deposit, it must be governed by the same rules which control other promissory notes, and which vary according to the instru- ment's form. If it be payable to bearer it may be trans- ferred by delivery, but if payable to order it should be in- dorsed. And when payable to order, mere manual delivery without indorsement or proof of a valuable consideration would not be evidence of title.^ The liability of an in- ' Bower v. Hoffman, 23 Md., 264. " Vastine v. Wilding, 45 Mo., 89. I ^ 1 703. THEIR TRANSFER AND NEGOTIABILITY. 707 dorser is the same as upon the indorsement of any other promissory note.* § 1 702^. Overdue certificates of deposit. Certificate of deposit a continuing security. — If the certificate of deposit be transferred when overdue, the transferee takes it subject to equitable defences." But the certificate of deposit is not regarded as overdue and dishonored until actually pre- sented for payment, when, as is usual, it is not payable at a particular time ; and if the bank pay any portion of the amount due upon it to the original depositor without indors- ing the credit on the certificate, a bona fide holder for value without notice may recover the whole sum from the bank. The certificate is regarded as a continuing security, and hence this doctrine arises. In New York it was applied to hold the bank liable to the holder where the certificate which bore interest was transferred seven years after it was issued,' An indorser of a certificate of deposit remains liable until an actual demand is made, and the holder is not chargeable with neglect for omitting to make such demand within any particular time, for the instrument is a continuing security between indorser and indorsee.* § I 703. As to the negotiability of certificates of deposit. — It has been questioned whether or not certificates of de- posit are negotiable. But we conceive that there can now be no doubt that they are negotiable when expressed in negotiable words. And this view is sustained by au- thority of experienced judicial writers as well as by ad- • Mills V. Barney, 22 Cal., 240 ; Coye v. Palmer, 16 Cal., 158 ; Ford v. Mitchell, 15 Spoon., 304; Gate v. Patterson, 25 Mich., 191 ; Hazelton v. Union Bank, 32 Wis., 35 ; Pardee v. Fish., 60 N. Y., 265. "Coye V. Palmer, 16 Cal., 158; Tripp v. Curtenius, 36 Mich., 494. 'National Bank of Fort Edward v. Washington Co. National Bank, 12 N. Y. S. C. (5 Hun), 605 (1875). Contra, Tripp v. Curtenius. 36 Mich., 497 (1S77). 'Pardee v. Fish, 60 N. Y., 271 (1875), citing- Merritt v. Todd, 23 N. Y., 28 (see ante, 609). In Pardee v. Fish, the certificate bore interest. The plaintiff retained it from June 8th, 1872, to December 24th, 1872. 7o8 CERTIFICATES OF DEPOSIT. $ 1 704» judlcated cases.^ But there are cases to the contrary. The Supreme Court of the United States held a certificate of deposit in the following form to be negotiable : " I hereby certify that H. S. has deposited in this bank, payable twelve months from ist of May, 1839, with five per cent, interest till due, $1,500 for the use of H. M., and payable only to his order upon the return of this certificate." ^ And the like decision was rendered in Connecticut, where the certificate ran : " I do hereby certify that W. T. & B. have deposited in this bank the sum of $10,608.75, payable on the first day of December next, to their order and the return of this certificate."^ In California it was considered that the statute law had settled the question in favor of the negotiability of certificates of deposit ; but it was thought that they were negotiable at common law.^ § 1704. A simple certificate of deposit containing no words of promise to pay the amount is nothing more than ' Miller V. Austen, 13 How., 218; Bank of Peru v. Farnsworth, 18 111., 563 ; Laughlin v. Marshall, 19 Id., 390; Carey v. McDougald, 7 Ga., 84; Lynch v. Goldsmith, 64 Geo., 42 ; Kilgore v. Bulkley, 14 Conn., 362 ; Bank of Orleans v. Merrill, 2 Hill, 295 ; Johnson v. Barrey, i Iowa, 531 ; Drake v. Markle, 21 Ind. (Kerr), 433 ; Lafayette Bank v. Ringel, 51 Ind., 393 ; Bean v. Briggs, i Clarke (Iowa), 488 ; Fells Point Sav. Inst. v. Weedon, 18 Md., 528 ; Welton v. Adams, 4 Cal., 37 ; Brummagin v. Tallant, 29 Cal., 503 ; Mills v. Barney, 22 Cal., 240 ; Gate V. Patterson, 25 Mich., 191; Poorman v. Mills, 35 Cal., 118; Blood v. Northrup, i Kansas, 28 ; Fultz v. Walters, 2 Montana, 165 ; Frank v. Wessels, 64 N. Y., 155; Howe V. Hartness, 11 Ohio St., 449; Bellows Falls Bank v. Rutland, 40 Vt., 377 ; Pardee v. Fish, 60 N. Y., 265 ; Tripp v. Curtenius, 36 Mich., 494 ; Edwards on Bills, 348 ; i Parsons N. & B., 26 ; Morse on Bank- ing, 54; Dos Passos on Stockbrokers, 554; Lewis on Stocks, 66; Benjamin's Chalmers' Digest, 272. ' Patterson v. Poindexter, 6 Watts & S., 227 ; Charnley v. Dallas, 8 Watts & S., 353 ; see also Sibree v. Tripp, 15 M. & W., 23. ' Miller V. Austen, 13 How., 918. * Kilgore v. Bulkley, 14 Conn., 363. In Pardee v. Fish, 60 N. Y., 268 (1875), where the amount was expressed to be payable " on the return of this certifi- cate," Miller, J., said : " Although a demand was necessary upon the bank before an action could be brought against it on the instrument, thus distinguishing the case from that of a promissory note, where the maker may be sued without any demand, I do not think that this fact takes away the negotiable character of the instrument under the decisions cited, and it must therefore be considered as possessing all the features of a negotiable promissory note." ^ Welton V. Adams, 4 Cal., 37. § I 705. THEIR TRANSFER AND NEGOTIABILITY. 709 a receipt, and could not be the basis of an action against the bank, nor would it be a transferable security. Parol evidence would be admissible to explain it, in the same manner as in the case of any other receipt ; the word " cer- tify " adding no additional force to the instrument as pur- porting a contract.^ § 1705. In those cases where the certificate is payable to ** A. B., or order," or to bearer, we think there is no doubt of its negotiability, and the cases cited bear us out in this view. But in Pennsylvania, Chief-Justice Gibson, render- ing the opinion of the court, held that a certificate running as follows, " I hereby certify that C. S. T. has deposited in this bank, payable twelve months from ist May, 1839, with five per cent, interest till due, per annum, $3,691.93, for the use of R. P. & Co., and payable only to their order upon the return of this certificate," was not a negotiable note, but " a special agreement to pay the deposit to any one who should present the certificate and the depositor's order." * And in England, where the form was, " Memorandum : Mr. Sibree has this day deposited with me ^500 on the sale of ^10,000 3/. per cent. Spanish, to be returned on de- mand," the court said that it was not intended to be, nor was it, a promissory note, either at common law or under the statute of Anne, but the evidence of an agreement re- specting the deposit.^ This latter decision does not mili- tate against the negotiability of certificates drawn in nego- tiable form. And the true rule seems to us to be that expressed by a learned annotator, who says that "an instru- ment merely acknowledging a deposit upon whatsoever special terms, can not be a promissory note"; and considers only such certificates to be notes as contain evidence that ' Hotchkiss V. Mosher, 48 N. Y., 482 (1872). " Patterson v. Poindexter, 6 Watts & S., 227 ; confirmed in Charnley v. Dal- las, 8 Watts & S., 353. See also Lebanon Bank v. Mangan, 28 Penn. St., 452 London Sav. Society v. Savings Bank, 36 Penn. St., 498. * Sibree v. Tripp, 1 5 Mees. & Wels., 23. 7IO CERTIFICATES OF DEPOSIT. ^ 1 706 " the matter continues to deposit, or is converted into a loan, or that a present debt is created, accompanied by an undertaking to pay."^ § 1 706. Requisites of 7iegotiability. — In order, however, to be negotiable a certificate of deposit must possess the requisite features of certainty in respect to parties, and time and mode of payment ; and the same causes which deprive bills and notes of negotiability would affect it in like man- ner. Thus, if payable " in currency," it would not be ne- gotiable according to the principles which prevail as to bills and notes ;^ though it has been held otherwise.^ So if payable in " United States six per cent, interest-bearing bonds," it is a mere contract to deliver such bonds, and not negotiable.* § 1 706^. Whether negotiable in States where there are certain statutory tests of negotiability, — In some of the States the general principles of the law merchant which determine negotiability do not apply, and peculiar words are necessary to make notes negotiable. The words "value received" are essential to the negotiability of a note in Mis- souri, and a certificate of deposit without such words has been held there to be not negotiable.^ Whether or not in those States where it is essential to the negotiability of a note, that it be payable at a bank (as is the case in Vir- ginia and Indiana), a certificate of deposit in the usual form would be held negotiable, is a question as yet unde- cided in any case within our knowledge. But as a check is regarded as payable at the bank on which it is drawn, so a bank certificate of deposit is a note payable at the bank ' I Amer. Lead. Cas., 307, ^ Huse V. Hamblin, 29 Iowa, 501 ; Rindskoff v. Barrett, 11 Iowa, 172 ; Lind- say V. McClelland, 18 Wise, 481 ; Ford v. Mitchell, 15 Wise, 304 ; London S. C. V. Hagerstown S. Bank, 12 Casey, 498. ' Drake v. Markle, 21 Ind. (Kerr), 433 ; see vol. i, §§ 55 et seq. ; Pardee v. Fish, 60 N. Y., 265 ; Klauber v. Biggerstaff, 47 Wise, 551. * Easton v. Hyde, 13 Minn., 90. ' International Bank v. German Bank, 3 Mo. App,, 367. % IJOja. THEIR TRANSFER AND NEGOTIABILITY. /H by which it is issued, and it would, as it seems to us, come within the meaning of " a note payable at a bank." § 1707. Conflicting decisions as to whether a certificate of deposit is payable without previoics dema?id. When stat- ute of limitations begins to riui. — Where the certificate states that the amount is payable " on the return of this certificate," or on " the presentment of this certificate," or uses some similar phrase, it has been held that such lan- guage does not alter the legal effect of the instrument ; that the holder is not under any obligation to present it for pay- ment before suit upon it ; and that it is the bank's duty, like the maker of any other note, to find out the payee and pay it.^ But where a certificate was given to A., " payable to order of himself on presentation of this certificate, prop- erly indorsed," it was considered so far like an ordinary de- posit that A. could not sue the bank upon it without a previous demand.^ It has been held in Maryland that where a certificate of deposit is expressed to be payable "on return of the same," the statute of limitations only runs from the time of actual demand and notice.'^ It is considered, however, in some cases, that if the certificate be payable on demand (which is substantially the same as "on return of this certificate"), the statute of limitations begins to run from its date, and no special demand is nec- essary to put the statute in motion.^ § I 'joy a. True principles applicable to the question, — Certificates of deposit are designed to subserve with con- venience the purpose of temporary investments of money ; and whether the expression used in them as to payability be " on the return of this certificate," or " on presentation ' Gate V. Patterson, 25 Mich., 191 ; Hunt v. Divine, 37 111., I37 ; Bellows Falls Bank V. Rutland County Bank, 40 Vt., 377, affirming Smilie v. Stevens, 39 Vt., 315- " Bellows Falls Bank v. Rutland County Bank, 40 Vt., 377. ' Fells Point Savings Inst. v. Weedon, 18 Md., 320. * Brummagin v. Tallant, 29 Cal., 503 ; Tripp v. Curtenius, 36 Mich,, 499. 712 CERTIFICATES OF DEPOSIT. § I'JO'ja. of this certificate," or " on return or surrender of this cer- tificate properly indorsed," the substantial meaning is the same ; that is to say, that the certificate is payable when payment is demanded by the party entitled, to receive the money, and who avouches the fact by producing the instru- ment with evidence of title. If the statute of limitations begins to run at once, suit must, of course, be maintainable at once, and therefore no prior demand would be necessary. But such is not the usual contemplation of either the de- positor or the bank. The former seeks an indefinite in- vestment of his funds. The bank is not expected, accord- ing to the usage and practice of such institutions, to seek him and offer payment, as in the ordinary case of a demand loan. And the better opinion seems to us to be that the statute of limitations only begins to run when there is an actual demand of payment in due form, and that such de- mand must precede a suit.^ The bank may, indeed we think has the right to, pay a demand certificate at any time, for the reason that the policy of the law interdicts a per- petual loan ; and while the creditor holding the certificate can not regard the bank as in default, and is not himself in default, until a demand has been made, yet these circum- stances should not prevent the operation upon certificates of deposit of the ordinary principle, that the debtor owing a demand loan has the right to pay at any time. The or- dinary principles applicable to debts due on demand are only modified to fit the nature of the case, the policy of the law, and the intention of the parties to the contract. ' Hunger v. Albany City N. B., 85 N. Y., 587 ; Payne v. Gardiner, 29 N. Y.. 146 ; Pardee v. Fish, 60 N. Y., 265. Sec also Howell v. Adams, 68 N. Y., 314 ; Boughton V. Flint, 74 N. Y., 476 ; Bellows Falls Bank v. Rutland County Bank, 40 Vt., 377 ; Fells Point Sav. Inst. v. Weedon, 28 Md., 320 ; see ante, § 1685 and note. CHAPTER LII. CERTIFICATES OF STOCK ; AND OTHER QUASI NEGOTIABLB INSTRUMENTS. \ SECTION I. CERTIFICATES OF STOCK. § 1 708. T/ie certificates of stock issued to shareholders by incorporated companies are not regarded as coming within the classification of negotiable instruments/ although they generally inure, subject to certain rules, to the benefit of the bearer.^ Very frequently by application of the prin- ciples of estoppel, and to effectuate the ends of justice, and the intention of the parties, the courts decree a better title to the transferee than actually existed in his trans- ferrer ; and as the result reached in many cases is the same as would be reached if the certificate were negfotiable, cer- tificates of stock may be classed amongst instruments qtiasi negotiable. The phrase ''quasi negotiable" has been termed an unhappy one ; ^ and certainly it is far from satisfactory, as it conveys no accurate well-defined mean- ing. But still it describes better than any other shorthand expression the nature of those instruments which, while 'Pierce on Railroads, in; Dos Passos on Stockbrokers, 596; Biddle on Stockbrokers, 149, 156; Lewis on Stocks, 64, 71, 72, et seq. ; i Edwards B. & N., § 22, p. 61 ; Scliouler on Personal Property, 606, note ; 2 Ames B. & N , 784 ; Shaw V. Spencer, 100 Mass., 383 ; Bank v. Lanier, 11 Wall., 377 ; Railn^id Co. V. Howard, 7 Wall., 415 ; Mechanics' Bank v. New York & N. H. R.R. Co., 13 N. Y. (3 Kernan), 599; Jarvis v. Rogers, 13 Mass., 105; Sewall v. Boston Water Power Co., 4 Allen, 277. * Railroad Co. v. Howard, 7 Wall., 415. * Lewis on Stocks, 82. (713) 714 CERTIFICATES OF STOCK. § I'JoSa not negotiable in the sense of the law merchant, are so framed and so dealt with, as frequently to convey as good a title to the transferee as if they were negotiable. In a case before the United States Supreme Court it was said : " Written contracts are not necessarily negotiable simply because by their terms they inure to the benefit of the bearer. Doubtless the certificates were assignable, and they would have been so if the word bearer had been omitted, but they were not negotiable instruments in the sense supposed by the appellants. Holders might transfer them, but the assignees took them subject to every equity in the hands of the original owners."^ § 1708^. Nature of certificates of stock. — 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 per- sonal 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 holder's interest in the corporate estate. The stock of the corporation is generally raised by mutual subscription of the members in the first instance, and its amount is regulated by the statutory provisions by or under which the corporation is chartered. The persons interested in the corporation are termed shareholders, or stockholders ; and certificates of stock are generally issued to them by the corporate authorities of the muniments of their title to a proportionate part of the profits of the corporation, and as evidence of their right to participate in its concerns. Unless otherwise provided by statute, the shares in the corporation are generally deemed personal estate.^ The certificate of stock is the customary and convenient * Railroad v. Howard, 7 Wall., 415. * Allen V. Pegram, 16 Iowa, 173, Dillon, J. ; Lewis on Stocks, 19. ' Hutchins v. State Bank, 12 Mete, 421 ; Arnold v. Ruggles, i R. I., 165; Denton v. Livingston, 9 Johns, 100; Johns v. Johns, i Ohio St., 350 ; Payne v. Elliot, 54 Gal., 339; Lewis on Stocks, 18; Dos Passos on Stockbrokers, 142, 587, 589 ; Biddle on Stockbrokers, 142. § 1708^. CERTIFICATES OF STOCK. 715 evidence of the holder's interest in the corporation which issues it ; but in the absence of legal provisions requiring it, no certificate of stock is necessary to attest the rights of the shareholder.^ If the corporation issues certificates to its shareholders, as is usual to do, any shareholder may compel it by legal proceedings to issue to him a certificate for the number of shares to which he is entitled.^ Cer- tificates of stock are generally deemed choses in action,* and as the holder may be driven to an action to recover the proportionate part of the corporate property or assets, or the interests therein which his shares entitle him to, they are properly within the classification of "choses in action." As said in Massachusetts by Shaw, C. J. : "A certificate of stock is a muniment of title of the same nature with 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." ^ In the United States the stockholder's interest in the corporation is generally deemed liable to attachment, and execution at the suit of such stockholder's creditor, and to legal process of the like kind,^ and the usual method of 'Chester Glass Co. v. Dewey, 16 Mass., 94; Agricultural Bank v. Burr, 24 Me., 256 ; Angell & Ames on Corporations, § 565 ; Biddle on Stockbrokers, 266 ; Dos Passos on Stockbrokers, 5S2 ; Thompson on Stockholders, § 106. ^ Angell & Ames on Corjiorations, § 565. 3 City of Utica v. Churchill, 33 N. Y., 161 ; DriscoU v. West Bradley & C. M. Co., 59 N. Y., 105 ; The King v. Capper, 5 Price, 264 ; Humble v. Mitchell, il A. & E. ; Haseltine v. Siggers, I W. PI. & G., 856 ; Hutchins v. State Bank, 12 Mete, 421, Shaw, C. J. : " If a share in a bank is not a chose in action, it is in the nature of a chose in action, and, what is more to the purpose, it is personal property." In Schouler on Personal Property, p. 32, it is said . ' If I own bank stock and draw regular dividends, is not the stock a chose in possession, since I occupy and enjoy it to the fullest extent ? No, is the reply, for this is never any- thing more than a chose in action." Dos Passos on Stockbrokers, 5S6, 762 ; Biddle on Stockbrokers, 145. " It is really nothing more than a chose in action, and trover will not lie for it, though it might lor the certificate." Lewis on Stocks, 19 ; Acraman v. Cooper, 10 M. & \V., 585 ; Neiler v. Kelley, 19 P. F. S., 403. Confra, that trover will lie for stock as such, see Boylan v. Huguet, 8 Neb., 245 ; Kuhn v. McAllister, i Utah, 273, cited in Biddle on Stockbrokers, 146, note. * Hutchins v. State Bank, 12 Mete, 421. ' Chesapeake & Ohio R.R. v. Paine, 29 Grat., 502 ; Foster v. Potter, 37 Mo., 525; Howe V. Starkweather, 17 Mass., 243; Lewis on Stocks, 20; Dos Passos on Stockbrokers, 589; Pierce on Railroads, no. 7l6 CERTIFICATES OF STOCK. § 1 708^. levy is by leaving a copy of the writ with the proper officer of the corporation in which the shares are held, with notice that such shares are levied upon.* § 1 708^. The transfer of certificates of stock. — Certifi- cates of stock represent so great a portion of the wealth of the country, and the transactions in them are so numerous, that all questions bearing upon their validity, and upon the forms and effect of transfers, are highly important. The full discussion and elucidation of such questions, however, belong rather to the treatises on corporations and on stock- brokers than to a work on negotiable instruments ; and only an outline of the general principles affecting the nego- tiation of stock certificates seems pertinent here. (i) As between the transferrer and transferee of a stock certificate, it is very well settled that, in the absence of stat- utory restrictions, the beneficial interest passes by assign- ment, and delivery of the certificate, as in the case of any other species of personal property, or chose in action, no particular formality being necessary to invest the transferee with the riirht and title of the transferrer, as between the parties to the transfer.* The equitable title passes as be- tween the immediate parties, whatever may be the rights of others in the premises.^ And, as a general rule, statutory restrictions do not affect the immediate parties to the trans- fer, being designed for other purposes. § i7oS(r. (2) As between the corporation a7id the trans- feree of a certificate of its stock the rights acquired by the latter depend upon the charter and general laws which control the matter; a corporation being the creature of statute law and regulated for the most part by it. It is ' Freeman on Executions, § 26212. ' Biddle on Stockbrokers, 268 ; Dos Passos on Stockbrokers, 591, 623, 628 ; Angell & Ames on Corporations, §§ 354, 564; Morawetz on Private Corpora- tions, § 326. 8 Gilbert v. Iron M'f'g Co., 11 Wend., 628 ; Utica Bank v. Smalley, 2 Cowen, 770; Johnson v. Underhiill, 52 N. Y., 203; Johnston v. Laflin, 103 U. S., S04 ; Farmers' Bank v. Wasson, 48 Iowa, 338. ^ l'J02>d. CERTIFICATES OF STOCK. 717 frequently provided by the charter or general statute under which the corporation is organized that the stock shall be transferable only in a prescribed manner, and upon certain conditions. A provision of this nature not only limits the transferability of the shares, but constitutes a part of the agreement between the shareholders, and the mutual con- sent necessary to a change of this agreement can only be satisfied by compliance with its conditions. Accordingly, it has been held by the Supreme Court of the United States that where a banking corporation had by its charter a lien upon the shares of its stockholders for debts due the bank, it could not be deprived of this lien by an assignment of the shares which was not entered upon the books of the bank in the manner required by law, Justice Story saying: " No person can acquire a legal title to any shares except under a regular transfer, according to the rules of the bank ; and if any person takes an equitable assignment it must be subject to the rights of the bank under the act of incorpo- ration, of which he is bound to take notice."^ And for the like reason, as the transferee of the stock would, in such a case, acquire only the equitable interest, and not be- come a stockholder until the conditions of transfer were complied with, the corporation, it has been held, could not claim a lien upon the shares on account of the indebted- ness of such transferee.^ § 1 708^. Right of corporation to claim a lien 07i stock against a transferee for debt d7ie by transferrer. — When the charter of the corporation creates a lien on its stock for debts due by stockholders, such lien can, as we have al- ready seen, be maintained against any transferee.^ The corporation may assert or waive it according to its interest ' Union Bank v. Laird, 2 Wheaton, 390. See also Brent v. Bank of Wash- in^on, 10 Peters, 596; Rogers v. Huntingdon Bank, 12 Sergt. & R., 73; Ger- man Security Bank v. Jefferson, 10 Bush (Ky.), 328 ; Farmers' Bank v. Iglehart, 6 Gill, 50 ; Angell & Ames on Corporations, §§ 571 et seq. ^ Helm V. Swiggett, 12 Ind., 194. ^ § 1708^. 71 8 CERTIFICATES OF STOCK. § IJO^d and pleasure,* But in the absence of some legal creation no such lien exists by implication in favor of the corpora- tion by the common law. And if it grants credit to a stockholder it has no prior legal claim upon his stock to satisfy the debt ; and it is under obligation, notwithstand- ing such debt, to enter on its books the transfer of such stock in pursuance of an assignment duly made.^ Whether a corporation without express authority by statute (and when no statutory lien is created) has the power to adopt by-laws creating a lien on stock for debts and liabilities of the stockholders, and to refuse to transfer the stock upon its books until such debts and liabilities are satisfied, is a question upon which the courts differ. Gen- eral authority given to corporations by statute to adopt by- laws prescribing the manner in which stock shall be trans- ferred, and for the regulation of business, has been con- sidered not broad enough to authorize a prohibition upon, or an abridgment of, the right of transfer ; but simply to direct the manner in which it shall be made ; and it has been held accordingly that a by-law unauthorized by statute which gives the corporation a lien on the stock of members would not affect a bona fide purchaser of the stock without notice, the policy of the law being opposed to secret liens.* • Reese v. Bank of Commerce, 14 Md., 271 ; Hill v. Pine River Bank, 45 N. H., 300 ; Angell & Ames on Corporations, § 571 ; Morawetz on Corporations, § 337 ; Morse on Banking, 444. ^ Steamship Co. v. Heron, 52 Penn. St., 280 ; Farmers' Bank v. Wasson, 48 Iowa, 336 ; Bates v. N. Y. Ins. Co., 3 Johns' Cas., 238 ; Driscoll v. West Brad- ley & C. M. Co., 59 N. Y., 96 ; Sargent v. Franklin Ins. Co., 8 Pick, 90 ; Mass. Iron Co. V. Hooper, 7 Cush., 183 ; Heart v. State Bank, 2 Dev. Eq., in ; Peo- ple V. Crockett, 2 Cranch C. C, 188 ; Dana v. Brown, i J. J. Marsh, 306; Far- mers' Bank v. Wasson, 48 Iowa, 336 ; Byon v. Carter, 22 La. An. ; Angell & Ames on Corporations, §§355, 569; Dos Passos on Stockbrokers, 629; Biddle on Stockbrokers, 176; Morawetz on Corporations, § 332 ; Field on 'Corpora- tions, p. 345, § 310 ; Pierce on Railroads, 129 ; Morse on Banking, 442 ; Schou- ler on Personal Property, 637 ; Proffat's note 11, American Decisions, 581. 3 Driscoll V. West Bradley & C. M. Co., 59 N. Y., 96. See also Wain v. Bank, 8 S. & R., 73 ; Farmers' Bank v. Wasson, 48 Iowa, 338 ; Evansville N. B. y. Metropolitan N. B., 2 Biss., 527 ; Dos Passos on Stockbrokers, 630 ; Green's Brice's Ultra Vires, 15, note a (2d ed.) I I ^ i;o8^/. CERTIFICATES OF STOCK, 719 And the United States Supreme Court has adopted these views, and appHed them to stoek in the national banks.* That the stockholders may agree amongst themselves that such a lien shall exist ; that they may adopt, or au- thorize the adoption of, by-laws prohibiting the transfer of stock until the debts and liabilities of the stockholder are discharged ; and that such a by-law will be effectual as be- tween the stockholder and the corporation, and all persons who have notice of its existence, are propositions which seem to us to rest on sound principles, and to be sustained by creditable authority.^ When the certificate of stock expresses on its face the reservation of such a lien, a pur- chaser would be put upon inquiry, and constructively noti- fied if any debt existed as a lien upon the stock ; and in such cases the lien should be recognized/^ And it is said in Angell &. Ames on Corporations that " a by-law of a bank o-ivina: to the institution a lien upon the shares of a stockholder for debts due from him to the bank is a reason- able and valid by-law." * Charter and statutory provisions ' Schouler on Personal Property, 490 ; Bullard v. Bank, 18 Wall., 589. In this case it appeared that under the National Banking Act of 1863, no stock- holder in a national bank could sell any share held by him in his own right so long as he was indebted to the bank; but the act of 1864 abolished this pro- vision and declared that no national banking association should make any loan or discount on the credit of the shares of its own capital stock. The act ot 1864 also provided that such associations might adopt by-laws not inconsistent with its provisions to define and regulate the manner in which stock should be transferred, and its general business conducted. The Supreme Court of the United States decided that no authority was given a national bank by the pro- visions quoted to adopt a by-law giving it a lien on stock of its debtors ; and that such a by-law was not " a regulation of the business of the bank, or a reg- ulation for the conduct of its affairs," nor such regulation as a national bank might make under the act of 1864, to the spirit of which such by-law was op- posed. ^ Leggett V. Bank of Sing Sing, 24 N. Y., 183 ; Bank of Attica v. Manufac- turers' Bank, 20 N. Y., 501 ; Driscoll v. West Bradley & C. M. Co., 59 N. Y., 105-109 (semble) ; Tuttle v. Walton, i Ga., 43 ; Morgan v. Bank of N. A., 8 Sergt. & R., 73 ; Child v. Hudson's Bay Co., 2 P. Wms., 207 ; Morse on Bank- ing, 442 ; Green's Brice's Ultra Vires (2d ed.), 15, note «; Field on Corpora- tions, p. 346, § 311 ; Angell & Ames on Corporations, § 355. ^ Van Sands v. Middlesex Co. Bank, 26 Conn., 144; Driscoll v. West Bradley & C. M. Co., 59 N. Y., 96 ; Proffat's note 11, American Decisions, 582. " Angell & Ames on Corporations, §355, p. 3S0; Pierce on Railroads. 129; Morse on Banking, 442 ; Green's Brice's Ultra Vires, note a (2d ed.) ; see also Lockwood V. Mechanics' N. B., 9 R. I., 308; Mechanics' Bank v. Merchants' 720 CERTIFICATES OF STOCK. , § 1708^. that stock shall only be transferable upon the books of the corporation are chiefly designed for the protection of the corporation ; and when authorized to adopt by-laws regu- latins: the transfer of stock it would seem that a rcQ-ulation made creating the lien for debts due the institution would be a reasonable exercise of such authority. A purchaser acquires by proper transfer of the certificate of stock all the rights of the transferrer. He can protect himself from possible loss by inquiry as to the status of the stock ; and there are well-considered authorities which sustain the view that the corporation when authorized to regulate the trans- fer of stock has an incidental power to pass a by-law fixing a lien upon its stock for debts due by the stockholder.^ But the weight of authority is in favor of the doctrine that a purchaser for value in the usual course of business with- out notice is not affected by a secret lien of the corporation on the stock.^ § 1708^. (3) As between the transferee of a certificate of stock and a creditor of the transferrer, it would seem that any bona fide assignment of the stock for value would effectually pass the transferrer's interest therein, so far as to supersede the right of an attachment or execution creditor to levy upon it for a debt due by the transferrer. For whether such assignment vest the legal or equitable interest of the assignor in the assignee, no property right of the as- signor remains that is subject to legal process ; and the pro- visions of corporate charters that no transfer of stock shall be valid or effectual until entered or registered upon the books of the corporation, are manifestly designed for the security of the corporation itself, and of third persons tak- ing transfers of stock without notice of any prior equitable transfer, and are not made with reference to the rights of Bank, 45 Mo., 513; St. Louis Perpetual Ins. Co. v. Goodfellow, 9 Mo., 149; Pendergast v. Bank of Stockton, 2 Sawyer, 108 ; McDowell v. Bank, i Harr. (Dei.), 27, 369 ; in re. Dunkerson, 6 Biss., 227. ' Farmers' Bank v. Wasson, 48 Iowa, 338, and cases cited supra. ' Id. § I708/C CERTIFICATES OF STOCK. 72 1 creditors of a stockholder.^ This is in accordance with the general principles applicable to all manner of equitable as- signments of personal property ; but there are cases which hold that there can be no valid transfer of stock as against a creditor of the transferrer, unless the regulations provided by the charter or general statutes are complied with.^ § I /oSy! (4) As between the transferee of a certificate of stock, and a third party who has purchased the shares, the better opinion is that a bona fide transfer of the certificate carries with it the transferrer's interest in the stock, and that a subsequent purchaser who simply relies on the books of the corporation for information as to who are stock- holders, and who buys the shares without taking the certifi- cate, does so at his peril. The certificate is the muniment of title. It is generally dealt with as the representative of the proportionate interest it assures ; and if not in pos- session of the parts offering to sell the shares, a purchaser would be put upon inquiry to ascertain the true condition of things. And on the other hand, a purchaser of the cer- tificate from one whom it testifies to be a shareholder, would have a right to suppose that no one would have bought the shares without taking the customary evidence of title.^ If the corporation should actually transfer the shares upon its books to a subsequent purchaser without surrender of the certificate, it would act wrongfully and would be bound to ' Black V. Zacharie, 3 Howard, 483 ; Western v. Bear River, etc., Co., 6 Cal., 425 ; Newberry v. Detroit, etc., Iron Co., 17 Mich., 141 ; Commonwealth v. Watmough, 6 Whart., 139 ; Bank of Utica v. Smalley, 2 Cowen, 770; Stebbins V. Phoenix Ins., Co., 3 Paige, 350 ; Gilbert v. Manchester Man. Co.. 11 Wend., 627 ; Farmers' Bank v. Iglehart, 6 Gill, 50 ; Sargent v. Essex Marine R.R., 9 Pick., 202 ; Continental N. B. v. Eliot N. B., cited in 37 Am. Rep., 353 ; Dos Passos on Stockbrokers, 624, 628, and cases cited. Angeil & Ames on Cor- porations, § 354. - Sabin v. Bank of Worcester, 21 Maine, 353 ; Pinkerton v. Manchester & L. R.R., 42 N. H., 424 ; Foster v. Essex Bank, 5 Gray, 373 (but see Sargent v. Essex Marine R.R., 9 Pick., 202) ; People's Bank v. Gridley, 91 111., 457. ' DriscoU V. West Bradley & C. M. Co., 59 N. Y., 96. See also Holbrook v, N. J. Zinc Co., 57 N. Y., 616 ; Bank v. Lanier, 11 Wall., 369 ; Dos Passos on Stockbrokers, 629. This does not seem to be the xiew taken in England. See Shropshire Union R. & C. Co. v. The Queen, L. R., 7 H, L. Cas., 496. Vol. II.— 46 722 CERTIFICATES OF STOCK. § 1 7o8^ issue certificates to the prior purchaser, who had acquired the stock by transfer of the certificate in due course.^ § 1708^. Usual method of transferring stock. Transfers under powers of attorney in blank. — Conimercial corpo- rations generally encourage the assignment of their shares, as their value is increased by the facility of transfer ; and it is generally provided in the face of their certificates of stock by virtue of their charters, by-laws, or regulations, that the shares " are transferable on the books of the company, in person or by attorney, on the surrender of this certificate." And on the back of the certificates there is generally a printed form of sale and assignment, with an irrevocable power of attorney in blank, authorizing the unnamed per- son to do all things requisite to perfect the transfer on the books of the corporation. When such formal assignment, and power of attorney in blank is signed by the share- holder, and the certificate is delivered therewith, an appar- ent ownership in the shares represented is created in the holder. And the general principle sustained by the great weight of authority, as well as of reason, is that when the owner of a certificate of stock with such a power of attorney in blank thereon written, or thereunto attached, entrusts it to an agent with power to deal therewith, a bona fide pur- chaser for value without notice will be protected in his ac- quisition of the certificate, although the agent to whom it has been entrusted has diverted it from the purposes for which it was put in his charge, or has been guilty of a fraud or breach of trust in reference thereto.^ This doctrine does ' Cushman v. Thayer Man. Co., 76 N. Y., 267 ; Smith v. American Coal Co., 7 Lansing, 317. ^ Johnston v. Laflin, 103 U. S. (13 Otto), 800; Burton's Appeal, 93 Penn. St., 214; Wood's Appeal, 92 Penn. St., 379 ; Cushman v. Thayer Man. Co., 76 N. Y., 371 ; Burrall v. Bushwick Railroad Co., 75 N. Y., 220 (semble) ; Moore v. INIetropolitan N. B., 55 N. Y., 41 ; McNeil v. Tenth N. B., 46 N. Y., 325; New York & N. H. R.R. Co. v. Schuyler, 34 N. Y., 30; Commercial Bank v. Kortright, 22 Wend., 348 ; Holbrook v. New Jersey Zinc Co., 57 N. Y., 616 (semble) ; Leitch v. Wells, 48 N. Y., 585 ; Prall v. Tilt, 28 N. J. Eq., 480 ; Bridgeport Bank v. New York, etc., R.R., 30 Conn., 275 ; Mount Holly Turnpike Co. v. Ferree, 2 C. E. Green, 117; Duke v. Cahawba § 1709. CERTIFICATES OF STOCK. 723 not rest upon the idea that the certificate of stock is a ne- gotiable instrument ; but upon the equitable principle that where a person confers upon another all the indicia of ownership of property, with comprehensive and apparently unlimited powers in reference thereto, he is estopped to assert title as against a third person, who, acting in good faith, acquires it for value from the apparent owner. The like principles would apply if the certificates of stock were issued in favor of the bearer, and were entrusted to an aeent who transferred them in breach of his trust.^ But if the certificate of stock were lost or stolen with a blank assignment and power of attorney, not being a ne- gotiable instrument, a purchaser could not acquire title against the true owner.* The doctrine of lis pendens has no application to corporate stock.^ We have not consid- ered the questions which arise when blank powers of at- torney are executed under seal. They are elaborately dis- cussed in the treatises on stocks.^ § 1 709. The corporation should require the surrender of Co., 10 Ala., 82 ; Thompson v. Toland, 48 Cal., 99 ; Fraser v. Charleston, 1 1 S. C. N. S., 4S6 ; Dos Passos on Stockbrokers, 6oo ct seq. ; 2 Ames B. & N., 784 ; Lewis on Stocks, 43 et seq. In Taylor v. Great Ind. P. R.R. Co., 5 Jur. N. S., 1087, the blank transfers were blank as to the value and number of the shares, aAd on account, as it would seem, of their defective character, the doctrine of the text was not applied. In Rumball v. Metropolitan Bank, 2 Q. B., 194 ; 20 Moak E. R., 279, a similar doctrine was applied where the scrip inured to bearer. ' In Rumball v. Metropolitan Bank, 2 Q. B. Div., 194, and 20 Moak's E. R., 279, it appeared that scrip of the Anglo-Eg-yptian Banking Company had been issued, certifying that after payment of certain instalments per share, the bearer would be entitled to be registered as the holder of ten shares. After paying one instalment the plaintiff put the scrip in the hands of a stockbroker for cer- tain purposes ; and the broker fraudulently diverted them, and deposited them with the defendant as security for a loan. " It was held that plaintiff could not recover his scrip in an action against the lender who took it as security, on the ground as stated by Miller, J., that "if a party possessed of a security purport- ing on the face of it to be transferable by delivery, chooses to leave such security in the hands of a third party, and the latter makes it over to a bona fide holder •'or value, the true owner must be taken to have brought about his own loss and can not recover it back.'' "^ Bereich v. Marye, 9 Nev., 312 ; Burton's Appeal, 93 Penn. St., 214 (semble) . Dos Passes on Stockbrokers, 601, note i. ^Holbrook v. New Jersey Zinc Co., 57 N. Y., 627. *See Lewis on Stocks, 46, 51. 724 CERTIFICATES OF STOCK. § I7IO. the certificate issued to a shareholder before entering a transfer of the shares upon its books, in order to avoid Habihty to a bo7ia fide transferee of such certificate without notice.^ The United States Supreme Court has held that where a bank whose certificates of stock declared the stock- holders entitled to so many shares of stock, which can be transferred on the books of the corporation, in person or by attorney, when the certificates are surrendered, but not otherwise, and which suffers a stockholder to transfer to anybody on the books of the bank his stock, without pro- ducing and surrendering the certificates thereof, is liable to a bona fide transferee for value of the same stock, who produces the certificates with properly executed power of attorney to transfer ; and this is so, although no notice has been given to the bank of the transfer. The equities in this case were not allowed to be set up by the bank, be- cause by its own act it had given implied assurance that there were none.^ SECTION II. OTHER QUASI NEGOTIABLE INSTRUMENTS. § 1 710. Bills of lading constitute the most important of all varieties of documents of title w^hich possess a quasi negotiable quality, and a special chapter is devoted to their consideration.^ There are a few other instruments which, except when so declared by statute, are not negotiable ; and indeed do not approximate negotiability to the same extent as -bills of lading or certificates of stock. But the tendency of modern usage is to increase the facility for ' Cushman v. Thayer Man. Co., 76 N. Y., 367 ; Dos Passes on Stockbrokers, 618. ^ Bank v. Lanier, 11 Wall., 369, See Schouler on Personal Property, 651, 632,. 633. 634- ^§ 1727. ), 1/12. OTHER QUASI NEGOTIABLE INSTRUMENTS. 725 their transfer, and a few words as to their general nature may not be out of place in this work. § 1710^. As to dividend warrants. — In England, it has been held, that a dividend warrant in the form of a check drawn by the Bank of England upon its cashier, payable to the plaintiff, but containing no words of negotiability, was not at law assignable ; and that whatever might be the effect of an immemorial custom in a particular place, that the custom and usage of bankers and merchants, approved for sixty years, could not alter the law by which such an in- strument conferred no right of action on an assignee.^ § I 71 1. Checks for baggage issued by common carriers are not of the character of bills of lading and the like quasi negotiable instruments ; and the persons receiving them are not presumed to know that they contain the terms upon which the property is carried.^ § 1 712. Delivery orders. — In regard to delivery orders, by which are meant orders given by a vendor on a bailee, who holds possession as his agent, it has been held in Eng- land, that delivery of the goods is not complete until the bailee has attorned to the buyer, and thus become his agent.'^ It has also been decided that such an order differs in effect from a bill of lading ; that the indorsement of it by a vendee to a sub-vendee was unavailing to oust the possession of the original vendor, and that his lien remained unaffected, when neither the first buyer, nor the sub- vendee had procured the acceptance of the order, nor taken actual possession of the goods before the order was countermanded.* Where the defendants sold to B. & Co. 100 tons of zinc, and gave them four documents to the fol- ' Partridge v. Bank of England, 9 Q. B., 396. 'Blossom V. Dodd, 43 N. Y., 264; see Buller v. Heane, 2 Camp., 415. "Benjamin on Sales, 613. * McEwan v. Smith, 2 House of Lords' Cases, 309 ; Griffiths v. Perry, 1 E. & E., 680 ; 28 L. J. O. B., 208. 726 CERTIFICATES OF STOCK. § ^7 '^3' lowing effect : " We hereby undertake to deliver to your order indorsed hereon, twenty-five tons merchantable zinc off your contract of this date "; and upon the faith of these documents the plaintiffs bought of B. & Ca, and paid for fifty tons of the zinc, and B. & Co. failed, without having paid for it themselves, whereupon the defendants refused to deliver it to the vendees — it was held that the delivery orders or undertakings did not estop them from setting up as against the vendees of B. & Co. their right as unpaid vendors to withhold delivery.^ § I 7 1 3. Dock warra7tls and warehouse-keepers receipts for goods, independent of statute law, are of modern inven- tion, and do not rest like bills of lading upon ancient mer- cantile custom, imparting to them a quasi negotiability. " These documents," says Blackburn, J., " are generally written contracts, by which the holder of the indorsed document is rendered the person to whom the holder of the goods is to deliver them, and in so far they greatly re- semble bills of lading ; but they differ from them in this respect, that when goods are at sea, the purchaser who takes the bill of lading has done all that is possible in order to take possession of the goods, as there is a physical ob- stacle to his seeking out the master of the ship, and requir- ing him to attorn to his rights ; but when the goods are on land, there is no reason why the person who receives a delivery order, or dock warrant, should not at once lodge it with the bailee, and so take actual or constructive posses- sion of the goods. There is, therefore, a very sufficient reason why the custom of merchants should make the transfer of the bill of lading equivalent to an actual delivery of possession, and yet not give such an effect to the trans- fer of documents of title to goods on shore." ^ ' Farmeloe v. Bain, i Common Pleas Div., 445 (1876). 'Blackburn on Sales, 297 ; Benjamin on Sales, 613 ; Farina v. Home, 16 M, & W., 119. Earlier cases took a different view ; see Lucas v. Dorrien, 7 Taunt., 268 ; Zwinger v. Samuda, 7 Taunt., 265 ; Keyser v. Suze, Gow., 58 ; see also Benjamin on Sales, 616. Ji 1 7 14. OTHER QUASI NliGOTlABLE INSTRUMENTS. 727 § 1 714. There are statutory enactments in England which greatly enlarge the effects of such instruments.^ In Virginia, by recent act of Assembly, warehouse receipts (for produce) are made negotiable under certain rules and regulations,^ and in Minnesota they are negotiable by in- dorsement and delivery.^ ' See Benjamin on Sales, 607, and the factors' acts there cited. '^ See Acts of Assembly of 1874, p. 233, * State V. Loomis, 27 Minn., 521. I CHAPTER LIII. BILLS OF CREDIT. § 1 71 5. Constitutional prohibition tcpon the emission of bills of C7^edit by the States. — The tenth section of the first article of the Constitution of the United States contains certain prohibitions and restrictions upon the power of the States ; and the first clause of the section reads as follows : " No State shall enter into any treaty, alliance, or confed- eration ; grant letters of marque and reprisal ; coin money, EMIT BILLS OF CREDIT ; make any thing but gold and silver coin a tender in payment of debts ; pass any bill of at- tainder, ex post facto law, or law impairing the obligation of contracts." Herein, we are only concerned in the pro- hibition against the emission of bills of credit ; but that prohibition it is important to consider, as negotiable instru- ments to which the States are parties are frequently im- pugned as coming within its pale ; and sometimes a ques- tion of nicety is involved, in determining whether they do or not. Every word of the prohibition, " No State shall emit bills of credit," is pregnant with significance. In the first place, the prohibition is upon the States only ; and cor- porations chartered by the States may be authorized to issue bills which the State itself can not issue.^ In the second place, the word emit is appropriately selected, be- cause it is never employed in describing those contracts by which a State binds itself to pay money at a future day for services actually received, or for money borrowed for pres- ent use.^ And in the third place, the term "bills of 'Brisco V. Bank of Kentucky, 11 Pet., 433 (1837). » Craig V. State of Missouri, 4 Pet., 328 (1830). (728) ^ I717. WHAT ARE BILLS OF CREDIT. 729 credit " is used in a sense well understood when its history- is adverted to. We propose to consider (i) What are bills of credit, and (2) What are not bills of credit. SECTION I. WHAT ARE BILLS OF CREDIT. § 1 716. Defijiition. — A bill of credit is a negotiable paper designed to pass as currency and circulate as money. Such a bill of credit as comes within the constitutional prohibition is a negotiable paper issued by the sovereign power of one of the United States, and designed to pass as currency and circulate as money. § 1 71 7. The nature of this class of negotiable instru- ments, and the object and spirit of the constitutional restriction, first received a judicial exposition in the case of Craig V. State of Missouri.^ In that case it appeared that the State of Missouri, with a view to relieve the necessities of the times, established loan offices to loan certain sums to citizens, taking security by mortgage redeemable in instalments. The loan was in certificates in the following form : "This certificate shall be receivable at the Treasury, or any of the loan offices of the State of Missouri, in the discharge of taxes or debts due the State for the sum of $ , with interest for the same at the rate of two per centum per annum from this date, the day of , 182-." They were signed by the auditor and treasurer, were not to exceed in amount two hundred thousand dollars, and were to be of denominations not over ten dollars nor less than fifty cents. '4 Pet., 411 (1830). 730 BILLS OF CREDIT. § l7lS They were also made receivable in payment of salt at the salt springs, and by all public officers, civil and military, in discharge of their salaries and fees of office. The proceeds of the salt springs, the interest accruing to the State, and all estates purchased, and all debts due the State, were consti- tuted a fund for their redemption. Chief-Justice Marshall, rendering the opinion of the majority of the court, said : " In its enlarged, and perhaps its literal sense, the term ' bill of credit ' may comprehend any instrument by which a State engages to pay money at a future day, thus including a cer- tificate given for money borrowed. But the language of the constitution itself, and the mischief to be prevented, which we know from the history of our country, equally limit the interpretation of the terms. The word 'emit' is never employed in describing those contracts by which a State binds itself to pay money at a future day for services actually received, or for money borrowed for present use ; nor are instruments executed for such purposes in common lano-uacre denominated ' bills of credit.' To ' emit bills of credit' conveys to the mind the idea of issuing paper intended to circulate through the community for its ordi- nary purposes as money, which paper is redeemable at a future day. This is the sense in which the terms have been always understood." And considering that the instruments in question, though calling themselves " certificates," were of the character above indicated, they were adjudged bills of credit and void. § 1 71 8. That instruments bear interest does not render them the less bills of credit. — In the same case,* Mr. Justice Johnson dissenting, considered that a sufficient reason why the papers should not be regarded as bills of credit, was found in the fact that they bore interest, and consequently varied in value every moment of their existence. This, he • Craig V. State of Missouri, 4 Pet., 438, 444, Thompson and McLean, JJ.j dissenting. ^ 1720. WHAT ARE BILLS OF CREDIT. 73 1 said, " disqualifies them for the uses and purposes of a cir culating medium, which the universal consent of mankind declares should be of a uniform and unchanging value, otherwise it must be the subject of exchange, and not the medium." The opinion of the court does not notice this argument ; but it strikes us as without force — indeed as self- destructive. The very object of the constitutional pro- vision was to inhibit the issue of a paper currency which would vary in value every moment of its existence, and was not of a uniform and unchanging value. Hence, these very qualities made them all the more bills of credit. § 1 7 1 9. // is not necessary that a bill of credit should be a legal tender. — It was contended further, in the same case, that these certificates, although deemed bills of credit in the common acceptation of the term, w^ere not so in the sense of the constitution, because they were not made a legal tender. But the prohibition is general. It extends to all bills of credit, not to bills of a particular description ; and there is no just foundation for this distinction.^ § 1720. It has been urged, upon the basis of more recent historical light on the subject, that no instrument is a bill of credit, within the meaning of the Federal Constitution, un- less it be made a legal tender in payment of debts, and this was the opinion of as great a statesman as James Madison. It does not seem that this information was afforded in the cases decided by the Supreme Court of the United States, which take an adverse view ; and it has been thought by that able publicist, R. M. T. Hunter, of Virginia, that had it been supplied a different result might have been antici- pated. Militating strongly against his opinion on the ques- tion is the fact that the very succeeding phrase of the con- stitution contains an express prohibition against the States making anything but "gold and silver coin " a legal tender. * Craig V, State of Missouri, 4 Pet., 434. 732 BILLS OF CREDIT § I72I. which would alone be sufficient to interdict bills of credit, if Mr. Madison's and Mr. Hunter's conceptions are correct. This subject is of such extended interest that we append extracts from a recent report of Mr. Hunter, as treasurer of Virginia, submitting a financial scheme with arguments in support of it.-^ § 1 72 1. The name is immaterial. — The Chief-Justice, in answer to the argument that the instrument in Craig v. ' In one of the documents accompanying- the annual message of the Governor of Virginia, made December 2, 1874, is published Mr. Hunter's " Plan of a Con- stitutional Currency," communicated to Governor Jas. L. Kemper. It is briefly this : " Let the State issue $3,000,000 in bills of the denomination of $1, $5, $10, $20, and in fractions of a dollar, with a provision that the holder may at pleasure convert these notes into bonds, in sums of $100, or multiples of $100, to draw in- terest from the State at the rate of four per cent, per annum, in specie. In addi- tion to which the holder of this bond shall be allowed to reinvest into bills of the like denomination as at first ; which bills shall bear no interest, but shall be con- vertible and reconvertible as originally provided. The interest on these bonds shall be paid semi-annually, unless the holder should convert them into currency, at a shorter period, when interest shall be paid for the period of its existence as a bond. Until the sum of $3,000,000 has been issued, any holder of Virginia State bonds shall be allowed to exchange them for these bills at the market price in Richmond when sold for legal tenders. And when once issued these bills may be received at par in payment for half the taxes of any person or corpora- tion who may owe the State for taxes." In the course of his argument Mr. Hunter says : " The privilege of paying half the ta:-:es in these bills would add greatly to their credit, and consequently afford great relief to our people. Nor would the State run any risk if it should not exceed the limit of $3,000,000 — for every bill thus issued a corresponding value, and possibly a much larger amount in State stock would be secured. In following the provisions of the law, no bill would be issued except in exchange for State stock at the market rate. It may be supposed that such an issue would subject the State to the tax of the United Stales upon the amount, but a reference to the law will show that the tax is imposed only upon the notes of any person, State bank, or State banking association, used for circulation. A description and enumeration of issues which does not include such an emission of bills by the State as is herein described. If it did, the United States would doubtless relieve the State from any tax upon such an issue designed to build up a sinking fund for a State so deeply indebted as Virginia, and one in which such an issue would perform so useful a function for currency purposes amongst a people so deeply depressed as ours. It has been objected that the provision herein proposed falls within the constitutional prohibition to the States to emit bills of credit. But a careful examination of the question, it is believed, will remove this objection. It has been a matter of much difliculty to decide what is a ' bill of credit,' within the meaning of the consti- tution. Judge Marshall, in the case of Craig v. The State of Missouri, 4 Pet., 431, 432, which was decided by four out of seven judges, said, that to ' emit bills ot credit conveys to the mind the idea of issuing paper intended to circulate through the community for its ordinary purposes as money, which paper is re- deemable at a future day. This is the sense in which the terms have always been understood.' Judge McLean, in Briscoe v. Bank of Kentucky, 11 Pet., 314, says : ' The definition which does include all classes of bills of credit emitted by the colonies or States, is a paper issued by the sovereign power, containing a § 1723- WHAT ARE BILLS OF CREDIT. ^^3 State of Missouri were certificates of debt, not bills, con tinued : " Had they been termed * bills of credit ' instead of 'certificates,' nothing would have been wanting to bring them within the prohibitory words of the constitution. And can this make any real difference? Is the proposition to be maintained, that the constitution meant to prohibit names and not things ? That a very important act, big with great and ruinous mischief, which is expressly forbidden by words most appropriate for its description, may be performed by the substitution of a name ? That the constitution, in one of its most important provisions, may be openly evaded by giving a new name to an old thing ? We can not think so. We think the certificates emitted under the authority of this act are as entirely bills of credit as if they had been so denominated in the act itself." § 1722. It was contended also that these instruments were not bills of credit, because they were not promises to pay, but promises to receive. But they were made receiv- able for official salaries and fees, and were designed to be used as currency, and thus were bills of credit. § 1723. Being bottomed on a fiLiid does not rendei' the instrument any less a bill of credit. — In the same case, Mr. pledge of its faith, and designed to circulate as money.' Mr. Madison, in a let- ter hereafter to be quoted, says the constitution meant such bills as were issued with a provision that they should be received as a legal tender. In the opinion of Marshall and McLean, the bills were not only to circulate as money, but to con- tain a pledge of the faith of the State to redeem them at some future time with money. Both attributes were necessary to lead to the mischiefs enumerated by Mr. Madison in the 44th number, p. 207, of the ' Federalist,' and both must have existed to render the bills unconstitutional. The last was especially neces- sar}-. It was not until there was an overissue of these bills, and the State be- came unable to pay them in money, or in some mode satisfactor)- to the holder, that the mischiefs began. Then, indeed, when the bills became irredeemable, they became worthless as a medium of exchange and a nuisance to society. Could the State have redeemed them in some satisfactory mode, no harm would have ensued. The plan here proposed is liable to no such objection, and does not come within the mischief sought to be prevented. There is no promise to pay this bill ; the holder is to be allowed to fund it in a convertible bond of the State, which may always be done." Mr. Hunter appends Mr. Madison's letter, dated Montpelier, Februarj" 2, 1831, and found on page 210 of" Selections from Private Correspondence of James Madison, from 18 13 to 1836," published by J. C. McGuire, exclusively for private circulation, wherein Mr. ^ladison says : "The evil which produced the prohibitory clause in the constitution of the United States was the practice of the States in making bills of credit, and in some instances appraised property, a legal tender." 734 BILLS OF CREDIT. § '^7^Z' Justice Thompson, dissenting, thought that the natural and literal meaning of the term " bills of credit " imported bills drawn on credit merely, and not bottomed upon any real or substantial fund for their redemption. - But although secured by a fund, the bill is nevertheless issued upon, and received upon, the credit of the State — the belief and faith that the State will pay them. Should the fund fail or be diverted, the credit of the State would still be pledged to their redemption ; and even if the fund were mainly the source of the creditor's reliance, he would still look to the State, and credit it, to make faithful appropriation.^ The circumstance, however, that a fund was appropriated to their redemption has been adverted to, amongst others, in subsequent cases, as decisive of the question that such bills were not bills of credit.^ In Louisiana, papers of the character indicated in the subjoined opinion of the court were adjudged bills of credit.^ ' Story on the Constitution, § 1368, vol. ii. ^ Darrington v. Alabama, 13 How., 16. 'City National Bank v. Mahan, 21 La. Ann., 753 (1869), Ludeling, C. J. : '' Section I of the Act of 1866 provides ' that it shall be the duty of the governor, and he is hereby empowered to issue, on behalf of the State, from time to time, for the purpose of paying the current expenses of the State, in accordance with appropriations therefor, according to law, a sum not exceeding two millions of dollars in certificates of indebtedness.' " " That they were issued on the faith of the State is apparent on the face of the certificates : " ' New Orleans, Louisiana, May 23, 1866. " ' It is hereby certified that five dollars is due by the State of Louisiana to bearer, and the State Treasurer is hereby directed to pay the same twelve months after date. " ' (Signed) H. Peralta, Auditor. " ' Approved : Adam Giffen, Treasurer.' " "Indorsement. — ' This certificate is receivable in payment of all State dues and for sale of public lands, and is fundable, at the option of the holder, in State bonds bearing six per cent, interest per annum, payable semi-annually, in ac- cordance with the provisions of an act of the legislature approved ninth Febru- ary, 1866.' " " That ihey were designed to circulate as money is manifested by the act of the legislature as well as by the certificates themselves. The act aforesaid declares the certificates are to be issued ' for the purpose of paying the current expenses of the State.' Section two declares that the governor shall determine the denomination and form of the certificates ; that they shall be printed and engraved under his direction and control, etc., and that they shall be receivable for all State taxes or other public dues, as well as for the sale of public lands.' They were issued in sums of five, ten, and twenty dollars, in the § 1724- WHAT ARE NOT BILLS OF CREDIT. 735 SECTION 11. WHAT ARE NOT BILLS OF CREDIT. § 1724. The States 07ily prohibited from emitting them — -corporations and private parties may do so. — We have already defined bills of credit, as they are understood within the meaning of the constitution. The inhibition contained in that instrument is limited to the States ; and although the bill may be designed to circulate as currency, if it be not emitted by a State, it is as free from impeachment, as in violation of the constitution, as any other negotiable paper. A State may therefore grant acts of incorporation author- izing banks or other associations to issue that description of paper to answer the purposes of money, and it may be issued by private persons and partnerships. This was de- termined by the United States Supreme Court in a case involving an act of the legislature of Kentucky, which in- corporated the " Bank of the Commonwealth of Kentucky," in behalf of the Commonwealth, the president and direct- ors of which were chosen by the legislature.^ The bank was authorized to issue negotiable notes to the amount of three millions of dollars, which were declared to be receiv- able at the treasury and by public officers in payment of taxes, debts, and county levies, and in discharge of executions of fie7'i facias. They were in denominations of from one to one hundred dollars. It was contended that these notes were bills of credit emitted by the Commonwealth of Ken- tucky, and that the paper medium of the country was in- tended to be embraced in the constitutional inhibition. similitude of ordinary bank bills, and they were actually circulated as money. We are constrained, therefore, to declare that said certificates were bills of credit, and that the act number five of the General Assembly of the State ot Louisiana, entitled 'An Act to authorize the issue of certificates of indebtedness and of bonds for the funding- of the same,' is null and void, being- a contraven- tion of section ten of article one of the constitution of the United States." " Briscoe v. Bank of Kentucky, 1 1 Pet., 328, Story, J., dissenting. •^^S BILLS OF CREDIT. ^ 1 725. But the court held otherwise, McLean, J., saying : " If this argument be correct, and the position that a State can not do indirectly what it is prohibited from doing directly be a sound one, then it must follow, as a necessary conse- quence, that all banks incorporated by a State are uncon- stitutional. This doctrine is startling, as it strikes a fatal blow against the State banks, which have a capital of nearly four hundred millions of dollars, and which supply almost the entire circulating medium of the country The Federal government is one of delegated powers. All pow- ers not delegated to it, or inhibited to the States, are re- served to the . States, or to the people. A State can not emit bills of credit, or, in other words, it can not issue that description of paper to answer the purposes of money which was denominated, before the adoption of the consti- tution, bills of credit. But a State may grant acts of in- corporation for the attainment of those objects which are essential to the interests of society. This power is incident to sovereignty ; and there is no limitation in the Federal Constitution on its exercise by the States in respect to the incorporation of banks." § 1 725. In subsequent cases this view has been reaffirmed ; and it is decided that, although a State may supply the whole capital of the bank, may be its only stockholder, select the directory, and receive the profits, if any be realized, and may make the bills receivable for debts and taxes, the bills of the bank can not be called bills of credit issued by the State, not being made payable by the State, but by the bank only.^ And the doctrine has been carried to the extent of holding such instruments valid, even though the State may pledge its faith for their ultimate redemption. In a case of this kind the Supreme Court said : " It is impossible to say that bills of this kind come within the definition of bills of ' Woodruff V. Trapnall, 10 How., 203 (1850) ; see, also, Curran v. Arkansas, 15 How., 304 (1853). § 1726. WHAT ARE NOT BILLS OF CREDIT. 'Jl'J credit"; and the reasons assigned were, that upon the face of the bills there was no promise to pay by the State, but an express promise by the bank ; that the bank had an ample fund for their redemption ; that the guaranty of eventual payment of the notes by the bank was remote and contin- gent, and merely formal, if the bank were properly con- ducted ; and that because the State received the profits, it could be no more said that it issued the notes than that a private stockholder issued the notes of his bank.^ § 1726. Not every promissory note, however, issued by the State constitutes a bill of credit. Bonds of the States are frequently issued with coupons attached for instalments of interest. They are not bills of credit, because not is- sued to circulate as money, but to pay actual indebtedness in a convenient form.^ And the fact that they are made receivable for dues to the State does not make them bills of credit.^ ■ Uarrington v. Alabama, 13 How., 15-17 (1851) ; to same effect, see Owen v. Branch Bank, 3 Ala., 258, * McCoy V. Washington Co., 3 Wall., Jr., 389. See next note, and post, § 1491- ' Antoni v. Wright, 22 Grat., 833 ; Wise v. Rogers, 24 Grat., 169 ; Maury v. Rogers, Id. ; see chapter XVI, on Governments as Parties to Negotiable Instru- ments, § 449, vol. I. VUL. II.— 47 CHAPTER LIV. BILLS OF LADING. SECTION I. DEFINITION AND NATURE OF BILLS OF LADING. § 1727. Bills of lading are generally classed among ne- gotiable instruments, and are frequently spoken of as ne- gotiable, like bills of exchange, by text writers and by jurists of high reputation and authority.^ But while they are assignable, and possess certain capacities of negotia- tion, which assimilate them quite closely in some respects to negotiable instruments, they are not negotiable in the same sense as bills of exchange or negotiable promissory notes.^ And it is more correct to speak of them as quasi negotiable instruments, since they are rather like than of them.^ This close resemblance to instruments strictly ne- gotiable, and the frequent use made of them in commer- cial transactions, in connection with bills of exchange, suf- ficiently identifies them with the subject of this treatise to render a consideration of their leading characteristics de- sirable. § 1728. As to their definition and 7iature. — A bill of lading may be defined to be a written acknowledgment by • Lickbarrow v. Mason, 2 T. R., 63 ; Berkling v. Watling, 7 Ad. & E„ 22 ; Bell V. Moss, 5 Whart., 189. * Gurney v. Behrend, 3 E. & B., 622 ; 23 L. J. Q. B., 265 ; Barnard v. Camp- bell, 55 N. Y., 462 ; I Smith's Lead. Cas., 890. ' Schouler's Personal Property, 410, 605 ; Davenport Natl. Bank v. Homeyer, 45 Mo., 145 ; Blanchard v. Page, 8 Gray, 297 ; National Bank v. Merchants' Nat. Bank, i Otto (91 U. S.), 98. As to negotiability by statute, see § 1747a. There is quite a comprehensive and interesting article on bills of lading in the Central Law Journal tor January 13th, 1882, p. 24, vol. 14, No. 2. (738) § 1729- DEFINITION AND NATURE OF BILLS OF LADING. ^ 2>L, the master of a ship, or the representative of any common carrier, that he has received the goods therein described for the voyage or journey stated, to be carried upon the terms and delivered to the persons therein specified. • It is at once a receipt for the goods which renders the carrier responsi- ble as their custodian, and an express written contract for their transportation and delivery.^ And to facilitate com- mercial transactions, it has grown to be regarded as the symbolical representative of the goods which it describes ; and its transfer carries with it such rights as the party in possession of the goods could transmit by actual corporeal transfer of the goods themselves. § I 729. Bill of lading is prima facie evidence of quan- tity and quality of goods received. — The bill of lading is clearly a receipt for the goods, accompanied with a promise to redeem them to the bailor, or according to his order.^ And while the master of the ship, or the agent of the car- rier, has no authority to sign bills of lading for a greater quantity, or different quality, of goods than is actually received, yet the bill of lading is sufficient prima facie evidence of the truth of its contents as against the master or owner of the ship, or other carrier, not only as to the reception of the merchandise, but also as to any material fact stated, respecting the quantity, or quality, or any other element in the description of the goods.^ And very clear proof would be required to show that the goods receipted for were not in fact received.* The law applica- ' See on the subject, Schouler's Personal Property, 408 ; Redfield on Carriers, §247 ; I Smith's Lead. Cas., 879 et scq. ; Benjamin on Sales, 656. ' Knox V. The Nivclla, Crabbe, 534. ' Leggett on Bills of Lading, 108 ; Nelson v. Woodruff, i Black, U. S. S. C, 156; The J. W. Brown, i Biss., 76; O'Brien v. Gilchrist, 34 Me., 554; May v. Babcock, 4 Ohio O. S., 346 (1829) ; Clark v. Barnwell, 12 How., 272 ; Rich v. Lambert, Id., 347 ; Great Western l^.R. v. McDonald, 18 111., 172; The Lady Franklin, 8 Wall., 325 ; Redfield on Carriers, §§247, 259; Bates v. Todd, i M. &: Rob., 106; Dickerson v. Seelye, 12 Barb., 102; Wayland v. Mosely, 5 Ala., 430; Woife V. Myers, 3 Sandf., 7 ; Greenleaf on Ev., § 305 ; Abbe v. Eaton, 51 N. Y., 410; Meyer v. Peck, 28 N. Y., 590; Berkley v. 'Watling, 7 Ad. &: E., 29 Hubbersty v. Ward, 8 Exch., 330; Campion v. Colvin, 3 Bing., N. C, 17. * Little Miami, etc., R.R. v. Dodds, i Cin. (Ohio), 47. 740 BILLS OF L\DING, § 1729^. ble to this question, in so far as it relates to the condition of the goods received, has been well stated in Massachu- setts by Shaw, C. J.^ § I 729^2. Hoiv fai^, and as against whoni', a bill of lad- ing is conclusive evidence of the quantity of the goods re- ceived. — As between the immediate parties to the bill of lading, and in so far as it is a receipt for the goods defining their quantity, quality, etc., it is open to explanation and contradiction by parol evidence or otherwise ; ^ though its contracting terms are like those of any other contract sub- ject to the general principle that a written contract can not be varied or contradicted by parol testimony.^ As against the master of the ship the bill of lading is conclusive evidence, in favor of a consignee who has ad- vanced money upon the faith of its statements as to the quantity and condition of the property of which it ac- knowledges the receipt, so far as from the whole instru- ment and the usage of trade the facts may be regarded as absolute statements from the master's own knowledge;^ ' Hastings v. Pepper, 1 1 Pick., 43, Shaw, C. J., saying : " It may be taken to be perfectly well established that the signing of a bill of lading, acknowledging to have received the goods in question in good order, is prima facie evidence, that as to all circumstances which were open to inspection and visible, the goods were in good order ; but it does not preclude the carrier from showing, in case of loss or damage, that the loss proceeded from some cause which existed, but was not apparent, when he received the goods, and which, if shown satisfacto- rily, will discharge the carrier from liability. But in case of such loss or damage the presumption of law is, that it was occasioned by default of the carrier, and of course the burden of proof is upon him to show that it arose from a cause existing before his receipt of the goods for carriage, and for which he is not re- sponsible." See Nelson v. Woodruff, i Black, U. S. S. C, 160 ; Clark v. Barn- well, 12 Howard, 272; Rich v. Lambert, 12 Howard, 347; Farra v. Adams, Buller N. P., 69; post, § 1742. * The Lady Frankhn, 8 Wall, 325 ; The Delaware, 14 Wall., 579 ; Grace v. Adams, 100 Mass., 505; Sears v. Wingate, 3 Allen, 103; Abbe v. Eaton, 51 N. Y., 410; Meyer v. Peck, 28 N. Y., 590; Bissel v. Campbell, 54 N. Y., 356 ; Dickerson v. Seelye, 12 Barb., 102 ; Cox v. Peterson, 30 Ala., 608 ; Bates v. Todd, I Mood & R., 106 ; Wharton on Evidence, § 1070. 'York Co. V. Central R.R., 3 Wall., 107; The Lady Franklin, 8 Wall., 325; Cincinnati, etc., R.R. v. Pontius, 19 Ohio St., 221 ; Bank of Ky. v. Adams Ex- press Co., 93 U. S., 174; Kirkland v. Dinsmore, 62 N. Y., 171 ; Dorr v. New Jersey, etc., Co., 11 N. Y., 485 ; Grace v. Adams, 100 Mass., 505 ; Wharton on Evidence, § 1070 ; post, § 1740. * Sears v. Wingate, 3 Allen, 103. St& post, § 1733 ; see also Brown v. Powell Coal Co., 10 C. P. L. R., 562. § I730- DEFINITION AND NATURE OF BILLS OF LADING. 74I but it is not conclusive against the owners of the ship as to property not actually received, because it is not within the scope of the master's authority from the owners to sign bills of lading for any property but such as is put on board.^ When the master of the ship, or agent of the carrier, issues a bill of lading without receiving the goods at all, the same principle is deemed applicable, as is here- after shown. ^ But if the carrier or its authorized agent issues the bill of lading containing the words "quantity guaranteed," the carrier will be responsible for the quantity specified to the consignee, the terms of the bill being conclusive.' § 1 730. How the effect of a bill of lading is a7ialog07is to that of a negotiable instrument. When right of stoppage in transitu is defeated. — The idea that bills of lading are negotiable arose from the use to which they were ap- propriated, in the transfer of goods purchased, before they were delivered to the purchaser, or before they were paid for ; but it will be seen that their peculiar properties are attributable rather to a liberal application of the doctrine of equitable estoppel for the benefit of trade, than to any custom or statute which placed them upon the footing of negotiable instruments,'* for both of these sources of negotiability are wanting. The consignor of goods shipped takes from the master of the ship a bill of lading, ' Sears v. Wingate, 3 Allen, 103 ; The Loan, 7 Blatchford, 244. In Sears v. Wingate, 3 Allen, 107, Hoar, J., said : " We think that the rules which must govern the case at bar are these : First. The receipt in the bill of lading is open to explanation between the master and the shipper of the goods. Second. The master is estopped as against a consignee who is not a party to the con- tract, and as against an assignee of the bill of lading, when either has taken it for a valuable consideration upon the faith of the acknowledgments which it contains, to deny the truth of the statements to which he has given credit by his signature, so far as those statements relate to matters which are, or ought to be, within his knowledge. Third. When the master is acting within the limits of his authority, the owners are estopped in like manner with him ; but it is not within the general scope of the master's authority to sign bills of lading for any goods not actually received on board." ' See post, % 1733. ' Bissel v. Campbell, 54 N. Y., 353. * I Smith's Leading Cases, 897. 742 BILLS OF LADING. § ^73^- and sending it to the consignee who has ordered the goods, draws upon him by bill of exchange for the purchase money. Before the goods reach their destination the consignor, who in the case instanced is the vendor of the ^goods, learns that the vendee is insolvent ; and to prevent the injustice which would be done, if, in consequence of the vendee's in- solvency, and while the price is yet unpaid, they were to be seized upon in satisfaction of his liabilities, the law con- fers upon the vendor the right to stop the goods in tran- situ, and to retain them until the whole purchase money is paid.^ But suppose the consignee has received the bill of lading of the goods, deliverable to him or his assigns, or indorsed to him or his assigns, by the consignor, and has assigned the bill by indorsement to a bojia fide third party, then the vendor's right to stop the goods in transitu and hold them as security for the purchase money is defeated, and the as- signee of the bill acquires as perfect a title to the goods, although they have not reached the buyers hands, as if they had actually passed through his hands and been deliv- ered bodily to him. This was decided in the leading case of Lickbarrow v. Mason,^ and may now be regarded as the ' Gibson v. Carmthers, 8 M. & W., 336 ; Snee v. Prescott, i Atk., 246 ; D'Aquila v. Lambert, 2 Eden, 95 ; Amb., 39. - In I Smith's Leading Cases, 895, 896, it is said by the learned American an- notators in the course of their masterly comments on Lickbarrow v. Mason : " It would seem evident from what has been said, that Lickbarrow v. Mason should not be considered as going beyond the only point which it actually de- termines, that the right of a vendor to stop in tra7isitti may be defeated by a sale made by the vendee, accompanied by a transfer of the bill of lading, and not treated as giving bills of lading the character of negotiable instruments, which was wholly unnecessary for the purposes of the decision. For, as the property passes under such circumstances by the sale, the indorsement of the bill has no other effect than that of defeating the right of the vendor to reclaim it, by operating as a constructive and symbolic delivery. The utmost, therefore, that' this decision establishes, is an exception to the rule, that an unpaid vendor has a right to stop in transitu, an exception and a rule which have nothing in common with the' negotiability, either of the bill of lading or of the property which it represents. Nothing can, in fact, be a greater departure from the prin- ciples and analogies of the common law, than to treat bills of lading or other documentary evidences of title to chattels personal as negotiable instruments. In- struments which represent choses in action may be negotiable, because the right can not be separated from the instrument, and has no distinct or actual physical j 1730^-?. DEFINITION AND NATURE OF BILLS OF LADING. 743 settled law of England and of the United States.^ But this capacity of the bill of lading for transferring the right of property, under these circumstances, does not imply that it is a negotiable instrument to all intents and purposes.' The assignee of the bill of lading is protected because the vendor of the goods has placed in the hands of his assignor a muniment of title, clothing him with apparent ownership of the goods, and it is unequitable that a secret trust should be enforced in favor of the vendor, who has issued such muniment of title against a person who has taken an as- signment of it for valuable consideration, atid without no- tice of such circumstances as render it not fairly and honestly assignable.^ § 1730^. IV/ien right of stoppage in trajtsitu ceases. — If the goods had actually reached the consignee, and he were to sell them to a third party, although they might be un- paid for, such third party would acquire a perfect title against the world.^ 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? And after goods have reached the consignee, the right of stoppage in existence. And even there, negotiability only exists in the case of absolute promises for the payment of money, a thing negotiable in itself, and which can not be reclaimed by the true owner from any one who has received it bona fide and in exchange for a valuable consideration. But chattels personal are wholly insusceptible of negotiation in themselves, and it is manifestly inconsistent to give the documents which represent them a different character The re- sult of the cases, therefore, as a whole, seems to be that, while, on the one hand, the possession of bills of lading or other documents of the same nature, may be evidence of title, and equivalent for some purposes to actual possession, yet, that on the other, it does not constitute title, nor dispense with the rule nemo plus juris ad all urn transferre potest, qiiatn ipse habet." ' Newhall v. Central P. R.R. Co., 51 Cal., 345 ; Emery v. Irving N. B., 25 Ohio St., 360; Dows V. Greene, 24 N. Y., 641 ; Gumey v. Behrend, 2 El. & B., 622; 2 Redfield on Railroads, 160, 161 ; Becker v. Hallgarten, 86 N. Y., 167. "^ See Shaw v. Railroad Co,, loi U. S. (11 Otto), 564, s^wApost, § 1750^. 'Brewster v. Sime, 42 Cal., 130; Newhall v. Central R R.R. Co., 51 Cal., 345, * Ilsey v. Stubbs. 49 Mass., 65 ; Winslow v. Norton, 29 Me,, 419- Nathan v Giles, 5 Taunt., 588 ; Becker v. Hallgarten, 86 N. Y., 167. ' Craven v. Ryder, 6 Taunt., 433 ; Holmes v. Crane, 2 Pick., 606, 744 BILLS OF LADING. § 1 73 1. transittt-, as its very terms import, is at an end.^ To stop them while in transitu is an equitable remedy, first applied by courts of equity in order to prevent injustice to the ven- dor ; but, on the other hand, it is considered that if the vendor has chosen to transmit to his vendee the document- ary evidence of title to the goods, accompanied with au- thority (which a bill of lading imports) to vest the same in his assignee, and he has done so before the goods have reached their destination, then the equitable right to stop them must yield to the broader and more commanding equity of the '%ona fide purchaser of the bill of lading to hold them as his own.^ § 1 73 1. Transfer of bill of lading passes title to prop- erty in same manner as a delivery of the goods. — Thus the bill of lading passes the property, when it is indorsed and intended so to operate, in the same manner as a direct de- livery of the goods would do if so intended, and it operates no further.^ It constitutes a symbolic and constructive delivery of the goods,'* being the proper substitute for the actual delivery of goods at the time at sea en roiUe to the consignee, and the arrival and delivery of which the con- signor has placed it in his power by the bill of lading to anticipate.^ § 1731^. When bill of lading becomes functus officio. — The bill of lading being the substitute and symbolic repre- sentative of the goods, not physically delivered at the time * Edwards v. Brewer, 2 M. & W., 375 ; Nicholls v. Lefevre, 2 Bing. N. C, 83 ; Turner v. Trustees, 6 Eng. L. & Eq., 515 ; Sturtevant v. Orser, 24 N. Y., 539. "^ I Smith's Leading Cases, 891. ^ Newsom v. Thornton, 6 East., 41 ; Gardner v. Rowland, 2 Pick., 599 ; Mears V. Waples, 3 Houst. (Del), 582 ; Empire Trans. Co. v. Steele, 70 Penn. St., 190 ; Mower v. Peabody, 3 Kern., 121 ; Indiana, etc., Bank v. Colgate, 4 Daly, 41 ; Emery V. Irving Nat. Bank, 25 Ohio St., 360 ; Newhall v. Central P. R.R., 51 Cal., 345 ; Dows v. Greene, 24 N. Y., 638. * Mechanics', etc.. Bank v. Farmers', etc.. Bank, 60 N. Y.,47, Miller, J. : "The delivery of the bill of lading to the plaintiff was a good symbolical deliver}' of the grain, and the plaintiff thereby acquired a lien upon it, or title to it, and was fully authorized to hold it until the loan was paid." " Pratt v. Parkman, 24 Pick., 42. § I732. DEFINITION AND NATURE OF BILLS OF LADING. 745 it is issued, continues to represent them until they have reached the hands of the party entitled to their possession. It becomes /unc^us officio as soon as the goods are landed and delivered to the person entitled to possession ; and if they are landed and warehoused in the name of the holder it seems that he is then possessed of the goods in the eye of the law, and that he deriv^es his power over them there- after, not from the bill of lading, but from such possession.^ But it has been held in England that under the statute of II and 12 Victoria, c. 1 8, which is known as the Sufferance Wharves Act, the bill of lading continues to represent the goods at a sufferance wharf until replaced by the wharfin- ger's warrant.^ In brief, the bill of lading is exhausted, and does not become fundics officio until there is a delivery of the goods ; and there can be no complete delivery of the goods until they come into possession of some person who has the right of possession under it.^ The indorsement and delivery of a bill of lading while current to a bank as col- lateral security for paper discounted on its faith and credit operates the same as a delivery of the goods ; and the bank can hold them so far as necessary to pay the discounted paper as against the consignee or any other person.* § 1 732. As to who may issue a bill of lading. — This may be done by any common carrier, as well by one which car- ries by land as by water, though the term " bill of lading" ' Hatfield v. Phillips, 9 M. & W., 467 ; Mottram v. Heyer, 5 Denio, 632. ^ Meyerstein v. Barber, L. R., 2 C. P., 661 ; 36 L. J. C. P.,' 361, Martin, B., saying : " For many years past there have been two symbols of property of goods imported ; the one the bill of lading, the other the wharfinger's certificate or warrant. Until the latter is issued by the wharfinger the former remains the only symbo' of property in the goods." In New York the factor's act of 1830 protects one who makes advances upon the faith of the documentary evidence of title furnished by a warehouseman keeper's receipt of imported goods procured by a factor by his being intrusted with an invoice of the goods, although the invoice shows that the goods belonged to the shipper. Cartwright v. Wilder- ming, 24 N. Y., 521. * Heiskell v. Farmers', etc., Bank, 89 Penn. St., 155 ; IMeyerstein v. Barber, L. R., 2 C. P., 661 ; 36 L. J. C. P., 361 ; Leggett on Bills of Lading ; Benjamin on Sales, 622. * First Nat. Bank v. Kelly, 57 N. Y., 34. St^post, § 1734a. 746 BILLS OF LADING. § 1 733 seems to have had its origin from the act of " lading " ves- sels, which in the early days of commerce were the most frequent vehicles of trade. Railroad corporations,^ express companies,^ and all other common carriers -may issue such a bill. The bill of lading must be issued by the carrier or its representative. If the paper be signed by the consignor only, it is not a bill of lading.^ The obligation of the carrier to give on receiving goods a bill of lading, extends only to acknowledging the receipt of the goods, and expressing the promise to carry and de- liver them. He is not bound to specify the freight.* § '^72)?)' Whether carrier is bound by bill of lading issned by master of ship, or other agent, when the goods are not in fact received. — Although the bill of lading is signed by the master of the ship, or other agent of the carrier who undertakes the transportation of the goods, the subscription is as accent for the carrier, and the contract, in so far as it is within the scope of the agency, is binding upon the carrier But according to the English authorities, and to the weight and general current of the American authorities also, the master of the ship, or other shipping agent of the carrier, has no implied authority to grant a bill of lading unless the goods are actually received by him for transportation. He is an agent with limited authority, and parties dealing with the bill of ladino^ are chargeable with notice of the limita- tion. And if the master of the ship or other shipping agent, transcend his authority and issue a bill of lading for goods which are not actually shipped, the ship-owners or other carriers, represented by the master or other shipping ' Stevens v. Boston, etc., R.R. Co., 8 Gray, 262 ; Illinois Central Railroad Co. V. Owens, 53 111., 391 ; Lawrence v. N. Y., etc., R.R. Co., 36 Conn., 63 ; Stein- weg V. Erie R.R. Co., 43 N. Y., 123 ; Worden v. Bemis, 32 Conn., 268. '^ Grace v. Adams, 100 Mass., 505. ' Gage v. Jaqueth, i Lans., 207, * The May Flower, 3 Ware, 300. ^ Ferguson v. Coppeau, 6 Har. & J., 394. ^ 1733^. DEFINITION AND NATURE OF BILLS OF LADING. 747 agent, will not be bound by the bill of lading, although it be transferred to a bona fide holder for value without notice.^ The United States Supreme Court, following the English cases, has adopted these views ; and in a recent case reafiiirms its previously expressed conclusion to this effect.^ If the goods were actually received alongside the ship by the servants of the ship-owners, and the master thereupon signed the bills of lading, this would suffice to bind the ship-owners.' And if the goods were not so received as to bind the carrier, the master or other agent issuing the bill of lading would be liable for the consequences of his misrepresen- tation to a person advancing money upon the faith of his statements therein.* § 1733^- Confiicting authorities. Cases maintaining that bill of lading is conclusive evidence against carrier as to receipt of goods. — The decisions which exonerate the carrier from liability when the bill of lading is issued by * See ante, § ij2gn. Grant v. Norway, 20 L. J. C. P., 93 ; 2 Eng. L. & Eq., 337; 10 C. B., 665. See also Hubbersty v. Ward, 18 Eng. L. & Eq., 551 ; Coleman v. Riches, 29 Eng. L. & Eq., 323 ; McLean v. Fleming, L. R., 2 S. Ap., 128; Union, etc., R.R. v. Yeager, 34 Ind., i ; Hall v. ^Layo, 7 Alien, 456 ; Louisiana Bank v. Laveille, 52 Mo., 380; Sears v. Wingate, 3 Allen, 103; Hunt V. Miss. C. R.R., 29 La. An., 449 ; Fellows v. Steamer Powell, 16 La. An., 316 ; B.altimore & Ohio R.R. v. Willcens, 44 Md., 11 ; Dean v. King, 22 Ohio St., 136; Second N. B. v. Walbridge, 19 Ohio St., 419; Robinson v. Memphis, etc., R.R., 9 Fed. R., 129 ; Mackenzie on Bills of Lading, 9 ; Leggett on Bills of Lad- ing, 27. ' The Schooner Freeman v. Buckingham, 18 Howard, 182 ; Pollard v. Vinton, U. S. S. C, 1882, Miller, J., saying: "Before the power to make and deliver a bill of lading could arise, some person must have shipped goods on the vessel. Only then could there be a shipper, and only then could there be goods shipped. In saying this we do not mean that the goods must have been actually placed on the deck of the vessel. If they came within the control and custody of the officers of the boat for the purpose of shipment, the contract of carriage had commenced and the evidence of it in the form of a bill of lading would be bind- ing. But without such a delivery there was no contract of carrying, and the agents of defendant had no authority to make one." See also The Delaware, 14 Wall, 602 ; The Joseph Grant, i Biss., 193; The Bark Edwin, i Sprague, 480. ' McLean v. Fleming, Law R., 2 H. L., 128 ; Bryans v. Nix, 4 M. & W„ 775 ; 8 L. J. Ex., 137 ; British Columbia Mill Co. v. Nestleship, Law R., 3 C. P., 499; Pollard V, Vinton, U. S. S. C, 1882 ; Mackenzie on Bills of Lading, 9. * Lickbarrow v. Mason, 2 T. R., 75 ; Sears v. Wingate, 3 Allen, 103 ; Mac- kenzie on Bills of Lading, 9 ; attie, § 1729a. 748 BILLS OF LADING. § 1733^' his shipping agent without actual receipt of the goods, have met with strong opposition in some cases ; and the carrier has been liable on the ground that the act of issuing the bill is within the scope of general authority -conferred upon the agent, and that if he violates instructions, or in bad faith issues the bill when not in actual receipt of the goods, the principal should be bound to those who act on the faith of the representation contained in k, upon the principle that where one of two innocent parties must suffer, he who has enabled a third person to occasion the loss must sustain it. The master of a ship is generally separated from his principals, and beyond their supervision and control. Roving the seas in commercial enterprises, and often thousands of miles apart from those who trust. him, the policy of the law might well shield his principals from responsibilities, which, were he in a position under their inspection, and subject to their superintendence, it might withhold. And in respect to railroad corporations, express companies, and other carriers by land, whose agents are within view of superior officers, and subject to speedy removal for delinquencies, it might be well contended that their shipping agents, when acting within the apparent scope of authority, would bind their principals, although in the particular case violating actual authority, and committing a breach of trust. These do not appear to be the grounds of dissent from the doctrines heretofore stated in the text. And the cases which maintain the liability of the carrier when the bill of lading is issued by the shipping agent without receipt of the goods, rest upon the broader grounds above set forth, and upon public policy in reference to commercial trans- actions of this kind. In New York, where the agent of a railroad company in Chicago, upon delivery to him of a forged warehouse receipt, issued to M. two bills of lading, each stating the receipt of a quantity of lard con- signed to plaintiffs at New York, to be transported and delivered to them there, it appeared that the agent was in i 5 1734- BILLS DRAWN ON SHIPMENTS. 749 formed that M. intended to use the bills of ladingr at bank. M. drew sight drafts on the plaintiffs in New York, attach- ing to them the bills of lading ; and delivered the drafts to a bank in Chicago, which forwarded them to New York for collection, and there the plaintiffs paid them on presen- tation upon the faith and credit of the bills of lading attached. In an action by the drawees of the drafts against the railroad company upon the bills of lading, it was held that the company was bound by the act of its agent, the same being within the apparent scope of his authority, that it was estopped to deny the actual receipt of the lard, and that the plaintiffs were entitled to recover.* SECTION II. BILLS OF LADING ACCOMPANYING BILLS OF EXCHANGE DRAWN ON SHIPMENTS. § 1 734. Effect of bill of lading sent to consignee with bill of exchange drawn for pttrchase money of goods. — Some- times a bill of lading for the goods shipped in pursuance of > Armour v. Michigan Central R.R. Co., 65 N. Y., in (1875), overruling same case in 3 J. & S., 563. Gray, Commissioner, said : " The well- recognized principle that a party who by his admissions has induced a third party to act in a particular manner, is not permitted to deny the truth of his admission, if the consequence would be to work an injury to such third party, applies to and governs this case." Dwight, Commissioner, said : " Street (the agent), having power to issue bills direct to consignees for goods actually in the possession of the defendant (the railroad company), and the present bills being in no ways distinguishable in form from those which were usually em- ployed, he must be considered as having the necessary authority as to the plaintiffs acting in good faith Grant v. Norway has been subject to much and severe criticism, as being adverse to the general view prevailing in the courts of this State, where confidence has been reposed in an agent, and ap- parent authority conferred upon him, that the principal must suffer from an actual exercise of authority not exceeding the appearance of that which is granted when one of two innocent persons must suffer, in such a case that person must bear the loss who reposed the confidence. So far as Grant v. Norway stands in the way of this doctrine, it must be deemed to be overruled (remarks of Davis, J., in New York, etc., R.R. v. Schuyler, 34 N. Y., T},)." To same effect, see Sioux City and P. R.R. v. First N. B., 10 Nebraska, 556, and Savings Bank v. Atchison, etc., R.R. Co., 20 Kansas, 519. Compare Relyea v. N. H. R. M. Co., 42 Conn., 579. 750 BILLS OF LADING. § 1734^* orders of the consignee, with a bill of exchange drawn by the shipper upon the consignee for the purchase money, are sent in one enclosure to the consignee. In such cases the bill of exchange must be honored by the consignee, other- wise the bill of lading can not be retained ; and if it is re- tained the consignee has no right to the goods.^ § 1734'^. Effect of bill of lading indorsed to payee of bill drawn on vendee for purchase money. — Frequently the con- signor of the goods takes a bill of lading from the carrier, draws a bill payable on demand upon the vendee for the price, and delivers the bill of exchange with the bill of ladinof attached to an indorser for value of the bill of lading. In such cases the consignee upon the receipt of the goods, takes them subject to the right of the holder of the bill of lading to demand payment of the bill of exchange ;^ and the consignee can not retain the price of the goods on account of a debt due to him from the consignee.^ If the goods be deliverable by the terms of the bill of lading to the consignee, or his order, the person to whom it is transferred by the consignor w^ould be charged with notice of the rights of the con- signee ; and on the other hand, if the bill of lading be drawn to the use of the consignor, or his order, the consignee would be charged with notice of the rights of those to wdiom the bill of lading may have been transferred. But in either case the question is open to inquiry as to what such rights may be, and can be determined only by inquiry into the real nature and character of the transaction.* ' Shepherd v. Harrison, L. R., 4 Q. B., 197 ; 5 H. L., 116; Marine Bank v. Wright, 48 N. Y., I ; Indiana, etc., Bank v. Colgate, 4 Daly, 41 ; Leggett on Bills of Lading, 363. ' Emery v. Irving Nat. Bank, 25 Ohio St., 255; Heiskell v. Farmers', etc., Bank, 89 Penn. St., 155 ; Dows v. Nat. Exchange Bank, 91 U. S. (i Otto), 631 ; National Bank v. Merchants' Bank, 91 U. S. (i Otto), 98. ' Emery v. Irving Nat. Bank, 25 Ohio St., 255. *■ Emery v. Irving Nat. Bank, 25 Ohio St., 255. See Dows v. National Ex- change Bank, 91 U. S. (l Otto), 631. (I § I734'^-. BILLS DRAWN ON SHIPMENTS. 75 1 In a case before the U. S. Supreme Court it appeared that McLaren & Co., of Milwaukee, Wis., purchased and paid for wheat on account of Smith & Co., of Oswego, N. Y., and took bills of lading describing themselves as shippers,- deliverable to Fitch, cashier of Merchants' Bank, Water- town, N. Y. McLaren & Co. presented drafts drawn on Smith «Sl Co., with the bills of lading attached thereto, to the National Exchange Bank of Milwaukee, which dis- counted the drafts, and by indorsement on the bills of lad- ing directed the wheat to be delivered to Smith & Co. upon payment of the drafts, and they sent invoices of the ship- ment to Smith & Co. It was held that McLaren & Co. remained owners of the wheat, notwithstanding their trans- mission of invoices to Smith & Co. ; that as owners they had a right to transfer it, and the bills of lading represent- ing it, to the National Exchange Bank, as a security for the acceptance and payment of the drafts drawn for the price ; that the bills of lading unexplained were almost conclusive proof of an intention to reserve to the shipper the jus dis- ponendi, and prevent the property in the wheat from pass- ing to the drawees of the drafts ; and that the bank which discounted the drafts, with the bills of lading attached, di- recting Fitch, the agent, to deliver the wheat upon their pay- ment, acquired a special property in the goods, and a com- plete right to hold them as security for acceptance and payment of the drafts.^ In a New York case it appeared that V., at Chicago, transferred to the Marine Bank a bill of lading for corn shipped to Wright in New York, the bank discounting a draft at sight drawn on the faith and credit of the bill of lading. Hunt, commissioner, giving the opinion of the court, said : " The transfer of the bill of lading to the plain- 'Dows V. National Exchange Bank, 91 U. S. (i Otto), 618. See. also Jenkins V. Brown, 14 Q. B., 496; Turner v. Trustees of the Liverpool Docks, 6 Exch., 543 ; Schorman v. R.R. Co., L. R., 2 Ch. App., 336 ; EUerslaw v. Magniac, 6 Exch., 570. 752 BILLS OF LADING. § 1 734^. tiff (the bank) under the circumstances stated, transferred also the title to the corn described in it. The transfer was conditional and limited, to wit : to provide for and until the acceptance of the draft. The title would then pass to the acceptor as their security, and the plaintiffs' security would be transferred to the personal liabihty of the defen- dants as acceptors. The defendants having refused to ac- cept the draft, the title of the plaintiff to the corn remained unimpaired."^ § I 734<^. Effect of bill of lading deliverable to order at- tached to draft sent to agent for collection. — In some cases the consignor of the goods sends the bill of lading to the consignee, and awaits a future settlement of the purchase money. And in others still the consignor retains the bill of lading drawn deliverable to his own order, and indorses it to an agent, accompanied with a bill of exchange drawn on the vendee for the purchase money of the goods, and with instructions to the agent to hold the bill of lading until the bill of exchange is paid. An acceptance of the bill of exchange, in such cases, will not entitle the vendee to the goods. It must be paid before title to the goods vests in him ; and if the carrier deliver the goods to the consignee, the consignor, or the party duly deriving title to the bill of exchange and bill of lading as its security, may recover them from him, or from any person to whom he has pledged or sold them — such delivery being unauthorized ' Marine Bank v. Wright, 48 N. Y., i. In Kelly v. Scripture, 16 N. Y. S. C (9 Hun), 283, it appeared that K. & Co. consigned to S. certain malt for sale on their account ; and after they were in possession of the goods drew a bill of ex- change lor $1,000 in favor of a third person, as an advance on anticipated realiza- tions from the sale. S. sold the malt and neglected to pay the drai't, which the drawers were compelled to take up. It was held that the consignors who drew and paid the draft could follow the proceeds of the sale of the malt and recover them from S., the consignee, and that S. did not cease to be a factor or agent ol the consigniors upon acceptance of the draft. Brady, J., who delivered the opmion of the court, distinguished and explained the cases of F. & N. Nat. Bank v. Sprague, 52 N. Y., 605, and German Bank v. Edwards, 53 N. Y., 541. As to the New York Factors' Act (§ 3, chap. 179, Laws of 1830) see First N. B. V. Shaw, 61 N. Y., 283 ; M. & T. Bank v. F. & M. Bank, 60 N. Y., 41 ; Cart- wright V. Wildemiing, 24 N. Y., 521. § l']Z\b. BILLS DRAWN ON SHIPMENTS. 753 by the terms of the bill of ladinf^, and not passing property on the goods.^ But if there be an agreement between the consignor of the goods and the drawees of the bill of exchange, drawn on time for the purchase money, that the bill of lading shall be surrendered on acceptance of the bill of exchange, a holder of the bill of lading who has become such by in- dorsement of the bill of lading, and by discounting the draft drawn against the property consigned, can acquire no greater rights than the consignor. He has the same rights that the consignor has to demand acceptance of the accom- panying draft, and no more ; and if the consignor can not require such acceptance without surrendering the bill of lading, neither can the holder of the bill of exchange.^ And if a bill of exchange drawn on time be sent to an agent for collection, without special instructions, and with a bill of lading for the goods sold attached thereto, and deliverable to order, there is no implied obligation upon the agent to do more than to require acceptance of the bill of exchange before delivering the bill of lading.^ ' Heiskell v. Farmers', etc., Bank, 89 Penn. St., 155. See also Dows v. Nat. Exchange Bank, 91 U. S. (i Otto), 631 ; Stollcnwerck v. Thacher, 115 Mass., 224; Aldermen v. Eastern R.R., 115 Mass., 233 ; Brandt v. Bowlby, 2 B. & Ad., 932 ; Seymour v. Norton, 105 Mass., 272 ; Leggett on Bills of Lading, 356. "^ National Bank v. Merchants' Bank, 91 U. S. (i Otto), 93. * National Bank v. Merchants' Bank, 91 U. S. (i Otto), 94, Strong, J., saying: " The fundamental question in this case is, whether a bill of lading of merchan- dise deliverable to order, when attached to a time draft, and forwarded with the draft to an agent for collection, without any special instructions, may be sur- rendered to the drawee on his acceptance of the draft, or whether the agent's duty is to hold the bill of lading after acceptance for the payment It seems to be a natural inference, indeed a necessary implication, from a time draft accompanied by a bill of lading indorsed in blank, that the merchandise (which in this case was cotton) specified in the bill was sold on credit, to be paid for by the accepted draft, or that the draft is a demand for an advance on the shipment, or that the transaction is a consignment to be sold by the drawee on account of the shipper. It is difficult to conceive of any other meaning the instrument can have. If so, in the absence of any express a<^ree)Hent to the con- trary, the acceptor, if a purchaser, is clearly entitled to the possession of the goods on his accepting the bill, and thus giving the vendor a completed contract for payment If the inference to be drawn from a time draft accom- panied by a bill of lading is, not that it evidences a credit sale, but a request for advances on the credit of the consignment, the consequence is the same. Perhaps it is even more apparent. It plainly is, that the acceptance is not Vol. II.— 48 754 BILLS OF LADING. § 1734^. § 1734^. It follows from the foregoing statement of principles applicable to the questions under consideration : First : That the indorsee of a bill of lading attached to a draft which he acquires upon the faith and credit of the bill of lading, takes it subject to the agreement between the consignor and consignee of the goods ; and that if the consignor has the right to withhold the bill of lading until the draft is paid, the bona fide holder of the draft has the same right.-' Second : That in the absence of a special agreement, a time draft with a bill of lading for the goods, for or on account of which it is drawn, indicates that the bill of lading is to be surrendered to the drawee of the draft upon its acceptance ; and that the holder of the draft can not withhold its delivery when the acceptance is given, unless the shipper of the goods had a right to do so.^ asked on the credit of the drawer of the draft, but on the faith of the consig-nment Nor can it make any difference that the draft with the bill of lading has been sent (as in this case) ' for collection.' That in- struction means, simply to rebut the inference from the indorsement that the agent is the owner of the draft. It indicates an agency. Sweeney v. Easter, i Wall., 166. It does not conflict with the plain inference from the draft and accompanying bill of lading, that the former was a request for a promise to pay at a future time for goods sold on credit, or a request to make advances on the faith of the described consignment, or a request to sell on account of the shipper. By such a transmission to the agent he is instructed to collect the money men - tioned in the draft, not to collect the bill of lading ; and the first step in the col- lection is procuring acceptance of the draft. The agent is, therefore, authorized to do all which is necessary to obtaining such acceptance. If the drawee is not bound to accept without the surrender to him of the consigned property, or of the bill of lading, it is the duty of the agent to make that surrender ; and if he fails to perform this duty, and in consequence thereof acceptance be refused, the drawer and indorsers of the draft are discharged." In his learned and compre- hensive opinion, Justice Strong cited, in support of his views, Lanfear v. Blos- som, I La. An., 148, and Wisconsin M. & F. Fire Ins. Co. v. Bank of British N. A., 21 Upper Canada O. B., 284, which are in point ; and also Shepherd v. Harrison, L. R., 4 O. B.,'493 ; 5 H. L., 133 ; Coventry v. Gladstone, 4 L. R. Eq., 493; Schuhardt v. llall, 39 Md., 590; Marine Bank v. Wright, 48 N. Y., i Cayuga Bank v. Daniels, 47 N. Y., 631 ; Gurney v. Behrend, 2 El. & B., 622, and other cases. And he distinguished and explained Seymour v. Newton, 105 Mass., 272; Gilbert v. Guignon, L. R., 8 Ch., 16; Newcomb v. Boston, etc., R.R., 115 Mass., 230; Stollenwerck v. Thacher, 115 Mass., 224, and Bank v. Bayley, 115 Mass., 228. 1 Heiskell v. Farmers', etc., Bank, 89 Penn. St., 225 ; Dowsv. Nat. Exchange Bank, 91 U. S. (i Otto), 618; Emery v. Irving N. B., 25 Ohio St., 255 ; Marine Bank v. Wright, 48 N. Y., i. "" National Bank v. Merchants' Bank, 91 U. S. (i Otto), 93 ; Marine Bank v Wright, 48 N. Y., i. § 1734^- BILLS DRAWN ON SHIPMENTS.- 755 Third : That where a bill of exchange is drawn upon a shipment, on time, with the bill of lading attached, the holder can not (at least in the absence of proof of a local usage to the contrary, or of the imminent insolvency of the drawee) require the drawee to accept the bill of exchange, except on the delivery of the bill of lading ; and when in consequence of the refusal of the holder to deliver the bill of lading, acceptance is refused, and the bill of exchange is protested, the protest will be without cause, and the drawer will be discharged.^ Fourth : That the drawee of the bill of exchange attached to the bill of lading is not entitled to the bill of lading or the property therein de- scribed except upon acceptance, or payment of the bill of exchange according to the nature of the case, and the agreement with the shipper of the goods who drew the draft.^ Fifth : That a party discounting a bill of exchange on the faith of the indorsement of a bill of ladins: for sroods deliverable to order acquires the same lien on the goods as security for the draft as he would acquire if the goods themselves were delivered to him instead of the bill of lading.* § 1 734 1/51. TRANSFER OF BILLS OF LADING. "J^J shipper, his obtaining and transferring a bill of lading for them will not vest title in the transferee.^ § 1 75 1. The indorsee of a bill of lading may libel the vessel in which the goods are shipped, for failure to deHver them, though he may be but an agent or trustee for an- other — as, for instance, the cashier of a bank.^ And the consignee of the goods to whom the bill has been indorsed, may not only libel the carrier vessel for its default, but also a vessel by whose tortious collision with the carrier vessel the goods have been lost.^ fraud, is valid as against the party committing the fraud, and is valid to pass and to protect a transfer of the property when there is an absolute delivery as against the vendor till it is rescinded. As against him and in his favor it is a voidable contract, voidable at his election ; as against all other persons it is a valid contract until rescinded. Now, I conceive that the same rule applies to this bill of lading as would apply to a sale and delivery of personal property." Compare Dows v. Perrin, i6 N. Y., 325, and Cartwright v. Wilderming, 24 N. v., 521. ' IMoore v. Robinson, 62 Ala., 537. ^ The Thames, 14 Wall., 98, * The Vaughan, 14 Wall., 258. CHAPTER LV. GUARANTIES, AND THE LAW OF GUARANTY AS APPLICABLE TO NEGOTIABLE INSTRUMENTS. SECTION I. DEFINITION, NATURE, AND CONSTRUCTION OF GUARANTIES. § 1752. A guaranty is defined to be a promise to answer for the payment of some debt, or the performance of some duty, in case of the failure of another person who is, in the first instance, liable to such payment or performance.^ The word guaranty signifies the same as warranty, and both words are derived from the French verb garanth% to un- dertake, and were formerly used as synonymous terms.^ § 1 753. Difference between guaranty and ordinary sure- tyship. — Guaranty is a peculiar kind of suretyship, as is also an indorsement ; but guaranty differs from indorse- ment, and it differs also from the ordinary contract of a surety. The distinction between a guarantor and an ordi- nary surety is not easily defined, and the terms have been frequently used as convertible. A surety is generally a co- maker of the note, while the guarantor never is a maker ; and the leading difference between the two is, that the surety's promise is to meet an obligation which becomes his own immediately on the principal's failure to meet it, while the guarantor's promise is always to pay the debt of another.^ A surety is liable as much as his principal is ^ Fell on Guaranty, i ; Story on Notes, § 457 ; Smith's Mercantile Law, chap, XI, sec. I. "^ Burrill's Law Dictionary. * 2 Parsons N. & B., Il8. (768) § 1754- DEFINITION, NATURE, AND CONSTRUCTION. 769 liable, and absolutely liable as soon as default is made, with- out any demand upon the principal whatever, or any notice of his default. He may be damaged by reason of no de- mand being made or notice given, and he may be sued as a promisor.^ The guarantor's liability is less stringent, and unless de- mand is made within a reasonable time, and notice given in case of default, he is discharged to the extent that he may be damaged by delay. Thus, if the debtor has, in the meantime, become insolvent, so that he could not have re- course upon him, he could not be held.^ Thus, we see the surety's liability is primary and direct, like that of the prin- cipal. The guarantor's is secondary and collateral. And, in general, the guarantor contracts to pay, if, by the exer- cise of due diligence, the debt can not be made out of the principal debtor, while the surety undertakes directly for the payment at once, if the principal debtor makes default. As has been well said, the surety " is an insurer of the debt ; the guarantor is the insurer of the solvency of the debtor."'' § I 754. Diffei'ence between gtiaranty and indorse7nent. — The liability of a guarantor also differs materially from, and is more onerous than, that of an indorser. The in- dorser contracts to be liable only upon condition of due presentment of the bill or note on the exact day of maturi- ty, and due notice to him of its dishonor. And he is ab- solutely discharged by failure in either particular, although he may suffer no actual damage whatever. The guarantor's contract is more rigid, and he is bound to pay the amount upon a presentment made, and notice given to him of dis- honor, within a reasonable time. And in the event of a failure to make presentment and give notice within such reasonable time, he is not absolutely discharged from all ' Perry v. Barret, 18 Mo., 140. - Ibid. ^ Krampt's Ex'x v. Hatx's Ex'rs, 52 Penn. R., 525 ; Reigart v. White, Ibid., 438 Arentsv. Commonwealth, 18 Grat., 770. Vol. II. — 49 'J'JO GUARANTIES. § 1755. liability, but only to the extent that he may have sustained loss or injury by the delay.^ The same person may be guarantor, and also indorser of a note ; and in such case, while failure to give him due notice of demand and non- payment will discharge him as indorser, he will still be bound as guarantor.^ § 1 755. As to construction of guaraiities. — For the inter- pretation of guaranties, the cases lay down very opposite rules. Some of them incline to construe the guaranty most strongly against the guarantor, on the ground that the words of an instrument are to be taken most strongly against the party using them.^ Others construe it strictly, because it is (generally) an engagement to answer for the debt of another.* Certainly, where there are ambiguous phrases used, they are to be taken most strongly against the guarantor, upon the general principle which throws the burden of ambiguity upon the party creating it.^ But no special rules, different from those which apply to other con- tracts, govern it, and it ought to receive a fair and liberal interpretation according to the true import of its terms. It being an engagement for the debt of another, there is certainly no reason for giving it an expanded signification or liberal construction beyond the fair import of its terms. On the other hand, as guaranties are contracts of extensive use in the commercial world, upon the faith of which large credits and advances are made, care should be taken to hold the party bound to the full extent of what appears to be his engagement. Letters of guaranty are commercial in- struments, generally drawn up by merchants, sometimes inartificial and often loose in their structure and form. ' Arents v. Commonwealth, 18 Grat., 770 ; Storj' on Notes, § 460. * Deck V. Works, 57 N. Y. Pr., 292. ' Mason v. Pritchard, 12 East., 227 ; Mayer v. Isaac, 6 M. & W., 610; Drum mond V. Prestman, 12 Wheat., 518, * Whitney v. Groot, 24 Wend., 82 ; Bigelow v. Benton, 14 Barb., 128 ; Evans V. Whyle, 5 Bing., 485 ; 15 E. C. L. R., 514 ; Nicholson v. Paget, i C.& M., 48. * Hargreave v. Smee, 6 Bing., 244 ; 19 E. C. L. R., 69. ^ 1757. DEFINITION, NATURE, AND CONSTRUCTION. 77 1 They should not, therefore, be construed with nice and technical care ; but according to the facts and circum- stances accompanying the transaction, holding in view as the main object to ascertain and effectuate the intentions of the parties.* § 1756. If the guaranty propose a credit, that particular credit must be granted, or the guarantor will not be bound.^ An authority to draw bills at ninety days from time to time means at ninety days' sight, and does not authorize a drawing at ninety days from date.'^ But in Massachusetts it has been held that one who is authorized to draw drafts on another " at ten or twelve days " with nothing to indi- cate whether ten or twelve days after date or after sight is meant, may exercise his own discretion, and consult his own convenience in that particular.'* Where, by letter of credit addressed to the plaintiffs, O. opened an account with them in favor of R. & Co., for a certain amount to be used by sixty days' sight drafts, " for advances to be made on consignments of merchandise" to Q.'s address, and afterward the plaintiffs by letter informed R. & Co. that Q. had opened a credit with the plaintiffs in favor of R. & Co. for that amount to be used by their drafts at sixty days' sight ; and the letter confirmed the credit, and promised that R. & Co.'s drafts should be protested, it was held that only sixty-day drafts, drawn " against shipments of consif^nments to the address of O.," fell within the letter.^ , § 1757. Liability of party who writes his name on back of note before that of payee. — Great diversity of opinion ' Douglas V. Reynolds, 7 Pet., 122; Lee v. Dock, 10 Id., 493 ; Lawrence v. McCalmont, 2 How., 449; Bell v. Bruen, i How., 187; >Lauran v. BuUus, 16 Pet., 528 ; Moore v. Holt, 10 Grat., 294; Smith v. Dann, 6 Hill, 543 ; Mussey v Rayner, 22 Pick., 228. 2 Walrath v. Thompson, 6 Hill, 540. ^ Ulster Co. Bank v. McFarlan, 3 Den., 553. * Barney v. Newcomb, 9 Cush., 47. ' Gelpcke v. Quentrell, 66 Barb., 617 772 GUARANTIES. § 1 757* has arisen as to the Hability of one who writes his name on the back of a note which is payable to a particular payee before such payee's name. If such an indorsement be made at a period subsequent to the original transaction, the in- dorser is not an original promisor, but a guarantor.^ It will be presumed, however, that such indorsement was made at the time the note was executed;^ and as will be seen in the first volume of this work, the decisions of the courts are very diverse and conflicting as to the liability of the party making it — some regarding him as a comaker, others as a surety, others as an indorser, and others still as a guarantor.^ Our view is this : When the note is not negotiable, such a party is to be deemed a guarantor. He can not be an indorser, for the simple reason that there is no such thing as indorsement, in its commercial sense, of non-negotiable paper. And if he intended to be a surety, it is reasonable to presume that he would have signed conjointly with the maker, or, by the word " surety " attached to his signature, indicated an intention to assume that character. He can, therefore, only be a guarantor. ^ When the note is negotiable, the very opposite presump- tion arises. It is intended to pass current from hand to hand, and it is but natural to presume that one who assures a negotiable instrument intends to assure it to all who may become its holders, unless the contrary design appears ; and that assuming the responsibility, he is also entitled to the privileges of an indorser. It is true that there is no trans- fer accompanying such indorsement, either in point of fact or colorably, as in the ordinary case of an accommodation indorsement, and in the title as against the maker, such ' Benthall v. Judkins, 13 Mete, 265 ; Union Bank v. Willis, 8 Mete, 504 ; Irish V. Cutter, 31 Me., 536. " Benthall v. Judkins, 13 Mete, 265 ; Lowell v. Gage, 38 Me., 35 ; Camden v M'Koy, 3 Scam., 437. Evidence is admissible to show when the signature was made. Draper v. Snow, 20 N. Y., 331. See vol. i, § 728. • See vol. I, §§ 707 et seg. § 1759* "^^^ CONSIDERATION 01- GUARANTIES. 'J']^ indorsement forms no link. But the indorser in suc.i a case seems to us to stand in the position of a drawer whose bill is payable to the order of the payee, and which has been accepted by the maker. His indorsing in that pecul- iar style would indicate that it was done for accommoda- tion of the maker, and we can not see that this analogy between his position and that of an accommodation drawer fails in any particular.^ § 1758. Right of guara7itor who pays note. — The guar- antor of a note, who pays it upon his guaranty of payment by the payee, who is also indorser, is entitled to it for his own use when he pays it to the holder ; and in so doing he becomes vested with the same rights which the payee had against the maker, and no more. If the consideration as between the maker and payee has failed, he can not recover of the maker, as he does not step in the shoes of the bona fide holder, to whom he paid it.^ A guaranty of a note made after its execution upon a new and sufficient consideration is valid, although the note is payable to the maker's order and not indorsed by him, it having been in that condition at the time the guaranty was made.^ SECTION II. THE CONSIDERATION OF GUARANTIES AND THE OPERATION OF THE STATUTE OF FRAUDS. § 1759. (I) As to the consideration of guaranties. — It is necessary to the validity of a guaranty that it should be upon a valuable consideration. There are three classes of cases which should be discriminated : (i) When the guar- anty is contemporaneous with the principal contract. In ' See vol. I, §§ 707, 714. " Putnam v. Tash, 12 Gray, 121, ' Jones V. Thayer, 12 Gray, 443. 774 GUARANTIES. § I760. such a case it is not necessary that it should be a separate and distinct consideration from that upon which the bill or note was executed. It may be for the accommodation of the drawer, maker, or other party to add strength to the paper and induce the guarantee to take it, and then the value received from him embraces the guarantor as well as the principal. The credit is not given solely to either, but to both ; and when the guaranty is made prior to delivery, it will be presumed to be upon consideration of the credit, and will be valid.^ § I 760. (2) Whe7i the guaranty is made after the contract is completed, and is not for the benefit of the guarantor. — In such case, the original consideration being exhausted, there must be some new and sufficient consideration to support it, otherwise it will be void.^ And when it is shown that the guaranty was made after the completion of the note or other contract, there is no presumption of consideration, but the contrary ; and the plaintiff must prove a new and express consideration in order to enforce it.^ There may, however, be circumstances which show that, although the guaranty was not made until after delivery of instrument, it was de- signed and understood originally that it should be made, or have the effect as if made beforehand, and that it entered into the inducement to the promisee to take it ; and under such circumstances it will relate back to the time when it was intended to operate, and be valid accordingly.'* But unless this be the case, the consideration must appear, where * Parkhurst v. Vail, 73 111., 323 ; Draper v. Snow, 20 N. Y., 331 ; Manrow v. Durham, 3 Hill, 584 ; Leggett v. Raymond, 6 Hill, 639 ; Bickford v. Gibbs, 8 Cush., 184; Hopkins v. Richardson, 9 Grat., 494; Snively v. Johnson, i W. & S., 309 ; Colburn v. Averill, 30 Me., 310 ; Gillighan v. Boardman, 29 Me., 79; Campbell v. Knapp, 15 Penn. St., 27. ^ Howe V. Merrill, 5 Cush., 80 ; Tenney v. Prince, 4 Pick., 385. See also and compare Williams v. Williams, 67 Mo., 667 ; Green v. Shepherd, 5 Allen, 570. But as to innocent holder, see Ewing v. Clarke, 8 Mo. Ap., 570. ' Tenney v. Prince, 4 Pick., 385 ; Klein v. Currier, 14 111., 237 ; Parkhurst v. Vail, 73 111-. 323- * Hawkes v. Phillips, 7 Gray, 284 ; Moies v. Bird, 1 1 Mass., 436. § 1763. THE CONSIDERATION OF GUARANTIES. 775 it is necessary that it be set fortli, in order to satisfy the statute of frauds.^ § 1 76 1. (3) When the guaranty is made after tJie con- tract is conipleted, and is for the benefit of the guarantor. — Thus, where a party holds a bill or note, and upon a trans- fer in some transaction of his own guarantees it is to his transferee. In such case, the consideration moves directly to him for his own benefit ; it is really his own debt that he promises to pay in a particular way, and not the debt of another. And the clause of the statute respecting a promise or engagement to pay the debt of another has no applica- tion to it.^ § 1762. (II) As to the operation of the statute of frauds. —In the 29th year of Charles II. (1667), there was enacted " The Statute of Frauds," as it is called, a provision of which was that " noe action shall be brought whereby to charge the defendant upon any speciall promise to answere for the debt, default, or miscarriages of another person, unlesse the 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 some other person thereunto by him law^fully author- ized." Many questions have arisen upon the construction of this statute both in England and in the United States, in every one of which it has been copied, either precisely or in a somewhat modified form, and some of them it is nec- essary to consider in connection with guaranties, (i) When is a guaranty such a promise to answer for the debt of another as to come within the meaning of the statute ? (2) How must it be expressed, when it comes within the statute, in order to conform to it ? § 1 763. Firstly : When a guaranty is a promise to ajiswer for the debt of a^tother. — When a third person gets credit, ' Edwards on Bills, 223. " Sttposi, § 1763. 77t> GUARANTIES. § 1^764. or forbearance, upon the guaranty of another, even when it is contemporaneous, the latter's promise is clearly " a prom- ise to answer for " his debt, and it must comply with the statute in order to be valid. But there arejcases in which a guaranty is really to answer for one's own debt, though having the appearance of a promise to answer for another's, and in such cases it is not within the statute.^ Thus, where the defendant transferred the note of a third person, payable to him or bearer, to the plaintiff, in exchange for his own note, which plaintiff held, and at the same time indorsed a guaranty on the back of it, without expressing a consideration, it was held that, " although in form a promise to answer for the debt or default of another, in substance it was an engagement to pay the guarantor's own debt in a particular way," and that " it would be good without any writing."^ So where a third person's note was transferred with mere verbal guaranty that it " was good and collectable," in part payment of a horse, it was held valid, because in reality a promise to pay the amount, unless the third person paid it for him.^ This doc- trine is uniformly adopted in the United States, where the guaranty is upon a pre-existing consideration, as well as where it is for a debt contracted, goods sold, or obligations exchanged, at the time the guaranty is made.* Where one who sells a note guarantees its payment, the guaranty is an original undertaking, and need not be written.^ § 1764. Secondly : As to the te}^ms of the giiaj'anty. — It ■ Throop on Verbal Agreements, 640, § 650. ^ Brown v. Curtis, 2 N. Y. (2 Comst.), 225. 'Cardell v. McNiel, 21 N. Y.. 336 (i860) ; see also Fowler v. Clearwater, 35 Barb., 143 (1861) ; Dauber v. Blackney, 38 Barb., 432 (1862) ; Milks v. Rich, 80 N. Y., 269 (1880) ; see ante, § 739^. * Beaty v. Grim, 18 Ind., 131 (1862) ; Malone v. Keener, 44 Penn. St., 107 (1862); Dyer v. Gilson, 16 Wis., 557 (1863); Huntington v. Wellington, 12 Mich., 10 (1863) ; Thurston v. Island, 6 R. I., 103 (1859J ; Hopkins v. Richard- son, 9 Grat., 485 (1852) ; Hall v. Rodgers, 7 Humph., 536 (1874) ; Rowland v. Rorke, 4 Jones (N. C), 337 (1857) ; Johnson v. Gilbert, 4 Hill, 178 ; Meech v. Smith, 7 Wend., 315 ; Sheldon v. Butler, 24 Minn., 513. ' Meech v. Smith, 7 Wend., 315 ; Hunt v. Adams, 5 Mass., 358. § 1 y6^. THE CONSIDERATION OF GUARANTIES. yyy has been held uniformly in England, that when the guar- anty is to answer the debt of another the consideration must be expressed, as well as the promise, to satisfy the word " agreement " in the statute, and that parol evidence is inadmissible to supply it.^ This view rested upon the ground that the word agreement was used in the sense of a mutual contract, and that it was necessary for the consider ation, without which there is no contract, to appear upon the face of the writing, in order to the existence of a writ- ten agreement. In the United States a number of cases have adopted this reasoning;^ but the word agreement sig- nifies, in its ordinary acceptation, the thing agreed upon, and it would seem that if the thing agreed upon was in writing the statute would be complied with. It is true that the formal compact is technically an agreement ; but the word would seem to have been used in its popular and ordinary sense, rather than as a technicality, being intended to apply to all manner of contracts among the people ; and the opinion predominates in this country that if the prom- ise is written it is sufficient.^ § I 765, When name in blank is sicfficient writing to sat- isfy statute of frauds. — In those States where the consid- eration is not required to be expressed, the name of the party in blank is often regarded as a sufficient writing to satisfy the statute, the signature applying to the contract already written, or to the words above the signature, which are afterward written by implied authority, as, for instance, ' Wain V. Walters, 5 East., 10 ; Saunders v. Wakefield, 4 Barn. & Aid., 595 Jenkins v. Reynolds, 3 Brod. & Bing,, 14; Morley v. Boothby, 3 Bing., 107; Newbury v. Armstrong, 6 Bing,, 201 ; Alnutt v. Ashenden, 5 Man. & G., 392. ^ Henderson v. Johnson, 6 Ga., 390 ; Elliott v. Giese, 7 Harris & J., 457 ; Righy V. Norwood,^ 34 Ala., 129; Simons v. Steele, 36 N. H., 73; Sears v. Brink, 3 Johns, 210; Leonard v. Vredenburgh, 8 Johns, 29; Nichols v. Allen, 23 Minn., 543; Ordeman v. Lawson, 49 Md., 135; Parry v. Spikes, 49 Wise, 385- ^ Packard v. Richardson, 17 Mass., 122, Parker, C. J. ; Smith v. Ide, 3 Vt., 390; Gillighan v. Boardman, 29 Me., 79; Sage v. Wilcox, 6 Conn., 81 ; Reed V. Evans, 17 Ohio, 128 ; Buckley v. Beardslee, 2 South, 570; Ashford v. Robin son, 8 Ired., 114 ; Wren v. Pearce, 4 Sm. & M., 91 ; Little v. Nabb, 10 Mo., 3. T^Z GUARANTIES. § 1 766. where one not the payee of a note indorses it when it is made.^ This is, we think, the correct view ; but there is also another ground on which such party may be held, that is, that such a party is an indorser, and that the statute has no application to those cases which come peculiarly within the rules of the law merchant.^ Where the statute only requires the " promise " to be in writing, it is not necessary for the consideration to appear.^ § 1 766. When consideration 77tust appear it need not be set out at length. — Where it is held that the consideration must appear in the guaranty of another's debt, it is never- theless not necessary that it be set out at length ; but suffi- cient, if it appear by reasonable intendment. Thus, " I hereby guarantee the present account of Miss H. M., due to B. (Sl Co., of £^11 4 4, and what she may contract from this date to 30th of September next," was held a suf- ficient indication of the consideration ; which was for a future as well as past credit, and it was not necessary that the consideration and promise should be co-extensive.* So, " in consideration of your being in advance to Messrs. Lees and Sons, in the sum of ^10,000, for the purchase of cot- ton, I do hereby give you my guaranty for that amount in their behalf." ° So, "You will please be so good as to withdraw the promissory note, and I will see you at Christ- mas, when you shall receive from me the amount of it, together with the memorandum of my son's, making, on the whole, ;^45."^ So it was held, that the consideration, which was a forbearance to sue, was sufficiently manifest ' Perkins v. Catlin, ii Conn., 213 ; Nelson v. Dubois, 13 Johns, 175 ; Aloies V. Bird, II Mass., 436. '■^ See chapter xix, § 567 and notes, vol. i ; Throop on Verbal Agreements, ^59' §§ 85, 86. Text approved in Taylor v. French, 2 Lea, 260. ^ Colgin V. Henley, 6 Leigh, 85 ; Taylor v. Ross, 3 Yerg., 330 ; Pearce v Wren, 4 S. & AL, 91 ; Violett v. Patten, 5 Cranch, 142 ; Edwards on Bills, 240^ 241. * Russell V. Moseley, 3 B. & B., 211. * Haigh V. Brooks, 10 Ad. & El., 309. * Shortrede v. Cheek, i Ad. & El., 57. §1767. THE CONSIDERATION OF GUARANTIES. 779 where the plaintiff, having pressed W. for payment of a debt, the defendant, W.'s attorney, sent to plaintiff a bill accepted by W. at two months, inclosed in a letter, wherein defendant said: "W. being again disappointed in receiving remittances, and you expressed yourself inconvenienced for money, I inclose you his acceptance at two months," and the plaintiff refusing the bill, unless defendant put his name to It, the latter wrote on the back of the letter • " I will see the bill paid for W.''^ § 1767. New York decisions. ~\xi New York, it was formerly held, that if the original contract and the guaran- tee were contemporaneous, and the guaranty, therefore, an essential inducement to the credit given, it would not be necessary to show any other consideration than that mov- ing between the parties to the original contract ; and that whether the guaranty were on the same or a separate paper, It need not disclose a distinct consideration.^ Subsequent- ly the statute of frauds was so amended in that State as to require the consideration to be expressed in writing, and since then a stricter interpretation has obtained. Thus, where a party wrote under a promissory note simultaneous- ly with Its execution, and the consideration was granted upon the credit of his name, " I hereby guarantee the pay- ment of the above note." the guaranty was held void be- cause no consideration was expressed.^ But where the con- sideration is required to be expressed, it need not be de- fined ; and, therefore, the words "value received" are deemed a sufficient expression of it.'' If a guaranty be un- der seal, the consideration is conclusively imported." ' Em matt v. Kearns, 5 Bing. N. C, 559 ^^oTr^^dr^?^''^^^' ^ J°^"^' =9; Barley V. Freeman. 11 Johns. 221; iNeison V. Dubois, 13 Johns, 175, approved in D-\Volf v. Rabaud. i Pet. lit ^^_ Bank of Tennessee v. Barksdale, 5 Sneed, jy. Crocker v. Gilbert, 9 Cush.. 78o GUARANTIES. § 1 768. SECTION III. FORMS AND VARIETIES OF GUARANTIES. — ABSOLUTE AND CON- DITIONAL GUARANTIES. § 1768. Forms of g2iaranties. — The guaranty of a bill or note need not be in any particular form, and it is gov- erned usually b}" the same rules which apply to other guar- anties. A guaranty is generally, and when it is to answer for the debt of another, it must be written. But there may be valid verbal guaranties. When written, it may be: (i) By a separate instrument ; or (2) by writing on the instrument guaranteed ; and it may be (3) sealed or unsealed. When it is written on the instrument guaranteed, its very presence is identification of the contract referred to ; but when on a separate paper, it must describe with suffi- cient accuracy the bill or note or other contract it refers to. § I 768^. As to the varieties of guaranties. — A guaranty may be (i) general or special ; (2) absolute or conditional ; (3) limited or unlimited ; and (4) temporary or continuing. A general guaranty is a guaranty to whomsoever may ac- cept the proffer made. A special guaranty is a guaranty to a particular person. § 1769. In the second place, as to absohUe and conditional guaranties. — If A. guarantees, expressly or by implication, to pay the note of B. to C, provided B. does not pay it, he be- comes absolutely liable for its payment immediately upon B.'s default, and is, therefore, deemed an absolute guarantor of the due payment of the note by B. to C.^ But if A. guarantees the collectibility or goodness of B.'s note to C, he does not absolutely guarantee its payment, but only that he will pay it in the event that C. shall test the collectibility ' Dickerson v. Derrickson, 39 111., 575; Allen v. Rightmere, 20 Johns, 365; Arents v. Commonwealth, 18 Grat., 770. § 1769'^. FORMS AND VARIETIES OF GUARANTIES. 78 1 or goodness of the note by regular prosecution of suit against B., and shall be unable, by due and reasonable diligence, to enforce its payment. And accordingly he is only deemed a conditional guarantor of payment^ And he is always deemed only a conditional guarantor of payment when there is some extraneous event, beyond the mere default of the principal, upon which the guaranty becomes binding.^ The words, " I guarantee the collection of the within note," ^ and " I promise that this note is good and collecti- ble after due course of law," * and " I warrant this note good," ° are phrases of similar import, binding the guarantor only upon condition that the guarantee acts with due diligence in prosecuting the collection of the note. § I y6ga. What is due diligence in such cases, depends largely upon the statutes of the States, which are variant, and upon the practice which has grown up in the courts ; and is rather a question of local jurisprudence than one of general commercial law. We do not deem it, therefore, ap- propriate to pursue the topic through its multiform ramifi- cations. It may be generally stated, however, that " dili- gent and honest prosecution of a suit against the principal to judgment with a return of nulla bo7ta, has always been regarded as one of the extreme tests of due diligence."^ But if the principal were insolvent, suit would be vain, and need not be brought.''' And so, if he remove from the ' 2 Am. Leading Cases, 129, 133. '^ Dickerson v. Derrickson, 39 111., 575. The guaranty was: "I do hereby agree, in case G. K. does not pay R. P. D. S325 in three months from date, to gxiarantee to said D. the payment of said sum of money." Walker, C. ]., said : '* In this case the parties have only clothed in language what the law implies in all mere absolute guaranties. The contract of an absolute guarantor is, that if the principal fails to pay, the guarantor will. If it were not so, it would not be a guaranty, but an independent undertaking." ' Loveland v. Shepherd, 2 Hill, 139. * Moakley v. Riggs, 19 Johns, 69. ' Curtis V. Smallman, 14 Wend., 231 ; Cumpston v. McNair, i Wend., 457. * Camden v. Doremus, 3 Howard, 515 ; Jones v. Ashford, 79 N. C, 176. ■' Camden v. Doremus, 3 How., 515 ; M'Doal v. Yeomans, 8 Watts, 361 ; Sanford v. Allen, i Cush., 473. 782 GUARANTIES. § ^JJO. State where the contract was made.^ But if the principal resided in a foreign State when the contract was made, the guarantee would then be required to proceed against him before pursuing the guarantor.^ SECTION IV. LIMITED AND UNLIMITED, AND TEMPORARY AND CONTINUING GUARANTIES. § 1770. A guaranty may be limited or unlimited in re- spect to the amount guaranteed. It may be limited to a single transaction. It may be limited within a certain period of time. And it may be a continuing or standing guaranty, applying to successive transactions, without limit as to time. Where A. & B. addressed a letter of credit to C, saying, " If D. wishes to take goods of you on credit, we are will- ing to lend our names as security for any amount he may wish," it was held unlimited as to the amount, but not con- tinuing beyond the first parcel of goods delivered to D., there beinof no words to show that successive transactions were contemplated.* So, where the agreement was to be answerable " for the payment of £^0 for T. L., in case T. L. does not pay for the gin he received from you," it was held limited to the single purchase of ^50 worth of gin.^ So, where it ran : " I hereby guarantee Mr. J. J.'s account with you for wine and spirits to the amount of ;^20o";^ and where it guaranteed A. "to the extent of sixty pounds, at quarterly account, bill two months, for goods to be purchased for him of B." ^ Where the wife of C, a retail ' Cooke V. Nathan, i6 Barb., 342 ; White v. Case, 13 Wend., 543. "" Burt V. Horner, 5 Barb., 501. ' Rogers v. Warner, 8 Johns, 92. * Nicholson v. Paget, i Cr. & M., 48. But qticere, Mayer v, Isaac, 6 M. & W, 605. ' Alnutt V. Ashenden, 5 M. & Gr., 392. " Melville v. Hayden, 3 Barn. & Aid., 593. § I 77 I- LIMITED AND UNLIMITED GUARANTIES. 7S3 trader, owning property in her own right, gave the plaintiff, with whom C. dealt, the following guaranty : "In con- sideration of you having, at my request, agreed to supply and furnish goods to C, I do hereby guarantee to you the sum of ;/^500. This guaranty to continue in force for the period of six years, and no longer," it was held that the guaranty did not cover sums due for goods supplied before its date, but was limited to goods sold after its date, to the value of ^500.^ § 1 771. Where the letter of credit ran, "The object of the present letter is to request you, if convenient, to furnish them (S. & H. H.) with any sum they may want, as far as fifty thousand dollars, say fifty thousand dollars," it was held to be limited to a single advance of $50,000, and that when the sum was once advanced, the guaranty was ex- hausted. "The language of a letter," said Story, J., "should be very strong that would justify the court in holding the guaranty to be a continuing guaranty, which is to cover ad- vances from time to time to the stipulated amount, toties quoties, until the guarantor shall give notice to the contrary. I see nothing in this letter to justify such a conclusion ; and in every doubtful case, I think that the presumption ought to be against it."*^ Where the guaranty was as security Vto the amount of ;^ 1 0,000 on certain acceptances, or any other account thereafter to subsist between A. & B.," it was held to cover all transactions up to the amount of ^10,000, but none be- yond.'* ' Morrell v. Cowan, 7 Ch. Div., 151, ■^ Cremer v. Higginson, i Mason, 323. ' Sansome v. Bell, 2 Camp., 39. In Ranger v. Sargent, 36 Tex., 26, it ap- peared that R. & Co. were sued on a draft drawn September 3, 1S66, on the faith of a letter of credit as follows : " The bearer, W. H. R., is authorized to draw on us for six hundred dollars specie. Houston, August 31, 1866. R. & Co." They pleaded that, since the giving of the letter of credit, they had paid to W. H. R., and to his order, more than the sum specified in the letter 01 credit, whereby the authority conferred by said letter had been exhausted ; and 784 GUARANTIES. § 1772. § 1772. Expressions of contimting credit. English de- cisions. — In the foregoing cases, it will be observed that there were no such expressions of continuing credit, as '* from time to time," or " at any time," or for " any debt," etc., — and where such expressions are used, they are re- garded as extending the guaranty to several and successive transactions. Thus a guaranty of " any debt A. B. may contract in his business as jeweler, not exceeding one hun- dred pounds, after this date," ^ or to A. "for any goods he hath, or may supply my brother W. P. with to the amount ^100,"^ has been held to be limited only in respect to the amount guaranteed at any one time, and to apply to any sum or goods not over ^loo, which might be advanced from time to time. Lord EUenborough said, in the first of the cases just cited : " The guaranty is not confined to one instance, but applies to debts successively renewed. If a party means to be surety only for a single dealing, he should take care to say so. By such an instrument as this, a continuing suretyship is created to the special amount."^ The like decision was rendered upon a guaranty of " any bills you may draw on him on account, etc., to the amount of ^200."* So where it was, "to the extent of ^300, for any tallow or soap supplied by B. to F."^ § 1773. Decisions in the United States. — In the United States the like course of adjudication has been followed. Where the guaranty ran, " I will be responsible for what stock McK. has had, or may want hereafter, to the amount that the plaintiff, by the exercise of ordinary diligence, could have ascertained these facts. Held to be a good defence. That though the instrument sued on was a general letter of credit, in that it was directed to no particular person, and limited to no time or place, yet it was special in that it was limited in amount, and a party making advances on it was bound to make inquiry whether it had been paid, or the authority to draw exhausted ; and held further, \\\2X when the defendants delivered the letter of credit, it became the absolute prop- erty of the holder, and they lost all control over it. 1 Merle v. Wells, 2 Camp., 413. ° Mason v. Pritchard, 2 Camp., 436. * Merle v. Wells, 2 Camp., 413. " Mayer v. Isaac, 6 M. & W., 605. ' Barton v. Bennett, 3 Camp., 220. § 1774^- THE NEGOTIABILITY OF GUARANTIES. 785 of five hundred dollars," it was held to embrace successive advances of five hundred dollars each.^ And in a leadinor case before the United States Supreme Court, where the letter of credit recited that the bearer " might require your aid from time to time " and promised " to be responsi- ble at any time for a sum not exceeding eight thousand dollars," the expressions, " from time to time," and " at any time," were thought decisive of its being a continuing guar- anty of several and successive advances oi eight thousand dollars.^ SECTION V. THE NEGOTIABILITY OF GUARANTIES. § 1774. In the first place : As to the negotiability of guaranties not zvritten tipon negotiable instruments. — It seems to be settled, by weight of authority, that when the guaranty is written upon a separate paper, unless it were addressed in such a manner as to denote that it was intended to guarantee the bill or note to every holder, it would not be negotiable ; and that if addressed to a particular person only, it would be a mere personal contract limited to that person.^ And when no person's name is mentioned in such a guaranty, it will be regarded as limited to the first person who takes the note, and relies on the guaranty.* § 1774^. Equitable iizterest in guara?ity is assignable.— But in either case — and in any case of the guaranty of a bill or note — the party to whom the guaranty is originally made, may, in equity, assign his right to the holder at the ' Gates V. McKee, 3 Kern., 237. " Douglass V. Reynolds, 7 Pet., 113. See 2 Am. Lead. Cas., 38 et seq. ' McLaren v. Watson's Ex'rs, 19 Wend., 559; S. C., 26 Wend., 425 ; Story on Notes, § 484; 2 Am. Lead Gas., 314 ; 2 Rob. Prac. (n. ed.), 298, 299. * Story on Notes, § 484. Vol. II.— 50 786 GUARANTIES. § 1775* same time that he transfers the bill or note, and thereby invest him with the equitable, although not the legal, title thereto.^ § 1775. In New York the doctrine was urged by Senator Verplanck, in a dissenting opinion of great learning and ability, that although the guaranty of a negotiable instru- ment be upon a separate paper, and be not expressed in ne- gotiable words, it ought to be held negotiable in the same manner and to the same extent in favor of each successive holder.^ And while the weight of authority is to the con- trary it is difficult, and in our judgment impossible, to an- swer satisfactorily the cogent reasoning upon which this view is based. § 1 776. In the second place : As to guaranties written upon the paper contemporaneously with its execution. Not ge7terally deemed negotiable. — When the guaranty is made at the time the paper is executed and delivered, there are numerous authorities which hold that where it is not ex- pressed in negotiable w^ords, the mere fact that it is written upon a negotiable instrument does not impart to it any nego- tiability, and no action can be maintained upon it by any subsequent holder thereof. It was so held in Massachu- setts where, underneath the signature of the payee of a note indorsed by him, the defendant wrote : " I guarantee the payment of semi-annual interest on this note as well as the principal."^ So in Michigan where the defendant McCauley, contemporaneously with the execution of the note, made by Sayer payable to Soule, wrote on the back : " For value received, I hereby guarantee the payment of the within note," and Soule, the payee, indorsed it to the plaintiff, it was held he could not recover, the guaranty not being negotiable.^ But in such cases it will be presumed, » Arents v. Commonwealth, 18 Grat., 770; Story on Bills, § 457. * McLaren v. Watson's Ex'rs, 26 Wend., 431 et seg. ' True V. Fuller, 21 Pick., 140 (1838). * Tinker V. McCauley, 3 Mich., 188 (1854), overruling Higgins v. Watson, I Mich., 420; see also Small v. Sloan, i Bosw., 353 (1857). §1777- THE NEGOTIABILITY OF GUARANTIES. 787 unless the contrary appears, that the guarantor of a note for accommodation contracted with the party who sues upon it, and it will not be necessary for him to prove affirmatively that he was the first holder for value.^ § 1777. Cases maintai7iing the iiegoHability of the guaranty of a negotiable iristrtcment made at its incep- tio7i. — But, on the other hand, there are cases which main- tain that, although the guaranty on the paper, written at the time of delivery, specifies no person to w^hom the guarantor undertakes to be liable, and has no negotiable words, it runs with the instrument to which it refers, partakes of its quality of negotiability, and any person having the legal interest in the instrument takes in like manner the guaranty as an incident, and may sue thereon.^ And it has been said, in such a case, " this view is consistent with the nature of the transaction, the evident intention of the parties, and the objects and uses of commercial paper." ^ This seems to us the better doctrine. By writing the guaranty on the paper, the guarantor evidences his intention to guarantee the contract of the maker. That contract being nego- tiable, is made with any and every person who may be the holder, and the guarantor is thus brought in privity with any and every person who becomes the holder.* The fore- going views of the text were recently approved in Indiana, in the case of a note where above the name of the payee and indorser there were written the words, " We jointly or * Northumberland County Bank v. Eger, 58 Penn. St., 97. ' See Cooper v. Dedrick, 22 Barb., 516, for law of New York. ' Webster v. Cobb, 17 111., 466 (1856), Skinner, J. ; see Arents v. Common- wealth, 18 Grat., 770. * McLaren v. Watson's Ex'rs, 26 Wend., 430 (1841), Walworth, Chancellor, saying : " A guaranty indorsed upon a negotiable note, whereby the guarantor agrees with the holder of the note that he will be answerable that the note shall be paid to him or to his order, or the bearer thereof, when it becomes due, is probably negotiable by the transfer of the note upon which it is written ; for it is in fcict a special indorsement of the note, or more properly a negotiable note in itself. But to make a guaranty negotiable as a part of the note to which it relates, it must be on the note itself, or at least it must be annexed to it, in the nature of iin allonge, or eking out of the paper upon which the note is written.'' ySS GUARANTIES § ^77^' severally, for value received, hereby guarantee the prompt payment of the within note," signed by two persons, and suit was brought by the indorsee of the payee against the guarantors.^ § 1778. Views of Story and Parsons considered. — Judge Story says that " with a view to the convenience and se- curity of merchants, as well as the free circulation and credit of negotiable paper, it would seem that such a guar- anty upon the face of a bill of exchange, not limited to any particular person, but purporting to be general, without naming any person whatsoever, or purporting to be a guar- anty to the payee or his order, or to the bearer, ought to be held, upon the very intention of the parties, to be a com- plete guaranty to every successive person who shall become the holder of the bill."^ On the contrary, Prof. Parsons says : " Our view of this question is this : The negotiability of paper payable to or- der is established by a very peculiar exception to the general law of contracts ; and this exception rests upon a usage so ancient and universal as to show a distinct and urgent need of it. But the negotiability of a guaranty has no such usage in its favor, and is not, therefore, within the excep- tion. Moreover, we do not think it likely to be brought within this usage, or on other grounds established by ad- judication, because all exceptions are to be limited by the necessity for them ; and we see no necessity for any such rule, inasmuch as all the good which could be gained from making guaranties negotiable may be derived, and is now in part derived, from the practice and the law of indorse ment."^ But we can not concur with this eminent jurist as to the inutility of a negotiable guaranty. There is no form of indorsement by which the liability of a guarantor can be engrafted upon, and made negotiable with, a negotiable ' Cole V. Merchants' Bank, S, C. of Indiana, American Law Register, Nov., 1878, p. 703. 2 Story on Bills, § 458. ' 2 Parsons N. & B., 133, 134. § 1780. THE NEGOTIABILITY OF GUARANTIES. 789 instrument. An indorser in the ordinary form is absolutely discharged by want of exact demand and notice. A guar- antor is only entitled to reasonable notice, and is only dis- charged to the extent that he would otherwise be injured. If the indorser waives demand and notice, he is entitled to no demand or notice whatever, and thus he makes the in- dorsement more onerous than that of guaranty. A nego- tiable guaranty is an engagement intermediate between that of an indorsement in the ordinary form, and one waiv- ing demand and notice ; and when a party intends to enter into such an engagement, there is certainly nothing in the policy of the modern law which should prevent it. § 1779. I^^ some cases it has been held that a guaranty of payment, indorsed on the back of a negotiable note at the time it was made, rendered the guarantor liable to the payee, and to every subsequent bona fide holder, as a joint and several maker of the note.^ But this doctrine, as has been said, " originated in, and has always been confined to. New York."^ And there it no longer obtains.^ § 1780. Absolute negotiable promise 07i the back of a note. — In the foregoing cases, the words only imported a secondary obligation ; and when they are absolute in their terms, an absolute effect will be given them. For a party signing on the back of a note may make an absolute ne- gotiable promise to pay it, as well as on its face. Where C. and D. indorsed on the back of a note from A. to B. at the time it was made : " For value received, we jointly and severally undertake to pay the money within mentioned, to the said B." (the payee), they were held as original promis- ors.^ So an indorsement, with the words "holders on the ' Hough V. Gray, 19 Wend., 202 ; Ketchum v. Gray, 24 Wend., 456 ; Luqueer V. Prosser, i Hill, 256 ; 4 Hill, 420. "^ Tucker v. McCauley, 3 Mich., 194, Douglass, J. ^ Brown v. Curtis, 2 Corns., 225 ; Durham v. Manrow, Id., 533 ; Brewster v, Silence, 14 Barb., S. C, 144 ; Draper v. Snow, 20 N. Y., 331 ; Glen Cove Mut Ins. Co. V. Harrold, 20 Barb., 298. * White V. Howiand, 9 Mass., 314, 790 GUARANTIES. § 1 78 1. within," makes the indorser an original promisor.^ So do the words indorsed: "I will see the within paid,"^ And where the note was written : " We, A. as principal, and B. as surety, promise, etc.," and was signed by A. and in- dorsed by B., the latter was held as joint maker. '^ § I 781. In the third place : As to guaranty written on the paper by the transferrer at the time of the transfer. View that it is negotiable. — In such cases the better opin- ion, as it seems to us, is that the transferrer combines the liability of indorser and guarantor. He transfers the in- strument, and indorses it, by which he becomes liable as indorser by due demand and notice, and he superadds a guaranty which renders him liable without demand or notice upon default of the principal. In Vermont, it. ap- peared that the payee of a negotiable note transferred it for value, and wrote on the back, over his signature, " I guarantee the payment of the within note." The plaintiff, a remote transferee, sued ; and it was held that he could recover, on the ground that the indorsement of the payee transferred the legal title in the note to every subsequent holder, notwithstanding the person to whom the note was first transferred was not named in the indorsement, and it was not made in terms payable to order or bearer. Fur- ther, that such indorsement rendered the payee liable as an indorser to any holder ; also as a guarantor without proof of demand and notice, and that the guaranty passed to every holder.* 'Brett V. Marston, 45 Me., 401. ^ Amsbaugh v. Gearhart, 11 Penn. St., 482. ' Palmer v. Grant, 4 Conn., 389. ^Partridg-e v. Davis, 20 Vt.. 500 (1848) ; see also Heaton v. Hulbert, 3 Scam., 489. Robinson v. Lain, 31 Iowa, 9, Day, C. J. : "We confess ourselves un- able to give effect to the contract of guaranty of payment and waiver of demand and notice if the payees intend to return the title. The writing simply consti- tutes an indorsement with an enlarged liability." In Heard v. Dubuque County Bank, 8 Neb., 16, the payee wrote on the back, " For value received, I hereby g;uarantee payment of the within note, and waive presentation, protest, and notice." Held to be an indorsement with the enlarged liability of guaranty. See Deck v. Works, 57 N. Y. Pr., 292. § 1782. THE NEGOTIABILITY OF GUARANTIES. 79 1 § 1782. Contrary vieiv that a guaranty upon the transfer of negotiable paper is not a negotiation ivithin the laiu merchant. — But other authorities hold that a guar- anty written on a note by the transferrer, naming no one as promisee, could only be operative in favor of the party who first took the instrument on the faith of it.^ In the United States Supreme Court it has been held that a guar- anty is not a negotiation of the bill or note as understood by the law merchant.^ In Massachusetts,^ the payee of a note wrote on the back, over his signature, " I hereby guar- antee the within note." Suit was brought by a subsequent holder. The court held that this was not such an indorse- ment as authorizes such holder to sue, and referring to a previous case,^ said : " It is true there was the further ob- jection in that case, that the guaranty w^as signed not only by the payee of the note, but also by another person. • 1 Nevins v. Bank of Lansingburgh, 10 Mich., 547 ; Omaha N. B. v. Walker, 5 Fed. R., 399. ■'Trust Co. V. National Bank, loi U. S. (11 Otto), 70. In this case the note was payable to the Cook County National Bank, and over the signature of the president of the bank, there was written on the back the following : " For value received, we hereby guarantee the payment of the within note at maturity, or at any time thereafter, with interest at ten per cent, per annum until paid, and agree to pay all costs or expenses paid or incurred in collecting the same." Strong, J., said : " In no commercial sense is this an indorsement, and probably it was not intended as such That a guaranty is not a negotiation of the bill or note as understood by the law merchant is certain. Snevily v. Ekel, i Watts & S., 203 ; Lamourieux v. Hewitt, 5 Wend., 307 ; Miller v. Gaston, 2 Hill, 188 The contract can not be converted into an indorsement or assignment. And if it could be treated as an assignment of the note, it would not cut off the defences of the maker." 'Belcher V.Smith, 7 Gush., 482 (1851); Taylor v. Binney, 7 Mass., 481 (181 1), is to same effect. But Upham v. Prince, 12 Mass., 14, seems to uphold the doc- trine of the text. 'Tuttle V. Bartholomew, 12 Mete, 454 (1847), Dewey, J.: "A different view of this question seems to have been taken in the case of Blakely v. Grant, 6 Mass., 386, which was an action upon a bill of exchange. This case was de- cided a year previous to that of Tyler v. Binney, but does not appear to have been referred to in the argument or decision of the latter case. In the case of Blakely v. Grant, it was held that a signature of ihe payee to the following words, ' should the within exchange not be accepted and paid agreeably to its contents, I hereby engage to pay the holder, in addition to the principal, twenty per cent, damages,' might operate as a transfer of the bill of exchange, and that the indorsement was good, though no person was named as indorsee ; and that a bona fide holder might insert above such stipulation a direction to pay the contents to his order." 792 GUARANTIES. § "^7^3^ But irrespective of that, the court were of opinion that the plaintiff could not enforce the payment of the note by a suit in his own name as indorsee." The view has been taken in some cases that a guaranty by the transferee operates as a strict guaranty as between transferrer and transferee, and does not pass to subsequent holders ; but that as to them it operates as an assignment of the note, so far as to enable them to sue other parties than the guarantor.-^ § 1783. In Massachusetts, where the payee of a note transferred it with the words, " I guarantee the payment of this note within six months," the court said : " The defend- ant's engagement amounts to a promise that the note should at all events be paid within six months. Now, this promise may not be assignable in law ; and yet the note itself may be -assignable by the party to whom it was so transferred, so that, upon non-payment of it by the promisor, the holder would have a right of action against Prince as indorser." ^ § 1 784. Where the holder transfers the note and guar- antees the collection, the doctrine has been held that the intention is manifested to make simply a special contract, and not to become liable as an indorser. Thus, where a note payable to S. B. or bearer was transferred by L. with the words, " I warrant the collection of the within note, for value received," over his signature, and it passed into the hands of a subsequent holder from the transferee, it was held that he could not maintain suit against the transferrer as an indorser.^ But it is at least clear that the transferrer of ' Myrick v. Hasey, 27 Me., 12 ; see Upham v. Prince, 12 Mass., 14. ''Upham V. Prince, 12 Mass., 15 (1815). ' Lamourieux v. Hewitt, 5 Wend., 308, Savage, C. J. : " I am of opinion that an action can not be maintained on the guaranty in the name of the present plaintiff. The defendant was hable upon his guaranty, not as an indorser of negotiable paper, but as the party to a special contract, which might have been written on a separate piece of paper as well as on the back of the note. The contract was made with Tuttle, and any action upon it must be in the name ol ^ I7^^5- PRESERVATION OF guarantor's LIABILITY. 793 a note payable to bearer, who acquires it under a guaranty from the holder, would get title as against the maker, and could maintain action against him.^ Where the payees of a note wrote on the back of it, " We guarantee the payment of the within note at maturity," it was held that they be- came jointly and severally liable without demand or notice, and that it was their duty to seek the holder and pay him.' SECTION VI. REQUISITES TO THE ESTABLISHMENT AND PRESERVATION OF guarantor's LIABILITY. § 1785. As to notice of acceptance of guaranty. — When the guaranty is made through personal treaty between the guarantor and guarantee, and whenever the fact that the guarantee has accepted the proffer of the guarantor is equally in the knowledge of both parties, no notice that he accepts the guaranty need be given by the guarantee, for the simple reason that it is already known to the guarantor.* This rule applies where there is a guaranty of a specific ex- isting demand, such as a bill or note ; ■* but when a propo- sition for a guaranty is made, it must, like any other propo- sition for a contract, be accepted before it is binding ; and the guarantee must notify his assent in some form, for both minds must concur in order to constitute a contract.^ And Tuttle. Promissory notes are negotiable only by virtue of the statute, but this negotiable quality is not extended to any other instrument relating to the note." Vanderveer v. Wright, 6 Barb., 547. 'Johnson v. Mitchell, 50 Texas, 212; see ante, §§ 663, 696. " Gage V. Mechanics' Nat. Bank, 79 111., 62. 'Lent V. Padelford, 10 Mass., 230 ; Wildes v. Savage, i Story, 22 ; Walker v. Forbes, 25 Ala., 139. * Montgomery v. Kellogg, 43 Miss., 486 ; Thrasher v. Ely, 2 Smedes & M., 147. * Jackson v. Yendes, 7 Blackf., 526; Sheurll v. Knox, i Dev., 404 ; 2 Am Lead. Cas., 104 ; 2 Rob. Prac. (n. ed.), 292. 794 GUARANTIES. § 1785^. when the guaranty is of a general character, addressed at large to any person, without limit as to amount or time, it is regarded rather as a proposition than as a contract, and notice of its acceptance should be given ^by the party acting upon it.^ § 1 785(3;. Views of United States Stcp7^eme Co2crt. — A series of decisions by the United States Supreme Court has established the further doctrine that when a letter of credit is addressed to a particular person, or is placed in the hands of the debtor, expressly or impliedly addressed to all the world, and such letter contemplates future and prospective guaranties, notice of its acceptance is necessary, because without it he could neither know to whom he was liable nor to what amount. And it is necessary in order that he may be put on his guard against losses, and avail himself of the appropriate means of protection.^ In a re- cent case before that court the question was elaborately considered, and it was held that the rule requiring notice of the acceptance of a guaranty, and of an intention to act under it in those cases where in legal effect the instrument is only an offer or proposal, acceptance of which by the guarantee is necessary to that mutual assent without which there can be no contract ; and that no such notice is necessary where the guarantors contract unconditionally to guarantee overdrafts to a certain extent.^ § I j2>^b. Decisions of State courts. — The State tribunals have generally adopted the same doctrine,^ and it may be * Mussey v. Rayner, 22 Pick., 229 ; Montgomery v. Kellogg, 43 Miss., 486. ''Adams v. Jones, 12 Pet., 207; Douglass v. Reynolds, 7 Pet., 113 ; Edmund- son V. Drake, 5 Pet., 624 ; Lee v. Dick, 10 Pet., 482 ; Russell v. Clarke, 7 Crancb, 69 ; Wildes v. Savage, i Story C. C. R., 22 ; Louisville Man. Co. v. Welch, 10 How., 461. ^ Davis V. Wells, Fargo & Co., Morrison's Transcript, vol. 3, No. i, p. 130, affirming S. C, 2 Utah, 411. * Bradley v. Carey, 8 Me., 234 ; Tuckerman v. French, 7 Me., 115 ; Norton v. Eastman, 4 Me., 521; Craft v, Isham, 13 Conn., 28; Rapelye v. Bailey, 3 Conn., 438; Babcock v. Bryant, 12 Pick., 133; Mussey v. Rayner, 12 Pick., 223; Kay v. Allen, 9 Barr, 320; Lawson v. Townes, 2 Ala., 373 ; Walker v. § 1786. PRESERVATION OF GUARANTOR'S LIABILITY. 795 regarded as the prevailing view of the law, although it has been sharply criticised,^ and it has been declared that it has no foundation in English jurisprudence.*^ Knowledge derived from circumstances will be equivalent to notice, unless injury has been caused by want of earlier informa- tion,^ and notice may be inferred from circumstances ; * and when the guaranty has been accepted, it is not neces- sary to give notice of each particular advance made in ac- cordance with it.^ § I 786. Demand upon pi^incipal and notice of default to guarantor. — When the guaranty depends upon the hap- pening of a contingent event, it is necessary when the event has occurred that notice should be given to the guar- antor within a reasonable time in order to enable him to secure himself against loss.^ But when the guaranty is an absolute engagement to pay in the event that the principal does not pay, the authorities differ as to the necessity of demand or notice at any time in order to preserve the lia- bility of the guarantor. By one class of authorities it is contended that where one transfers a promissory note and guarantees its payment, proof of demand and notice of non-payment is unnecessary ; that the guarantor is the debtor of the holder, and it is his duty to seek the creditor Forbes, 25 Ala., 139 ; Taylor v. Wetmore, 10 Ohio, 490 (overruled by Powers v. Bumcranz, 12 Ohio St., 284). See Wells v. Davis, 2 Utah, 44, and ante, § i/Ssrr; Montgomery v. Kellogg, 43 iNIiss., 486; Oaks v. Miller, 13 Vt.. 106; Lowry v. Adams, 22 Vt., 166 (overruling Train v. Jones, 11 Vt., 44) ; Kincheioe V. Holmes, 7 B. Mon., 5 ; Lowe v, Beckwith, 14 B. Mon., 184 ; Rankin v. Chikis, 9 Mo., 674 ; Hill V. Calvin, 4 How. (Miss.), 231 ; Central Savings Bank v. Shine, 48 Mo., 461. ' 2 Am. Lead. Cas., "]"], 99. "" Douglas v. Howland, 24 Wend., 50 ; see also Smith v. Dann, 6 Hill, 543 , Caton v. Shaw, 2 H. & Gill., 13: Powers v. Bumcranz, 12 Ohio St., 284 (over- ruling Taylor v. Wetmore, 10 Ohio, 490) ; Wilcox v. Draper, Nebraska S. C, Nov., 1 88 1, Albany L. J., March 18, 1882, p. 209. * Norton v. Eastman, 4 Me,, 521. *Oaks v. Weller, 13 Vt., 106 ; Lowry v. Adams, 22 Id., 160. * Douglass v. Reynolds, 7 Pet., 126; Lowe v. Beckwith, 14 B. Mon., 184. ' Dickerson v. Derrickson, 39 111., 577 ; Clay v. Edgerton, 19 Ohio St., 553 Montgomery v. Kellogg, 43 Miss., 486. 796 GUARANTIES. § 1 787 and pay the debt the very day it is due ; and that his un- dertaking is absolute to pay the note when due if the maker does not then pay it. And that proceedings against the maker and notice to the guarantor are only necessary when there is a guaranty of collection which is a conditional agreement to pay if the money can not be collected from the maker.^ § 1787. Cases maintaining necessity of demand, and no- tice of default in reasonable time to bind guarantor. — By another class of cases it is maintained that as the non-pay- ment of the debt must come peculiarly within the knowl- edge of the guarantee, the guarantor is entitled to require demand upon the maker within a reasonable time, and no- 1 Allen V. Rightmere, 20 Johns, 366 ; Brown v. Curtis, 2 Corns., 228 ; Heaton V. Hulbert, 3 Scam., 490 ; Wright v. Dyer, 48 Mo., 526 ; Voltz v. Harris, 40 111., 159. In Clay v. Edgerton, 19 Ohio St., 553, the holder transferred the paper, indorsing thereon the words, " I guarantee the payment of the within note to C. Edgerton or order." Brinckerhoff, C. J., said : " In the second place, it is argued by counsel for plaintiffs in error that the petition is insufficient, be- cause it contains no allegations of demand by Edgerton upon Hoot, the maker of the note, for payment thereof, and notice to Clay of non-payment. On this point much confusion has doubtless arisen from a failure to discriminate be- tween a guaranty which depends on some contingency or condition, and one which is in its terms absolute and unconditional. Where a guaranty is depend- ent on some condition or contingency expressed in, or fairly implied from, the terms of the contract of guaranty, a compliance with those terms on the part of the guarantee is necessary, and must be alleged and proved in order to a recov- ery upon it. But where the guarantee of payment is absolute and uncondition- al, we are of opinion that it is not necessary, in order to make owX. 2. prima facte case for recovery, to aver or prove either demand or notice. This, we think, is fairly inferable from what is said by this court in Bash ford v. Shaw, 4 Ohio St., 266. And this view of the question is directly ruled in Allen v. Rightmere, 20 Johns, 365 ; Brown v. Curtiss, 2 Coms., 225 ; Breed v. Hillhouse, 7 Conn., 523 ; Read v. Cutts, 7 Greenl., 186 ; and Heaton v. Hulbert, 3 Scam. (111.), 489. We are aware that cases may be found in which the point has been ruled otherwise ; but it seems to us that the reasoning of Bronson, J., in Brown v. Curtiss, supra, is unanswerable and irresistible. And there is nothing either in Bashford v. Shaw, supra, or in Forest v. Stewart, 14 Ohio St., 246, adverse to this conclu- sion ; and what is said by the court in Greene v. Dodge & Cogswell, 2 Ohio, 431, related to a case in which the court construed the contract of guaranty sued on to be a conditional one. Now, the contract of guaranty in the case before^ us is absolute and unconditional. Its language is : 'I guarantee the payment of the within note to C. Edgerton or order,' and we are of opinion that no aver- ment of demand or notice in the petition was necessary ; and if any loss had re- sulted to the guarantor by reason of any laches on the part of the guarantee, such laches, it it could be made available at all, would be matter of defence to be set up by the guarantor.'' §1788. PRESERVATION OF guarantor's LIABILITY. 79/ tice of non-payment within a reasonable time after default.^ This seems to us the correct doctrine ; and the great body of the cases which maintain the contrary view seem to have grown out of the idea which has obtained in New York, that the guaranty of a note is an absolute, and not a collateral and conditional engagement. In an Iowa case, where the defendant was sued as guarantor of a note upon which was written, " For value received, I hereby guaran- tee the payment of the within," it was said by Day, J. : " If the principal fails to pay when he should, the guaran- tor must be informed in a reasonable time, soon enough to give him such opportunities as he ought to have to save him from loss. If the notice be delayed a very short time, but by reason of the delay the guarantor loses the oppor- tunity of obtaining indemnity, and is irreparably damaged, he would be discharged from his obligation. But, if the delay were for a long period, and it was, nevertheless, clear that the guarantor would have derived no benefit from an earlier notice, the delay would not impair his obligation." ** § 1 788. Nature of the demand and notice of default nec- essary to hold guarantor liable. — But the authorities which ' Douglas V. Reynolds, 7 Pet., 126; 12 Id., 523. Story, J.: "The fourth in- struction insists that a demand of payment should have been made of Haring, and in case of non-payment by him, that notice of such demand and non-pay- ment should have been given in a reasonable time to the defendant, otherwise the defendants would be discharged from their guaranty. We are of opinion that this instruction ought to have been given. By the very terms of this guar- anty, as well as by the general principles of law, the guarantors are only collat- erally liable upon the failure of the principal debtor to pay the debt. A demand upon him, and a failure on his part to perform his engagements, are indispensa- ble to constitute a casus faderis. The creditors are not, indeed, bound to in- stitute any legal proceedings against the debtor, but they are required to use reasonable diligence to make demand, and to give notice of the non-payment. The guarantors are not to be held to any length of indulgence of credit which the creditors may choose; but have a right to insist that the risk of their re- sponsibility shall be fixed and terminated within a reasonable time after the debt has become due. The case of Allen v. Rightmere (20 Johns, 265) is distin- guishable. There the note was payable to the defendant himself, or order, at a future day, and he indorsed it with a special guaranty of its due payment ; and the court held this engagement absolute, and not conditional." O.xford Bank v. Haynes, 8 Pick., 423 ; Talbot v. Gay, 18 Pick., 535 ; Cannon v. Gibbs, 9 Sergt. & R., 202 ; Newton Wagon Co. v. Diers, 10 Neb., 285. " Second National Bank v. Gaylord, 34 Iowa, 248 ; Rodabaugh v. Pitkin, 46 Iowa, 545. 798 GUARANTIES. § 1 788. regard demand upon the principal, and notice of default, as necessary to render the guarantor's liability absolute, do not contemplate that punctual demand and immediate no- tice which are necessary to charge an indorSer. Nor do they consider that either the demand or notice at any time are absolute conditions precedent. The guarantor is only entitled in any event to exact demand and notice of default within a reasonable time — such time depending upon all the circumstances of the case ; and although they be neg- lected altogether, the guarantor will only be discharged provided he has suffered loss, and then only to the extent of such loss. For if he could not have profited by demand, or by notice of default, and has lost nothing for want of them, there is no reason why he should complain.-^ When the principal is insolvent at maturity of the debt, and so continues, there is a presumption that the guarantor has sustained no injury by delay as to demand and notice ;^ and, on the other hand, injury will be sufficiently proved when it appears that the guarantor was solvent at maturity, and became insolvent before demand was made or notice given. ^ The guarantor may expressly waive notice of acceptance of the guaranty, and also demand and notice of default, in writing, on the face of the guaranty ;* or he may waive it by a promise to pay after maturity, in like manner as an indorser.^ ^ Dickerson v. Derrickson, 39 111., 577 ; Voltz v, Harris, 40 111., 155 ; Farmers', etc., Bank v. Kercheval, 2 Mich., 504 ; Rhett v. Poe, 2 How. (S. C), 457 ; Fuller V. Scott, 8 Kan., 33. "^ Reynolds v. Douglas, 12 Pet., 523 ; Wildes v. Savage, i Story, 22 ; Rhett v. Poe, 2 How., 457 ; Bashford v. Shaw, 4 Ohio St., 263 ; Hance v. Miller, 21 111., 636 ; Van Wart v. Woolley, 3 B. & C, 439- « Oxford Bank v. Haynes, 8 Pick., 423 ; Talbot v. Gay, 18 Pick., 534 ; Wood- son V. Moody, 4 Humph., 303 ; Beeker v. Saunders, 6 Ired., 380 ; Mayberry v. Boynton, 2 Harr., 24. * Bickford v. Gibbs, 8 Cush., 154; Worcester Co. Inst., etc., v. Davis, 13 Gray. 531 ; Wadsworth v. Allen, 8 Grat., 174. ^ Reynolds v. Douglas, 12 Pet., 523; Louisville Man. Co. v. Welsh, 10 How., 476 ; Sigourney v. Wetherell, 6 Mete, 563 ; see anU, §§ 1059 to 1168. § 1789-* PRESERVATION OF GUARANTOR'S LIABILITY. 799 § 1 789. As to what zvill discharge giiarantor. — The guarantor is discharged by a release of his principal as ef- fectually as he would be by payment* He is also discharged by any extension of time allowed the principal by the guar- antee upon a consideration ; by any renewal which suspends the original debt ; and by a surrender of any security held by the creditor.^ Otherwise the guarantor might be seriously damaged by the act of the guarantee. But taking security from the principal would not discharge him, unless there were some agreement to give him time, because that would strengthen, rather than weaken, his debt.^ In short, a guarantor is a species of surety, and will be discharged by any act of the creditor that would discharge a surety.* A guarantee of the payment by another of goods to be sold not founded on any present consideration to the guarantor, and providing that it shall continue until written notice shall be given of its termination, is revoked by the death of the guarantor.^ ' Cowper V. Smith, 4 M. & W., 519. "^ Sigourney v. Wetherell, 6 Mete, 553; Shook v. Shute, 9 Port. (Ala.), 113 ; Crosby v. Wyatt, 10 N. H., 318; Mayhew v. Crickett, 2 Swanst., 185 ; Hart v. Hudson, 6 Duer, 294 ; Howell v. Jones, I C. M. & R., 97. ' Sigourney v. Wetherell, 6 Mete, 553 ; Norton v. Eastman, 4 Greenl., 521. * See a7ite, §§ 1 308 et seq., 1 326 et seq. 'Jordan v. Dobbins, 122 Mass., 168. CHAPTER LVL LETTERS OF CREDIT AND CIRCULAR NOTES. SECTION I. DEFINITION AND NATURE OF LETTERS OF CREDIT. § 1790. Letters of credit are instruments of frequent use in commerce, and while not possessing all the charac- teristics of negotiability which pertain to bills and notes, partake of them to such an extent as to be necessarily classed as negotiable instruments. A letter of credit may be defined to be a letter of request, whereby one person requests some other person to advance money or give credit to a third person, and promises that he will repay or guar- antee the same to the person making the advancement, or accept bills drawn upon himself, for the like amount. It is called a general letter of credit when it is addressed to all persons in general requesting such advance to a third, and a special letter of credit when addressed to a particular person by name.^ Sometimes the letter of credit is in the form of an au- thority to the correspondent to draw bills on the letter- writer ; and there are cases, as we shall see, in which it amounts to an actual acceptance by the letter writer of the bills when drawn. In the chapter on Guaranties,** letters of credit have been incidentally treated where they partook of the nature of guaranties. But they are frequently direct and indepen- dent promises, and deserve more particular notice. » See Union Bank v. Coster, 3 N. Y., 214. ' See ante, chapter LV. (800) § 1792. DEFINITION AND NATURE. 80I § 1 791. Mr. Bell, the learned commentator on the Laws of Scotland, whose language has been approvingly quoted by Judge Story in his treatise on Bills/ says : " Letters of credit, strictly speaking, are mandates, giving authority to the person addressed to pay money, or furnish goods, on the credit of the writer. They are generally made use of for facilitating the supply of money or goods required by one going to a distance or abroad, and avoiding the risk and trouble of carrying specie, or buying bills to a greater amount than may be required. The debt, which arises on such a letter in its simplest form, when complied with, is between the mandatory and mandant ; though it may be so conceived as to raise a debt also against the person who is supplied by the mandatory : i. Where the letter is pur- chased with money by the person v/ishing for the foreign credit ; or, is granted in consequence of a check on his cash account ; or, procured on the credit of securities lodged with the person who grants it ; or, in payment of money due by him to the payee, the letter is, in its effects, similar to a bill of exchange drawn on the foreign merchant. The payment of the money by the person on whom the letter is granted raises a debt or goes into account between him and the writer of the letter, but raises no debt to the person who pays on the letter against him to whom the money is paid. 2. Where not so purchased, but truly an accommo- dation, and meant to raise a debt against the person accom- modated, the engagement generally is to see paid any ad- vances made to him, or to guarantee any draft accepted, or bill discounted ; and the compliance with the mandate in such case raises a debt both against the wTitcr of the letter and against the person accredited." § 1792. Letters of credit have long been in use amongst merchants. Hallam, in his w^ork on the Middle Ages, has observed that : " There were three species of paper credit ' Stoiy on Bills, § 463. Vol. II.— 51 802 LETTERS OF CREDIT AND CIRCULAR NOTES. § 1793- in the dealings of merchants : i. General letters of credit, not directed to any one, which are not uncommon in the Levant. 2. Orders to pay money to a particular person. 3. Bills of exchange regularly negotiable. Instances of the first are mentioned by Macpherson about 1200. The sec- ond species was introduced by the Jews about 1 183." § 1 793. Marius ^ gives a very full description of letters of credit. " Now," he says, " letters of credit, for the fur- nishing of moneys by exchange, are of two sorts, the one general, the other special. The general letter of credit is, when I write my open letter, directed to all merchants, and others, that shall furnish moneys unto such and such persons, upon this my letter of credit, wherein and whereby I do bind myself, that what moneys shall be by them delivered unto the party or parties therein mentioned, within such a time, at such and such rates (or, in general terms, at the price current), I do thereby bind myself for to be accountable and answerable for the same to be repaid according to the bill or bills of exchange, which, upon receipt of the money so furnished, shall be given or delivered for the same. And if any money be furnished upon such my general letter of credit, and bills of exchange therefor given, and charged, drawn, or directed to me, although, when the bills come to hand, and are presented to me, I should refuse to accept thereof, yet (according to the custom of merchants) I am bound and liable to the payment of those bills of exchange, by virtue and force of such my general letter of credit, be- cause he or they which do furnish the money have not so much (if any) respect unto the sufficiency or ability of the party which doth take up the money as unto me, who have given my letter of credit for the same, and upon whose credit, merely, those moneys may be properly said to have been delivered. The special letter of credit is, when a merchant, at the request of any other man, doth write his ' Marius on Bills, 36, 37 ; Story on Bills, § 460. ^ 1794. DEFINITION AND NATURE. 803 open letter of credit, directed to his factor, agent, or corre- spondent, giving liim order to furnish such or such a man, by name, with such or such a sum of money, at one or more times, and charge it to the account of the merchant that gives the letter of credit, and takes bills of exchange, or receipts for the same." And again : " Now, in the gen- eral letter of credit, he that writes it doth make use of his credit for his own account and concernments in his way of trade ; and therefore there need no more than his letter of credit to make him liable to repay what shall be so fur- nished. But in the particular letter of credit, he that writes the letter doth it not to make use of the moneys himself, or to be employed for his own use, but for the use and accommodation of some other man, at whose request he is willinor and doth write his letter of credit ; and therefore it is very expedient and ordinary for him at whose entreaty the letter is written at the writing and upon receipt thereof, to give security by bond, or otherwise, unto the merchant that gives the letter of credit, for repayment unto him, his executors, or assigns, of all such moneys as shall be received by virtue of the said letters of credit ; for the merchant, by his letter, stands sufficiently bound to his correspondent ; and therefore it is no more but reason that he for whom the letter is granted should give (as it were) his counter- bond for repayment. The bills of exchange, which are to be made for moneys taken up by letters of credit, do run in the ordinary form of bills of exchange." § 1 794, Rcseinblance of letters of credit to bills of ex- change. — Letters of credit very much resemble bills of exchange in some particulars, but they are not bills ; on the contrary, they possess striking differences, although used frequently to avail the same general purposes. A person in New York having need of a certain amount in London, may purchase a bill on a London banker for that amount ; and thus readily transfer his funds from the one place to 804 LETTERS OF CREDIT AND CIRCULAR NOTES. § '^795' the other. But he may not know to what extent he will need funds in London, and not desire to make an absolute transfer of all that he may possibly need to that point, nor to reduce what securities he may hold, into money. And then his convenience may be better suited by taking with him, or sending to London, a letter of credit to a house there, in which the letter drawer, who is duly authorized to do so, requests it to furnish the letter holder, or order, or bearer, whatever of money, or other thing, he may need to a certain amount. The letter drawer may be only the agent of the letter drawee ; or he may be a correspondent, or other person well known to it. He receives the consid- eration either in a deposit of funds, or securities from the letter bearer ; and becomes the debtor of the letter drawee, who makes advancements upon faith of the letter, to their full extent. Thus it becomes a constructive transfer of funds, without any actual transfer, like a bill of exchange. But it differs from a bill in several particulars: (i) It is not payable absolutely, but only in the event that the letter bearer may use it ; which is optional with him. (2) It is not neces- sarily for a certain amount. (3) It is not necessary that it be addressed to a particular person. (4) The letter writer in many cases becomes the principal and only debtor for the advances, and is not in such cases at all like the drawer of a bill. And (5) he is never, like the drawer of a bill, entitled to immediate notice, if the letter is not complied with. § 1 795. The liability of the letter drawer is not definite like that of the drawer of a bill ; but each particular letter of credit is to be construed according to the particular lan- guage of the mandate, (i) Sometimes it is a ditect order to advance money to a certain amount to the letter bearer, and an absolute undertaking to repay it. (2) Sometimes it promises to honor bills, drawn for any amount which may § 1797- ^^ WHOM LETTER OF CREDIT AVAILABLE. 805 be advanced to the letter bearer. (3) And sometimes it undertakes that the letter drawer will become surety of the letter bearer to the extent of the amount advanced, or credit given him. § 1 796. Circular notes. — There is a peculiar kind of letter of credit, called a circular note, which has recently come in vogue, and is thus described : " Circular notes, as they are called, are a still more recent invention, and are now used ex- tensively both in this country and in Europe, but by travellers almost exclusively. They are generally, but not always, for specific sums, and are in fact letters of credit, which a banking house gives to a traveller, and which are made available, on presentation to any of the agents or correspondents of the house, in a long list of places, the names, both of the places and of the agents in them, being usually stated in the in- strument itself. A principal object of this is to enable a traveller to supply himself with funds frequently and at various points, and thus to prevent the necessity of carrying with him large sums of money, or depositing them at the principal centres of business along his route. They are usually transferable by indorsement, and are perhaps more like bills of exchange than ordinary letters of credit, but are not the same, nor would they be in all respects governed by the law of negotiable paper." ^ ' SECTION II. TO WHOM A LETTER OF CREDIT IS AVAILABLE, AND HOW FAR IT IS NEGOTIABLE. § 1797. There is no doubt that a special letter of credit is an available promise in favor of the person to whom it is specially addressed, whenever he makes the advance, or ' 2 Parsons N. & B., 109. So6 LETTERS OF CREDIT AND CIRCULAR NOTES. § 1 79?. grants the credit which it requests.^ Nor is there any doubt that if any one else attempts to accept and act upon the proposition contained in the letter, he comes, in as a mere volunteer ; and he can not, by thus thrusting himself for- ward, create any legal obligation on the part of the writer.' And, as we have already seen, it is equally well settled that if it contains a promise to honor bills, it is enforceable in the hands of any person taking them upon the faith of it, either as an actual acceptance, or as a promise to accept, as the case may be.^ It was at one time questioned whether a general letter of credit addressed to any person or persons, without any special designation, was available in the hands of any person making the advance, or granting the credit against the party signing it ; or whether the remedy lay ex- clusively between the letter writer, and the letter bearer to whom it was given. But this, too, is now settled, and there is no doubt that as soon as any person accepts the proposition tendered at large, and on his so doing, a con- tract is at once completed between himself and the letter writer, and it is the same in effect as if it had been specially addressed to him, for there springs up at once a direct privity between him and the letter writer.* And this ap- plies not only to cases where the letter purports on its face 1 Story on Bills, § 462. '^ Robins v, Bingham, 4 Johns, 476; Walsh v. Bailie, 10 Johns, 180; Taylor V. Wilmore, 10 Ohio, 490 ; 2 Robinson's Prac. (new ed.), 284. ^ See vol. I, §§ 550 to 570. In Marchington v. Vernon, Guildhall, Trin., 27 Geo, III. B. R. (quoted in Story on Bills, § 462, note i), which was assumpsit by the holder of a bill against the assignee of the drawee, who had given a promise to the drawer to honor the bill, Buller, J., said : " Independent of the rules which prevail in mercantile transactions, if one person makes a promise to another for the benefit of a third, that third person may maintain an action upon it." * Lawrason v. Mason, 3 Cranch (S. C.), 492 (1806); Watson's Ex'rs v. Mc- Laren, 19 Wend., 565; 26 Wend., 425; Birckhead v. Brown, 5 Hill, 642; North- umberland Bank v. Eyer, 58 Penn. St., 102, 103 ; Union Bank v. Coster, 3 N. Y., 214; 2 Denio, 375; Pollock v. Helm, 54 Miss., i ; 28 Am. Rep., 342, 347 and notes. In 2 Ames B. & N., 783, it is said : " One who issues a letter of credit makes a distinct contract with each holder who takes the bill on the faith of the letter, i.e., with each holder who accepts the offer contained in the letter, and these distinct contracts are no more negotiable than any other chose in action." Edwards on Bills, 239. § 1797' TO WHOM letter of credit available. 807 to be addressed generally to any person or persons whatso- ever, who should make the advance, but also in cases where the letter of credit is addressed solely to the person to whom the advance is to be made, and merely states that the person signing the same will become his surety for a certain amount, without naming any person to whom he will become security, if it is obviously to be used to pro- cure credit from some third person, and the advance is made by such person upon the faith of it.-^ In a case before the United States Supreme Court,^ the letter was as follows : "Alexandria, 28th November, 1800. Mr. James M'Pherson, Dear Sir : We will become your security for one hundred and thirty barrels of corn, payable in twelve months. (Signed) Lawrason &. Smoat." It was held that the plaintiff, who had advanced the corn on the faith of the letter, could recover of the writers. Marshall, C. J., said : "There is an actual assumpsit to all the world, and any person who trusts, in consequence of that promise, has a right of action." * Lawrason v. INIason, 3 Cranch, 492 (1806) ; Boyce v. Edwards, 4 Pet., 121 ; Adams v. Jones, 12 Pet., 207. ^ Lawrason v. Mason, 3 Cranch, 492 (1806) ; Pollock v. Helm, 54 Miss., i. In Russell v. Wiggin, 2 Story,. 213, Messrs. Wiggin, of London, authorized parties in Boston, by a letter of credit, to draw bills on them in London for a certain amount, and promised to accept them. The payees, who had taken the bills in India on faith of the letters, sued the Messrs. Wiggin. Story, J., said : "I have understood, and always supposed, that in the commercial world letters of credit of this character were treated as in the nature of negotiable instru- ments ; and that the party giving such a letter, held himself out to all persons who should advance money on bills drawn under the same, and upon the faith thereof, as contracting with them an obligation to accept and pay the bills. And I confess myself totally unable to comprehend how, upon any other understand- ing, these instruments could ever possess any general circulation and credit in the commercial world. No man ever is supposed to advance money upon such a letter of credit, ui)on the mere credit of the party to whom the letter is given ; and I venture to affirm that no man ever took bills on the faith of such a letter without a distinct belief that the drawee was bound to him to accept the bills, when drawn, without any reference to any change of circumstances which might occur in the intennediate time between the giving of the letter of credit and the drawing of the bills under the same, of which the holder, advancing the money, had no notice. Any other supposition would make the letter of credit no security at all, or, at best, a mere contingent security ; and the money would, in effect, be advanced mainly upon the credit of the drawer of the bills, which appears to me to be at war with the whole object for which letters of credit are given." 8o8 LETTERS OF CREDIT AND CIRCULAR NOTES. § 1 798. § I 798. Negotiability of letter of credit when it relates to bills of exchange. — The doctrine now established goes fur- ther than this, and asserts not only the inviolability of the promise contained in the letter of credit by any one acting on the faith of it, but real negotiability when it relates to bills of exchange. In an English case, it appeared that the A. & M. Bank gave to Dickson, Tatham & Co., a letter of credit, addressed to them, authorizing them to draw bills upon the bank to a certain amount, and that D., T. & Co. drew accordingly, and sold the bills to the Asiatic Banking Corporation. The A. & M. Bank having failed, the Asiatic Banking Corporation carried in a claim for the amount of them, under the winding up of the A. & M. Bank. The claim was resisted on the ground that D., T. & Co. were indebted to the A. & M. Bank in an amount exceeding the amount of the bills ; and that the Asiatic Banking Corporation was only the equitable assignee of D., T. & Co., and were subject to any claim arising from the state of accounts between the bank and their assignors. But the lords justices, before whom the case was heard, held that persons taking the bills on the faith of the letter of credit were entitled to the absolute benefit of its terms, and were not subject to any collateral or cross claims.^ § 1 799. lVhe7i letter of credit amounts to acceptance. — Sometimes the letter of credit is in the form of an authority to a party or parties therein named to draw a bill of ex- change on the letter writer ; and its effect is frequently such as to amount to an actual acceptance of the bill drawn, ac- cording to its tenor, and to transmute the letter writer's liability from a mere promise contained in the letter to that of an actual party to the bill. In order for it to have this effect, it is necessary, (i) That the letter be written a reasonable time before the bill is drawn ;^ (2) That the con- > Agra & AListerman's Bank, 2 Law Rep. Ch. App., 297 (1867) approved In re Blakely Co., 3 Law Rep. Ch. App., 154, and in Arents v. Commonwealth, 18 Grat., 769 (1868). ' See chapter XIX, §§ 560 et seq., vol. i § l800. TO WHOM LETTER OF CREDIT AVAILABLE. 809 tents of the letter should be communicated to the party who takes the bill, and that he should take the bill on the faith of the letter.^ When the letter designates a specific bill, which is drawn and taken in pursuance with its terms, the party taking it has his election to treat it either as an actual acceptance, or as a promise to accept, and accordingly to sue the letter writer as acceptor of the bill, or for breach of promise to accept.^ Accordins: to some authorities, the letter writer can not be sued as acceptor (but only for breach of promise to accept), unless the letter designates the specific bill — puts its finger on the particular bill, so to speak ;' but the better opinion, as it seems to us, is adopted by others, that when- ever the bill corresponds with the authority under which it is drawn sufficiently to be identified, the letter writer may be sued as acceptor.* § 1800. Conchision. — And here we conclude these Com- mentaries on the Law of Negotiable Instruments. Nice and refined in many of the distinctions necessary to be no- ticed, and strictly technical in many of its ramifications, the subject is, nevertheless, pervaded by a broad, and liberal, and catholic spirit, as engaging to the mind of the philo- sophical student of jurisprudence, as it is instructive and needful to the active practitioner of the profession. For- tunes, vaster in amount than the dowries of monarchs, are daily committed, in our commercial cities, to the keeping of those frail but precious fabrics known as negotiable papers. With good faith crowned as their patron goddess, and fortune as their ward, they attract to their considera- tion and protection, not only the hunters of wealth, but as ' Ibid. ' Russell v. Wiggin, 2 Story C. C. R., 213, " Boyce v. Edwards, 4 Pet., 1 1 ; Coolidge v, Payson, 2 Wheat., 66 ; Schimmel- pennick v. Bayard, i Pet., 264. * See chapter XIX, §§ 560, 561 et seq., vol. i ; Bissell v. Lewis, 4 Mich., 450; Nelson v. First N, Bank, 48 111., 39 ; Ulster Co. Bank v. McFarland, 5 Hill, 434; 3 Den., 553. 8lO LETTERS OF CREDIT AND CIRCULAR NOTES. ^ I bOO. well the good who cherish sentiments of integrity, and the learned and great who expound the principles by which it shall be jealously guarded and maintained. Ever expanding to embrace new species of instruments within its scope of operation; ever increasing in conse- quence as commerce explores new fields of adventure, in- dustry unlocks new mines of wealth, and capital seeks new subjects of investment, the law of negotiability is destined to rise into an importance of which its early history gave little promise, and which its present development falls far short of realizing. In no other branch of jurisprudence have the laws of different nations and different States so closely assimilated to each other. It is the pioneer in producing a homoge- neous code, which shall prevail throughout the realm of commerce, without regard to the limits of country, race, or language. It is continuously struggling to eradicate local partialities, and prejudices, and temporary expediencies, and to attain that which shall remain stable, because founded on principles of universal justice. It was in maintaining the validity, and enforcing the obligation of a negotiable instrument that the United States Supreme Court said : "We will never immolate truth, justice, and the law, be- cause a State tribunal has erected the altar and decreed the sacrifice."^ And for the facilitation of trade, and the fair understanding of mercantile negotiations among all mercan- tile men, it is to be hoped that the day is not far distant, when it may be truly said (in the language of Cicero, ap- provingly quoted by Mansfield and Story), respecting the law of our subject, wherever industry turns a wheel or commerce sets a sail : " Non ei'it alia lex RomcB, alia A the' nis, alia nunc, alia posthac, sed et apiid omnes gentes, et omni tempore, ttna eademqiie lex obtinebit." ' Ante, vol. l, § lo, p. lo, note i. END OF VOLUME SECOiN'D. GENERAL INDEX. INDEX TO VOLUMES I. AND II. [The figures opposite to references refer to paragraphs marked §. The Roman numeral " II." is prefixed to references to second volume]. ABSCONDING. See EXCUSES, and II., 1144. of payor is excuse for want of presentment, II., 1 144. especially if he is insolvent, II., 1144. of payor to another place in same State or country excuses want of pre- sentment, II., 1 144. but if holder knows his whereabouts he should seek him, II., 1 144. of drawee, maker, or acceptor does not excuse want of notice to drawer or indorser, II., 1144. when drawer or indorser absconds, notice should be left at last place ol abode, 11., 1144. or with party representing his estate, II., 1144. ABSENCE. See Excuses, and II., 1 114. as excuse for non-presentment and notice, II., 11 14 to 1123. ACCEPTANCE. See Presentment for ; Drawer and Drawee ; Prom- ises TO Accept ; Partners ; Corporations ; Statute of Frauds. I. Nature of, 360. drawer undertakes that bill will be accepted, 479. drawee who is not acceptor may discount bill, 479. drawee without acceptance not party to bill. 480. may be waived, or dispensed with, 481. in such case, negotiability of bill not impaired, 481. what bills do not require acceptance, 482. bills payable on demand do not require, 482. nor does bill drawn by party on himself, 482. nor bill drawn by partner on his firm, 482, nor by corporation on its officer, 482. either of a set may be accepted and sued on, 483. drawee should accept but one of a set, 483. when acceptor bound on several bills of a set, 483. (813) 8T TkT TM? V References a re to 1 4 1 JN UH-A.. farasraphs marked % ACCEPTANCE— con/zm/ed. 2. IVAo may accept, 484, 485. bill imports that drawee is competent to accept, 484, none but drawee can accept unless for honor, 485. second acceptance is alteration, 485. but party may guarantee bill, 485. can not be series of acceptors, 485. may be by any name party adopts, 485. ambiguous cases, 486. if no drawee is named, acceptor acknowledges himself drawee, 486. may be by agent, 487. holder may exact proof of agent's authority, 487. whether holder must take agent's acceptance, 487. if agency clear, holder must take acceptance by agent, 487, if holder takes acceptance from one falsely assuming agency, and does not notify antecedent parties, they may be discharged, 487. if hill drawn on agent individually he must accept individually, 487. various and conflicting cases, 487. joint drawees should accept jointly, 488. if either joint drawee refuse acceptance, bill must be protested, 488. but party accepting bound, 488. one partner may accept, 488. whether partner's acceptance in his own name suffices, 362, 488, 489. how partner should accept, 488. 3. When made, 490, 491. may be before drawing, 490. may be after discount, maturity, protest, or refusal to accept, 490, 491. acceptances in blank, 142, 143, I43«, 490- acceptor in blank liable for amount to bona fide holder, though author- ity be exceeded, 490. dates from delivery, 490. is revocable until delivery, 490. usage of banks respecting dishonor for non-acceptance, 490. may be after death of drawer, 491, 49812. and after prior refusal to accept, 491. presumption as to time of, 491. drawee may- deliberate twenty-four hours as to, 492. if drawee refuse, in twenty-four hours bill must be protested, 492. when accepted and issued, acceptance is irrevocable, 493. may be dated, 494. acceptance presumed to be after drawing, and before maturity, 494. when drawee should certify the date, 494. when amount should be expressed in, 494. 4. Form and varieties of, 496. may be express, implied, verbal, written, by telegram, on the bill, on separate paper, before bill drawn or afterward, absolute, conditional or qualified, 496. usual form is by writing his name and the word " accepted " on the face of the bill, 497, 504. References are to TXT-nirY RtC tarasraJ,Us marked %. ^^ ^^■^- ^15 ACCEPTANCE— f^«/z«?^^^. signature of drawee alone suffices, 497, 504. or the word "accepted," without signature, 497. what words constitute acceptance, 497. effect of words " I will not accept," written on bill, 502. not necessary for signature to be across the bill, 498. position of signature immaterial, 498. part payment does not amount to acceptance, 497^. statutory' requirement of acceptance in writing on bill, 497^. construction of statutory requirements that acceptance be written on bill and signed, 497^. letter of drawee, though drawer dead, may be sufficient, 498. effect of drawee's death, 498^;. drawer's death, after delivery of bill to payee, no revocation, 491, 498a. what conduct implies, 499. when keeping bill by drawee amounts to, 499(7. whether the destruction of bill by'drawee amounts to, 500. drawee procuring discount of bill for his own accommodation, and promising to pay it, constitutes himself acceptor, 501. authority to draw amounts to, 501. drawee promising and refusing to accept is bound for damages, 502. if drawee has funds of drawer, slight circumstances will raise presump- tion of contract to accept, 502. " I protest within," is refusal of, 502. may be on separate paper, 503. what promises amount to, 503. equivocal language will not amount to, 503. 5. Verbal and written acceptances, 406. senible, holder may require written, 504, 507^. verbal is binding, 504. by what law verbal, controlled, 867. what words constitute verbal, ^o\a, 505, 506. promise to pay on subsequent day, 505. words used rliust show clear intent to accept, 506, must be addressed to drawer, holder, or agent, 507. if to stranger, do not amount to, 507. holder must assent to verbal, 507^. 6. Absobtte, conditional, and qualified, 508. holder may require absolute, 508. at his risk take conditional or qualified, 508. or may treat the bill as dishonored, 508, plaintiff must show performance of condition, 508. conditional should be so averred, 508. what words amount to conditional, 509. holder refusing conditional, should protest, 510. holder accepting conditional, should notify parties, 510. protest for non-acceptance precludes holder from availing himself of conditional, 510. indorser discharged by conditional, unless he is notified of its terms. and assents, 510, 511, 515. 8 (■ TTSinW References are '" lO IINUIL^V. J>ara£ra/>ks murk.'J I h.CCEVi: A.'^CE—conflmeed. whether or not drawer discharged by conditional, 511. effect of neglect to notify, when conditions complied with, 511. construction of conditional, 512. to pay "when infimds" meaning and effect of, 513. when " in funds" means " when in cash," 513. when funds not received in lifetime of acceptor, administrator receiving them is liable, 513. various instances construed, 513. holder must show acceptor received funds, 513, 514. can not resort to drawer until acceptor receives funds and re- fuses to pay, 513. acceptor not liable if funds intercepted, 513. when evidence admissible to explain conditional, 514. Qualified^ 515. qualifications as to sum, time, place, and mode of payment, 515. drawer and indorser discharged unless they assent to, 515. acceptance to pay at another town is qualified, and operates as altera- tion, 515. II., 1379. 1381- but not if payable at particular place in same town, 515. II., 1380. may contain condition for renewal, 516. acceptance for part of amount is good/r£> tajtto, 516. acceptance for part discharges antecedent parties, unless assented to, 516. conditions in, should be written, 517. maybe in contemporaneous writing, 517. but in latter case would not affect holder without notice, 517- conditions in the body of the instrument, 517. written acceptance can not be altered by parol evidence, 517- verbal acceptance may be shown, 518. conditional, can not be made after absolute acceptance, 518. conditions as to acceptance may be in body of the bill, 517. such cases construed, 517. 7. Acceptances payable at a particular place, 519. House of Lords decided such acceptances to be qualified, 519. English statute on the subject, 519. does not affect promissory notes, 519. allegation of presentment not necessary against acceptor, 519. unless date be payable at a particular place, 519. the words, "only, and not otherwise or elsewhere," 519. presentment for, must be alleged against drawer or indorser, 519. so if bill be drawn payable at particular place, 519. rule as to, in the United States, 520. in effect, agrees with the English statute, 520, 8. Acceptance for honor, or supra protest, 521. happens when drawee refuses to accept, and stranger accepts for honor of a party, 521. References are to t -v- tm.- v O » »» Paragraphs marked §. lAUtX. 51/ ACCEPTANCE— r^«//;/«^rt'. inures to benefit of parties subsequent to one for whose honor the ac- ceptance is, 521. is only allowable after protest, 522. form and ceremony of, 523. acceptor should notify party for whose honor he accepts, 523. any third person, not a party, may accept for honor, 524. and, it seems, so may the drawee, 524. unless he were bound in good faith to accept, 524. rights o{ 2iCCt^\.or supra protest, 524, 526. when he may recover against indorser, 524, maybe several acceptors supra protest for honor of different parties, 525. acceptor supra protest should state for whose honor he accepts, 525. if he does not, it will be presumed to be for honor of the drawer, 525. acceptor supra protest may sue party for whose honor he accepted, and others whom such party could sue, 526. must prove presentment and notice when he sues drawer, 526. acceptance for honor not absolute engagement, 527. in order to be binding (i) bill must be presented to original drawee at maturity, 527. (2) if second refusal by dravver, must be second protest, 527. (3) and then bill must be presented to acceptor supra protest, 527. If acceptor supra protest refuse payment, after these steps taken, there must be another formal protest, 527. does not admit signature of mdorser for wnose honor it is made, 528. to what extent admissions extend, 528. holder not bound to take, 529. who may be sued by holder taking, 529, 531. cases of protest for better security, 530. effect of acceptance for honor on accommodation parties 531. releases parties who become such for accommodation of the drawer, 531. 9. Effect of accepta7tce ; what it admits, 532. acceptance makes drawee principal debtor, 532. but drawee can not charge drawer unless he pays the bill, 532. makes acceptor liable like the maker of a note, 532. according to all the terms of the bill, 53^. stipulations for payment of attorney's fees enter into, 533, 62a. if for accommodation, acceptor can not, nevertheless, sue drawer on the bill, 532. but may sue him for money paid at his request, 532. acceptance admits everj'thing essential to validity of the bill, 533, that is to say — (i) signature of the drawer ; (2) funds in the hands of the drawee ; (3) capacity of the drawer ; (4) capacity of the payee to indorse ; (5) handwriting and authority of drawer's assumed agent, 533. 534. 535. 536, 537- n., 1363. binds acceptor, though drawer's name be forged, 533. as between drawer and acceptor, the latter may show he had no funds ; but not as against bona fide holder, 534. Vol. II.— 52 8 1 8 INDEX. . ^'f'^"^"' ''^'•t", - paragraphs marked %. ACCEVT A'^CE— confznued. 10. What acceptance does not admit, 538. 539, 540. it does not admit genuineness of payee's or other indorser's signature^ 538. II., 1225, 1364. acceptor paying under forged indorsement may recover back amount, 538. rule does not apply where drawer has issued bill bearing forged indorse- ment, 538. reason of exception, 538. does not admit indorser's signature, though bill be payable to drawer's order, 538. II., 1225, 1365. rule in case of fictitious drawer, 538. does not admit agency to indorse, 539. II., 1225. does not admit genuineness of terms of the bill, 540. ACCEPTANCE SUPRA PROTEST, OR FOR HONOR, See Acceptance, and 521 to 531. if acceptor is responsible for issuing bill in such form as admits of easy alteration, he is bound, 540. 11. Extinguishment of acceptor's obligatio7i, 541. acceptor's obligation may be extinguished, discharged, or waived by — (i) operation of law; (2) payment ; (3) release ; (4) express or im- plied waiver, 541, 542, 543, 544, 545. bankruptcy or statute of limitations discharges, 541. acceptance discharged by express renunciation, 542, 544. different rule applicable to other executory contracts after breach, 542. when acceptance is for accommodation, 543. where acceptance is for value, 544. circumstances must amount to express renunciation, 545. delay to proceed against acceptor, or receiving interest from, or giving time to other party, does not discharge acceptor, 546. effect of failure of consideration, 547. extending time in acceptance, 547. accepting after maturity, 547. taking security from other party, 548. co-extensive or collateral security taken from acceptor, 548. when cancellation discharges acceptance, 549. effect of cancellation, 549. every holder may avail himself of written or verbal acceptance, 563. ACCEPTOR. See ACCEPTANCE; Promises to Accept; Corporation; Agent ; Forgery ; Alteration. there can be but one acceptor of bill, 412, 485. the acceptor must be drawee or acceptor for honor, 412, 485. whether corporation or officer is in certain cases, 412, 413. whether principal or agent is in certain cases, 414. is principal party to bill, 532. II., 1236. whether acceptor of bill indorsed in blank can pass good title before maturity, 78 1<^. if bill passed out of his hands after acceptance, its production is evi- dence of payment, II., 1227. pf47:,T,:::k%%. index. 819 hCCEVTOR—confimted. when he pays should take receipt, II., 1228. is entitled to possession of bill, II., 1228. whether liable for re-exchange, II., 1449, 1450. author's view that he is liable, II., 1450. is discharged by alteration of bill, II., 1379. insertion of place of payment is alteration, II., 1379. but drawee in particular city may designate place of payment therein, 515. II., 13S0. is bound to holder who takes bill after acceptance, though drawer's name be forged, II., 1361. whether he may recover from holder when bill is forged, who presented it for payment, II., 1361, 1362. what acceptor admits, see Acceptance and 533. law of place of payment controls contract of, 896. if place of payment not specified, it is presumably place of acceptance, 896, 918. liability of for interest, re-exchange, and damages, 918. II., 1449, 1450- when acceptor may recover amounts paid on forged and altered drafts. See Forgery and Alteration, and II., 1359 to 1369. recognized exceptions to rule generally stated that acceptor can not recover payments of forged drafts, II., 1367. may recover (i) when payment is made to payee, II., 1367. (2) where parties are mutually in fault, II., 1367. (3) where party holding paper has not exercised customary precaution, II., 1367. (4) where payment is made for honor of drawer, II., 1368. ACCOMMODATION BILLS AND NOTES. See Bona Fide Holder Consideration ; Diversion ; Principal and Surety. are made on sufficient consideration, 790. holder of bill or note made for accommodation need not show that he gave value, 165. bills and notes for mutual accommodation valid, 187. member of firm has no implied power to execute accommodation paper in firm's name, 365. if instrument shows on face that partner signed firm's name for accom- modation, holder must show assent of other members, 365. word " surety " attached to firm's name conveys notice, 365. when transaction shows on its face that party signed for accommoda- tion, 365. bona fide holder without notice may recover against firm whose name is used by member for accommodation, 368. burden of proof in such cases, 369. corporation has no implied authority to execute, 387. but is bound to bona fide holder without notice, 387. acceptor for accommodation can not sue drawer on bill, 532. but may sue for money paid at his request, 532. may be indorsed after maturity, and pass good title, 726, 786, 790. fact that holder knew nature of paper does not vitiate his title, 726, 786, 790. t>20 INDEX. paragrapi. . >,u. >^,J% ACCOMMODATION BILLS AND Y!"Z'rk:U^. INDEX. 8.^1 AMOUNT, OR ^X^yi— continued. when term dollars may be explained by parol evidence, 87. cases arisinjj^ out of late war, 87. if donee transfer bill or note for less than full value, holder can only recover amount paid, 181. see sales of bills and notes as to amount of recover)', 749, 754. surety, or accommodation party, can only recover what he pays, II., 1342. AMOUNT OF RECOVERY. See Sale; Collateral Security; Accom- modation Bills and Notes. when whole amount recoverable. And see Sale, and 754, 761. on coupon bonds, II., 15x7^. on bank notes. See Bank Notes, and II., 1682. ANTECEDENT DEBT. See Consideration, 184, and Pre-existing or Precedent Debt, 827 et seg. APPRAISEMENT LAWS. whether waiver of, in bill or note, impairs negotiability, 61. it does not, 61 and note. APPLICATION OF PAYMENTS. See Payment, and II., 1250, 1253. APPROPRIATION OF PAYMENTS. See Payment, and IL, 1250, 1253. ASSIGNMENT OF FUND BY BILL OR ORDER. See Bills OF EX- CHANGE AND Equitable Assignment. whether unaccepted bill of exchange for whole amount operates as as- signment of fund, 15, 17, 20. accepted bill for whole amount so operates, 18. order for whole amount so operates, 21. whether bill for part of fund so operates, 22. order for part of fund so operates, 22, 23. New York decisions, 23a. whether check operates as assignment of fund in bank pro tanto, 1 1., 1643. ASSIGNMENT OF PROPERTY. See Excuses, and II., 11 29, 1141. as excuse for non-presentment or notice, II. , 11 29, 1141. ASSIGNMENT— TRANSFER BY. 1. Term assignment is usually applied to transfer of paper not negotiable, and to transfer of such as is negotiable without indorsement, 729. bill or note payable to particular person may be transferred without in- dorsement, 729. but such assignment passes only equitable title, 729. and is not according to mercantile custom, 729. what is assignment of legal and what of equitable title, 729, 730, 741. 2. Assignor of legal title warrants — (i) the genuineness of the bill or note, 731 English cases, 731^. when instrument forged it matters not that some signatures are genuine, 731a. distinction between assignment for debt due or then created and sale by delivery, 73i<5. 8 T-\T'r»T?-v References are to j2 1 JN D t A. paragrapirs marked %, ASSIGNMENT— TRANSFER Wl—contimted. distinction not well taken, 73 1(^. contrary view in Maryland, 73ti5. (2) its validity and legal operation, 733. English cases, 732, 733. decision in New York that scienter as to usury is necessary to rendei assignor liable, 733«. (3) the competency of the parties to contract, 734. decision of U. S. Sup. Court and comments, 734^- in Nebraska and comments, 734^. (4) that transferrer has a title to instrument and right to transfer same, 735- (5) that he knows of no facts which show the paper, originally valid, to be worthless, 736. no implied warranty in, that paper was not made for accommodation, 736^. query, whether assignor warrants the solvency of the principal, 737. in such case, if both transferrer and transferee are ignorant of insol- vency of principal at time of transfer, the loss should rest where it falls, 737. doctrine of text as stated in Rhode Island, 737, 738. doctrine in England, 739. distinction where bill or note of third party was assigned in payment ol antecedent debt, and dishonored, not considered tenable, 739, 740. oral warranty of solvency, and guaranty of payment valid, 739«. liability of broker or agent making transfers by delivery. See Broker, and 740^;. 3. Where bill or nc It payable " to order " is transferred without indorsement, transferrer acquires only an equitable title, 741. holder, in such case, must aver and prove the assignment, 741. possession, in such case, not evidence of ownership, 741. holder can only recover subject to such existing defences as were avail- able against his assignor, 741. but he is protected against all defences stibseqtiently zxismg, 741. doctrine as to bills and notes not negotiable, 742. bills and notes not payable to bearer or to order can not be transferred, by indorsement or delivery, so as to enable transferee to sue in his own name, except by express statute, 742, 743. transferee, who has promised, upon good consideration, to indorse, may be sued for breach of promise, or compelled, by decree in equity, to indorse, 744. whether indorsement relates back to time of assignment, 745. indorsement at any time before suit brought cuts out right of maker or acceptor to plead set-off, 746. second assignee who gives notice of his assignment is protected against prior one who fails to do so, 747. assignment of a particular claim carries with it all securities held by assignor, 748, negotiable instruments may be assigned by a separate and distinct paper, deed, or mortgage, conveying them or all " choses in action,' 748«. References are to T -v r> f \' O paragraphs marked %. liNUtA. ^33 ASSIGNOR. See ASSIGNMENT, supra, and 741, 746. by what law it is determined whether party is assignor or indorser, 902. ASSIGNS. instrument payable to certain party or assigns is negotiable, 99, 104. II., 1496. ATTACHMENT. 5^^ Assignment. when assignment has priority over, 18, 19, 20 to 23a. whether negotiable note subject to for debt of payee, 800a. better opinion to contrary unless note be in hands of payee, 800a. AT SIGHT. See After Sight. bills payable at sight entitled to grace by law merchant, 617. effect of statute or custom, 6x8. " on demand at sight " same as "at sight," 621. ATTESTATION. not necessary bill or note should be attested by witness, 112. desirable where paper signed by mark or initials^ 112. if there be attesting witness, he must prove asgnature or mark, 112. exceptions to this rule, 112. admission of party good evidence, 112. when no chance for mistake, evidence of attesting witness not necessary, 112. statute in England, 112. when secondary evidence admissible, 112. witnessed and unwitnessed notes, II., 1392. when adding or obliterating witness' name is material alteration, II., 1392. ATTORNEY, POWERS OF. See Certificates of Stock. te execute sealed instrument must be sealed, 274. to transfer certificates of stock may be in blank, II., 1708^. whether if sealed, may be in blank not discussed, II., 1708^. ATTORNEY'S FEES. whether agreement in bill to pay impairs negotiability, 62, 62a. when agreement in bill to pay, binds acceptor and indorser, 62a. when holder may recover them, 62a. holder must prove amount, 62a. if in bill, do not render it usurious, 62a. conflicting and various views as to effect of agreements to pay, 62, 62a. whether agreement to pay is in the nature of a penalty, 62, 62^3;. AU BESOIN. meaning of term, in. indicates resort to second drawee if first refuses to honor the bill, iir. if drawee " au besoin " honors bill, drawer is liable to him for full amount, in. BANKS AND OTHER AGENTS FOR COLLECTION. I. Rights, duties, and liabflities of, 323 et seq. duties of collecting agents of commercial paper, 323. Vol. II.— 53 Q-. TVTTiTPV References are to *534 liMULX. paragraphs marked % BANKS AND OTHER AGENTS FOR COLLECTION— r^«//««^^. banks have implied power to collect commercial paper, 324. they frequently charge commissions for collections, 324. but temporary use of money is consideration for undertaking to collect, 324, 328. no special contract necessary when paper deposited in bank for collec- tion, 324, 328. bank at which paper is payable and deposited for collection is agent to receive payment at maturity, 325. designation of bank as place of payment imports that holder wJl have paper there at maturity, 325. payment may be made to bank by debtor unless he has notice not to do so, 325. if not lodged there, and payor has funds there to meet it, he is not bound for future damages or costs, 325. mere designation of bank as place of payment does not per se make it agent of payee to receive the amount, 326. paper must be lodged with it, or indorsed to it for collection, in order to make bank payee's agent, 326. without such or equivalent authority, bank receives money as agent of payor, 326. bank where paper payable is agent of payor to make payment, 326^. need not have payor's check, or draft, to make payment, 326a. contrary view expressed in previous editions of this work the author now deems erroneous, 326/is mar/ied%. IJNUtA. "3/ BANK BILLS OR BANK l^^OTKS—conli/tued. but are negotiable, like money, IL, 1672, 1674. bill or note payable is not negotiable, 55. IL, 1673. * 5. Liability of tra7tsfcrrer of batik notes, IL, 1675. transferrer warrants genuineness, IL, 1675. does not warrant solvency, IL, 1675, 1676, 1677. transferrer may indorse, IL, 1675, 1676. but party receiving forged bank note must act diligently, IL, 1675. what diligence required, IL, 1675. if forged are nullities, IL, 1675. query, whether solvency of bank is warranted, IL, 1676, 1676a, 1677. doctrine approved that it is not, IL, 1677. exception where transferrer kttows that bank is insolvent, IL, 1678. effect of warranty of solvency of bank, IL, 1679. duty of transferee in such cases, 1679. upon whom loss of insolvent notes falls, IL, 1677. 6. Rights, duties, and remedies of holder of bank notes, IL, 1680. ^oss^ssxon prima facie evidence of ownership, IL, 1680. distinction between bank notes and other negotiable instruments, II, 1680. holder regarded as original promisee, XL, 1680a. holder of bank bill must have acquired it in the usual course of busi- ness, IL, 1681, holder has no preference to assets, 1 1., 1681. holder is entitled to recover full amount of bank note without reference to what he paid for it, IL, 1682. also interest from time of demand, IL, 1682. bank notes are never overdue, IL, 1683. whether statute of limitations applies to, IL, 1684. rule as to presentment and demand, IL, 1685. may be presented in packages, IL, 1685. but each note is separate debt, 1 1., 1686. trover lies against finder of bank notes by owner, IL, 1687. when assumpsit lies, IL, 1687. if finder has passed the note to a bona fide transferee for value, the owner can not recover, IL, 1687. if bank receive in payment or on deposit counterfeit notes purporting to be its own, innocent party who pays or deposits them is not bound, IL, 1688. 7. Payment in bank notes, and set-off, II. , 1689. at common law nothing but money is legal tender, IL, 1689. by statute in many States banks are compelled to receive their own notes in payment, XL, 1689. as to bank notes required after bank goes into liquidation, 1 1., 1689, 1690. weight of authority is that notes acquired after and with notice ol assignment are not valid tender to assignee, IL, 1689. contrary view stated and approved, II. , 1689. while bank is solvent, debtor can plead as offsets its own notes, IL, 1691. RtS TMmrv Referinces are to t>3^ INDEX. paragraphs marked % BANK BILLS OR BANK '^Q>'YY.'S>— continued. when bank is insolvent, its assets must be marshaled, IL, 1691. when note is payable in bank bills, holder is entitled to recover its face value, n., 1692. • 8. Rule respectmg lost or destroyed bank notes, IL, 1693. contract of bank is to pay amount on surrender of itote, IL, 1693. claim of owner, who can not comply with this condition, is equitable, IL, 1693. one who loses whole of a bank note, must bear the loss, IL, 1693. but if note be destroyed^ he can recover amount of the bank on clear proof of such destruction, II. , 1694. rule when part of a bank note is lost, II. , 1695. view that action at law in such case is not maintainable, IL, 1695. and that bond of indemnity is requisite, IL, 1695. view that action at law is maintainable, IL, 1695. view approved that action at law is maintainable on half note, IL, 1695. that payment on such action is good, IL, 1695. and that holder of other half takes it subject to defence in first action, IL, 1695. equity will entertain suit on half note, IL, 1696. half notes sued on must be identified, IL, 1697. facts necessary to support case must be proved, IL, 1697. bank can not escape responsibility by publishing' notice that it will not be responsible for .y^T/^r^'^ notes, II. , 1695, note i, 1696. BANKER'S LIEN. See Certificates of Stock. bank receiving customers' bills for collection are holders for advances on faith thereof, 183^. bank advancing money to customer has a lien on his securities in its hands, 334a, 337. but particular trust or agreement may affect it, 334a. has no common law lien on its own stock, held by debtor, for his debt, 1 1., 1708^/. under what circumstances such stock lien exists, IL, 1708^, lyoM. balances upon account are consideration for bills and notes deposited as security with banker, i83fl. illustrations, 183^. BANKRUPT. property of, goes to assignee, 260. can not sue on his choses in action, or transfer them, 260. maker of note to, can not deny his right to transfer, 260. if he has transferred bill or note before bankruptcy, he or his assignee may be compelled to indorse afterward, 260. as to indorsement by, 182, 260. as to promise to pay, after discharge, 182. binds the promisor, and is on sufficient consideration, 182. as to note given after discharge, 260. notice to, IL, 1002. BANKUPTCY. See EXCUSES. no excuse for non-presentment and notice, IL, 1171, 1172. References are to TNrJFY 8?0 paragraphs marked %. IJNUIiA. Ujy BEARER. See Payee. bill or note may be payable to, 99. check may be payable to, 99. bonds and coupons may be payable to, 99. certificates of stock often inure to benefit of, 11., 1708. instrument payable to bearer A., same as payable to A. simply, 99. A., or bearer or holder, same as bearer, 99. indorsement in blank makes instrument payable to, 693. with legal title may sue, II., 1 191. burden of proof when suit brought by, 812, 814a. negotiable instruments payable to, transferable by delivery, 729 et seq. BILL BROKER. See Broker. BILLS OF CREDIT. provision of Constitution of United States that no State shall emit bills of credit, II., 1715. applies to States only, II., 171 5> 1724- emit is appropriate term, II., 17 15. bill of credit is negotiable paper designed to pass as ci^rrency and cir- culate as money, II., 1716. Chief-Justice Marshall's definition of, II., 1717. Justice Johnson's dissenting views, II., 1718. bearing interest makes instrument none the less a bill of credit, II., 17 18. not necessary for bill of credit to be a legal tender, II., 17 19, comment on views of Mr. Madison, and of Hon. R. M. T. Hunter, Treasurer of Virginia, II., 1720. the name is immaterial, II., 1721. being bottomed on a fund does not make instrument any less a bill of credit, II., 1723. States of Union only prohibited from emitting bills of credit, II., 1724, 1715. State may charter corporation to issue, and take all the stock, II., 1725. and the issues of the corporation are not deemed bills of credit, II., 1725. bonds and coupons of States not bills of credit, II., 1726. although receivable for dues, 449. II., 1726. BILLS OF EXCHANGE. 1. Origin, history, and use of, l, 2, 3, 4. rules of common law that choses in action were not assignable, first relaxed as to, I. probably first negotiable instruments, 2. origin and history of, 3, 4. term derived from French, 4. used to perfect contract of exchange, or bargain, 4. how employed to assign funds, 4. 2. Foreign and inland bills, 6. are foreign or inland, 6. are foreign when drawn in one State or country, and made payable in another, 6. inland when drawn and payable in same State or country, 6. 840 INDEX. . References are to ' paragraphs marked %. BILLS OF 'EXCYlA.'^GE—continued. derive negotiability from custom ol merchants, 6. foreign bills must be protested to charge drawer, 7. inland need not be, 7. come within rule that contracts are governed by law of place where made, 7. England and Ireland are foreign as to bills, 8. several States of the Union are likewise foreign, 9, lo. date of bill may show whether it is foreign or inland, 11. but to do so must show State or country where drawn, 11. courts do not take notice of location of places, such as Dublin, Phila- delphia, New Orleans, 11. which must be shown to be in foreign States, 11. whether bill dated in foreign State, where not drawn, is foreign bill, 13. innocent third parties may regard it as its face purports, 12. query, as to parties having notice, 13, 14. bill inland on face does not become foreign by being drawn and deliv- ered abroad, 13. bill purporting to be, is presumed to have been drawn abroad, 13. but it may be shown that bill purporting to be foreign is really inland, and void for want of stamp, 14. 3. Effect of bill of exchange, 15. whether negotiable bill for whole of fund in drawee's hands is assign- ment thereof, i6a, 17. is assignment as between drawer and payee, 17. whether without acceptance bill for whole fund is an assignment as between payee and drawer, 18, 19, 20. doctrine that without acceptance bill is not an assignment, 18, 19, 20. bill may be evidence of assignment, 20. view of author that bill for whole fund operates as equitable assign- ment, 20. accepted bill operates as an assignment, 18. after acceptance, no subsequent bill, transfer of, or process against fund, will affect it, 18, query, 19. holder can not sue drawee without acceptance in his own name, 19. whether holder may use drawer's name to sue drawee, 19. whether, after presentment to drawee, subsequent assignment or proc- ess will take priority, 19, 20. order on drawee for whole of a fund is an assignment thereof, 21. such order not defeated by subsequent assignment or process, 21. whether bill for part of fund is assignment, 22, 23, 23a. whether order for part of fund is assignment, 22, 23, 23a:. decisions in NeW York as to order for part of fund, 23T7V References are to 044 ^^ ^ ^■^' i>aragraphs marked {. BILLS OF l^kTiV^Q— continued. holder of bill of lading can not withhold its delivery unless shipper could, II,, 1734^'. generally holder of bill of lading with draft attached can not require acceptance of draft without delivering bill of lading, IL, 1734^. and if he protests draft, it is without cause, IL, 1734c " party discounting bill of exchange on faith of indorsement of bill of lading acquires lien on goods, IL, I724.C. party discounting bill of exchange need not inquire into genuinenness of bill of lading in order to hold liable drawer of letter of credit, IL, 1734^. 3. Form and contents of bills of lading, II. , 1735. usually issued in sets of three ; one for consignor, one for consignee, and one for the carrier, IL, 1735. the carrier's bill of lading (or " ship's bill ") is not evidence respecting the agreement of the parties, IL, 1735. usually bill of lading mentions consignee to whom the goods are to be delivered, II., 1736. sometimes made out for delivery to the consignor or his assigns or in blank, IL, 1736. effect in each case, IL, 1736. use of negotiable words, IL, 1736. bill of lading transferable by delivery whether such words be used or not, II. , 1736. if consignee advance money on bill of lading, he is owner to extent of reimbursement, IL, 1736. if the several sets of a bill of lading are indorsed to different parties, the property passes by the bill first indorsed, IL, 1737. bill of lading should contain the quantity and marks of merchandise, names of shipper, consignee, and master of ship, places of departure and discharge, and the price of the freight, IL, 1738. limitations usually inserted in the contract, are acts of God, public enemies, fire, and other dangers and accidents of seas, rivers, and navigation, IL, 1738. payment of demurrage sometimes stipulated, IL, 1738. effect of stipulation in bill of lading that goods immediately upon delivery by carrier shall be at shipper's risk, IL, 1739. if a particular vessel be designated in bill of lading, carrier can not send goods by another without being responsible for whole risk of loss or damage, II., 1740. carrier can not exclude liability for negligence, IL, 1740a. liability of railroad corporation for damage by fire or explosion, occa- sioned by sparks from its own locomotive, IL, 1740^;. where the goods are deliverable to order, carrier should require the production of the order, IL, 1740a. in case of losses by perils of sea, what it is incumbent on carrier to show, II. , 1 741. where loss from " rust, leakage, or shrinkage " is excepted, shipper must show negligence on part of carrier, IL, 1741. carrier is always liable for negligence in case of loss, IL, 1741. exclusion of liability for theft does not apply to theft by purser of ship, IL, 1741- Ke/ereKces are to Tismir v Q /i p paragraphs marked %. IJNUCA. O45 BILLS OF 'LhDmO—contimted. recital that goods were "received in good order and condition " is mert-ly presumptive evidence that they were free from nternal in- juries, IL, 1742, if the admission be limited to the apparent condition of the goods, a latent defect may be shown by the carrier, IL, 1742. rule where delay of vessel is caused by the forcible detention of the government, II., 1742. 4. Who may transfer bills of lading, IL, 1743. strictly speaking, only the consignee, when bill is made out in his name, can pass legal title to the goods by indorsement of bill, II., 1743. but if shipment is made on account of, and at the risk of consignor, as owner of goods, he, by assignment of bill of lading or by separate instrument, may pass the legal title to the same, IL, 1743. bill of lading must be delivered in order to pass the goods, IL, 1743. putting it in the post-office addressed to the indorsee or to another for him, is a valid delivery, IL, 1743. indorsement for value presumed, IL, 1743. no difference between bill of lading indorsed in blank, and one indorsed to a particular person, II. , 1744. indorsement of bill of lading with conditions, is of same effect as like indorsement of bills of exchange and promissory notes, II. , 1745. instances of such restricted indorsement, II. , 1745. bill of lading as contract with carrier is chose in action, IL, 1745a. transferee might sue carrier for conversion of goods, 1 1., 1745^. but at common law could not sue carrier for breach of contract of trans- portation, IL, 1745^. statute in England allows suit by transferee on carrier's contract, IL, 1745^. in United States, assignee of chose in action can generally sue in his own name, IL, I745«. between original vendor and vendee, the transmission or indorsement of bill of lading only serves as evidence of their relations, IL, 1746. the transfer is important only as between Consignor and consignee on the one hand, and the transferee as the representative of the goods to a bona fide purchaser on the other, II., 1746. how the common law on the subject of bills of lading has been modi- fied by statute in England, II. , 1747. although statute makes bill of lading negotiable, all incidents applicable to negotiation of bills and notes do not arise, IL, 1747^?, 1750. purchaser of lost or stolen bill of lading acquires no title, 1 1., 1747^, 1750. and is not like purchaser of bill or note, IL, 1747^, 1750. but if bill of lading be fraudulently obtained, transferee may acquire good title, II. , 1750a. difference between consignee and vendee, II., 1748. at common law, a mere consignee or factor differed from vendee in re- spect to his power to pass the property therein by indorsement of bill of lading, IL, 1748. now, in England, factor may give validity to pledge as well as to sale of goods, IL. 1748. consignor's right of stoppage will be defeated by assignment of bill to one from whom mcHiey has been borrowed on the faith of it, IL, 1748 Q./r TMnirv References are to "4^ IJNUJiA. ^^ ragraphs marked \ BILLS OF l^KDV^G—contimied. rights of consignee and indorsee under the bills of lading act, IL, 1748 transfer of bill of lading to affect vendor's right of stoppage in transitu, must be to a bona fide third party, IL, I749- bona fides of such person is not affected by notice that the goods have not been paid for, II. , 1749. it is otherwise where transferee knew at time of transfer that the con- signee was insolvent, or was in anywise party to a fraud upon the consignor, II. , 1749. mere possession of bill of lading indorsed in blank, is not such a title to the goods as like possession of bill of exchange or negotiable note, IL, 1750. if it be lost or stolen, the finder or thief can not confer a title on inno- cent third party, IL, 1750a. but title oi bona fide third party is good against vendor who has actually transferred bill of lading to the vendee, though induced to do so by vendee's fraud, IL, 1750a. transfer obtained by fraud is not void, but voidable, II. , 1750a. indorsee of bill of lading may libel vessel in which are shipped for fail- ure to deliver them, IL, 1751. though he be an agent or trustee for another, IL, 1751. consignee may libel both the carrier vessel and one by whose tortious collision with carrier vessel the goods were lost, IL, 1751. BLANK, NEGOTIABLE INSTRUMENTS EXECUTED IN. See Alter- ation. parties may sign names as makers, acceptors, drawers, or indorsers, to blank papers, 142. they then operate as letters of credit for indefinite sums, 142. if so intrusted to third party's custody, whether for his accommodation or not, the purchaser may recover on them, although the custodian exceeds authority in filling them up, 142, 143. authority implied by signature to blank, 143. party will be bound, although holder pervert it to unintended use, 143. or pervert his authority as to time or conditions prescribed, 143. if date blank, holder may insert true date, 143. and bona fide holder not affected if wrong date be inserted, 143. marginal figures are not limits of authority to fill up blanks, 143. blank may be filled as negotiable or non-negotiable instrument, 144. if blank intended for bill, party will be bound to bona fide holder, although it be filled up as note, 144. acceptance of bill blank as to drawer is valid in hands of creditor, 143a. holder for value of such bill may insert his name, and so may his per- sonal representative, 143a. acceptor of such instrument is bound to bona fide holder, though name of drawer be wrongfully inserted, 143a. if payee be left blank, holder may insert his own name, 145. such instruments intended to facilitate transfers without recourse, 145. they pass by delivery, 145. holder must actually fill blank before he can recover, 145. his apparent privity with maker or drawer may be shown not to be real, 145. I Rf/erences are to T-VTTkfV Q ,1 •» faragraphs, narked %. INDEX. 547 BLANK, NEGOTIABLE INSTRUMENTS EXECUTED \n— continued. unless filled up, paper can not be described in indictment as bill or note, 145. holder, where there is indorser, but no payee, may insert indorser's name as payee, 146. skeleton notes and bills may be filled up, 146. holder knowing authority has been exceeded, can not recover, 146. if holder exceeded authority, he can acquire no benefit from it, 147. whether knowledge that paper was blank in custodian's hands puts holder on inquiry as to extent of his authority, 147. better doctrine is, it does not, 147. views of Mansfield, Story, and Parsons, 147. bond-stands on different footing from negotiable instruments, 148. but if bond be negotiable, rule applicable to bills and notes applies, 148. action on paper indorsed in blank, IL, 1191 to 1196. bona fide holder of, IL, 1758. BONA FIDE HOLDER, RIGHTS OF. See Collateral Security Mortgage ; Negotiable Instruments executed in Blank ; Sale. 1. Nature and rights 0/ bona fide holder, 769 to 862. general principle as to immediate parlies to contract, 769. who is a " purchaser " or " holder " of negotiable paper, 769^. summary of recognized principles which establish the title to negotia- ble instruments, and the right to recover upon the same, 769(7. holder must have acquired the paper in good faith from his predeces- sor, 76917, 770, 775. and when so acquired, no equitable or other defences pleaded by prior parties affect his title, 769^. early English rule made bona fides test of holder's superior rights, 771. option rule was adopted that if circumstances were such as to excite suspicions of prudent man, holder could acquire no superior title. 772. this rule carped at, and " gross negligence " made the test, 773. early rule as to bona fides restored in England, 774. this rule generally prevails in the U. S., 775. and is adopted by U. S. Supreme Court, 776. IL, 1503. gross negligence not now considered to affect holder's title, 774, 775, 776. IL, 1503. meaning and effect of " gross negligence " on part of holder, 772, 773, 774.775.776. IL, I SOS- may be evidence oi tjtala fides, 774, "J^d. but is not the same thing, 774, "]"](>. history of the existing rule, 771, 7"]^. 2. Holder must have acquired instrument for a valuable consideration, 777. meaning of phrases " valuable consideration," " full value," " fair value," and " for value," 777. when value shown, amount of consideration only important as bearing on question of notice, 777. presumption of bad faith where the price paid is utterly trifling, 777a. various cases, 778, 779, 779^. Q ,Q TXTTiTTV References are to <->4^ liNiJCA. f,aragraj>hs }narked%, BONA FIDE HOLDER, RIGHTS OY— continued. line of demarcation between negligence and notice, 779. how knowledge of solvency of parties may affect question of notice, 779a. 3. Holder must have acquired paper in the ustial course of business, 780. transfer in payment of pre-existing debt is good, 780. query, where transferred as mere collateral security, 780. See Collateral Security, and 820 to 833. receivers of courts do not acquire title to negotiable instruments in reg- ular course of commercial dealing, 781. nor does assignee of a bankrupt or insolvent person, 781. nor trustee for benefit of creditors, 781. in Iowa, it was- held that indorsement of a note by sheriff, who had levied on it, was of same effect as if made by the holder, 781, 4. Who can ostetisibly transfer g-ood title. drawer of bill payable to his order can, 78 1«. whether acceptor of bill indorsed in blank may, 78i<5. held that he can in England and South Carolina, 781^, and p. 732, note I. held otherwise in New York, 781^, and p. 731, note 4. author's views changed, and now coincide with English decision, 7%ib, and notes, party not payee of unindorsed bill or note can not, 781a. 5. Holder jnust become possessed of instru7tient before maturity to have a better title than his transferrer, 782. unless he received it after maturity from a bona fide holder for value and without notice before maturity, 782. See also 726, 786, 803, 805. when bills at sight and bills and notes on demand are deemed overdue, 783. it is always presumed that holder acquired instrument before maturity, 784. presumption slight in its nature, 784. held not to apply where note is payable in one day after date, 785. the rule that if the paper is overdue at time of transfer, it is of itself notice to holder, does not apply to accommodation paper, if indorser's title unimpeachable, 786. and indorsee may acquire good title. after maturity of accommodation paper, 786. See also 726 and notes, note payable by instalments is overdue when first instalment is unpaid after maturity, 787. rule is different if mere instalment of interest is overdue, 787. II., 1506. rule where there are several notes upon same consideration, 787. whether note is current up to close of business hours on last day ot grace, query, 787a. what defences available against purchaser after maturity, 724^7, 725 et seq. 6. Holder must have acquired instru7nent without notice of its dishonor., 788 actual notice of dishonor of bill by non-acceptance before maturity, 788. marks of dishonor apparent on face of bill or note are "death wounds," 788. knowledge by holder of fraud, defect of title, illegality of consideration. Ke/irences are to yN'T^TTV Q/T7'V References are to 0-^ llNDliX. paragraphs marked^ BROKE R — c out in tied. may agree not to be liable for genuineness of instrument, 740a. selling bill or note in his own name is bound as principal whether he discloses principal or not, 740^. contract in his own name in writing binds him, and parol evidence is inadmissible to discharge him, 740^. exception when his name is by adoption used to bind another, 740a. evidence generally admissible to charge undisclosed principal, 740a. but inadmissible to discharge agent contracting in his own name, 740a. BURDEN OF PROOF. See Evidence ; Bona Fide Holder ; Partner- ship. as to partner's liability, 368, 369, 370. mere possession of negotiable instrument under ostensible title suflficient to recovery, 812. proof of want of consideration, or misapplication of paper, does not shift burden on plaintiff, 814. when bearer must show he was not original payee, 814a. what circumstances shift burden on plaintiff, 815. what circumstances restore plaintiff's /r/;«« /a^,? case, 819. plaintiff not bound to prove negative, 819. as to notice, II., 1047 to 1058. as to signature, II., 12 18. as to payment, II., 1227 to 1229. as to alteration, II., 141 7 to 1421. CALENDAR MONTH. 5^^ Month. CANCELLATION. See Acceptance. effect of, 549. when instrument regarded as cancelled and incapable of reissue, 549. CASHIER. See Corporations. authority of cashier of bank, 392. eflfect of signature, "A. B., cashier," 417. when payee is "A. B., cashier," II., 1188. CAPACITY. See Infants; Lunatics; Aliens; Bankrupts; Married Women; Fiduciaries; Persons under Guardianship. maker warrants payee's capacity to indorse, 93, 136, 139, 227, 242. acceptor warrants payee's capacity to indorse, 536. drawer's capacity to draw, 585. CAUSE OF ACTION. See Action. is indivisible, II., ii86a. what constitutes entire demand, II., Xi86a. CERTIFICATE OF PROTEST. See PROTEST. CERTIFICATES OF DEPOSIT. origin and nature of certificates of deposit, II., 1698. is a promissory note for the payment of amount which it certifies to be deposited in bank, II., 1698. very similar to goldsmiths' or bankers' cash notes, II., 1698a. Re/erencef are to ^^ q paragraphs marked §. i^Nuri/.-v.. "JO CERTIFICATES OF V)Y.VO%YY—contimied. Mr. Chitty's description of them, II., 1698a. usual for depositor to take certificate of deposit if he wishes his fund to run on interest, II., 1698a. represents money to be held for depositor, II., 1638^. what Morse says as to power of banks to issue certificates of deposit, II., 1699. the criterion in such case is its authority to issue promissory notes or drafts payable a certain time after date, II,, 1699. bank which pays amount of certificate to a bona fide holder on a forged indorsement of depositor's name can not recover amount so paid from depositor, II., 1700. when certificate is signed by bank president in his own name, depositor may show that the bank itself is bound, II., 1700. transfer of certificate of deposit for a debt is presumably only condi- tional payment, II., 1701. if payment is refused, creditor may resort to the original considera- tion, II., 1701. but, query, when he makes use of it for his own purposes, not demand- ing prompt payment, II., 1701. transfers of certificates of deposit are governed by the rules which obtain in other promissory notes, II., 1702. if payable to bearer, may be transferred by delivery ; if to order, must be indorsed, II., 1702. liability of indorser same as in other promissory notes, II., 1702. if transferred when overdue, transferee takes it subject to equitable de- fences, II., 1702, i'jo2a. when regarded as overdue, II., lyoza. certificates of deposit are negotiable if expressed in negotiable words, II., 1703. certificate which contains no word of promise to pay amount is only a receipt, II., 1704. and can not be basis of action against bank, nor a transferable security, II., 1704. the word " certify " is of no weight as purporting a contract, II.. 1704. where certificate is payable to " A. B. or order," or to bearer, there is no doubt of its negotiability, II., 1705. to be negotiable, it must be certain in respect to parties and to time and mode of payment, II., 1706. whether negotiable in States where there are certain statutory acts of negotiability, II., 1706a. causes which deprive bills and notes of negotiability, affect it in a like manner, II., 1706. for example, if payable "in currency" or " U. S. six per cent, interest- bearing bonds," II., 1706. when statute of limitations runs against, II., 1707. true principles applicable, II., ijoya. CERTIFICATES OF RECEIVERS. not regarded as negotiable, $oa. CERTIFICATES OF STOCK. I. Definition and 7iaiure of ,\\., 1708. are not negotiable, II., 170S. 854 INDEX. ,l'£:i;^'ZUU%. CERTIFICATES OF ^^TOZYi— continued. are termed " quasi " negotiable, II., 1708. are assignable, II., 1708. are not debts, money, nor securities for money, II., \'joZa. are incorporeal personal property, II., 1708a. are muniments of title, II., 1708a, are choses in action, II., 1708a. stockholders' interest subject to execution and attachment, II., 1708a. usual method of levy, II., 1708a. 2. Beneficial interest generally passes by assignment and delivery, 11., 17081^. between parties equitable interest transferable whatever be rights ot others, II., I'jo^b. statutory restrictions not generally applicable to immediate parties to transfer, II., 1708^. 3. When corporate charter gives corporation lien on stock for debt of holder, assignment can not defeat it, II., 1708^, lyoSd. corporation has no lien on stock for holder's debt at common law, II., 1708^. whether corporation may create such lien by by-laws, II., lyoSd. policy of law opposed to secret liens, II., ijoSd. when lien enforceable against parties with notice, II., lyoSd. notice of lien on face of certificate is effectual, II., lyoSd. 4. Assignment of defeats sitbseque}it attachittent or execution, II., 17081?. assignment of certificate defeats subsequent assignment, XL, 1708/'. usual method of transfer of, II., 1708^. transfers by agents under blank powers of attorney, II., 1708^^. holder trusting agent with blank powers of attorney to transfer, con- fers apparent ownership of, II., i7o8_^. such agent may pass good title to bona fide holder without notice, although guilty of fraud, II., i7o8f. this doctrine rests on principles of estoppel, II., 1708^. if certificate with blank assignment and power of attorney be lost or stolen, purchaser can not acquire title, II., i7o8_^. lis pendens does not apply to, II., 1708^. sealed powers of attorney in blank not discussed, II., 1708^- 5. Corporation shoidd require surrender of, before making transfer on books II., 1709. else, may be liable to bona fide purchaser of certificates, II., 1709. CERTIFICATES OF VALIDITY, effect of, 862. CERTIFICATION OF CHECKS. See Checks. CERTIFIED NOTES. See Irregular Instruments, and 132, 133. CHARGES. See Exchange ; Costs ; Protest. what recoverable, II., 1457. notarial charges, when recoverable, II., 933. CHECKS FOR BAGGAGE. not negotiable, II., 171 1. References are to tvttmt'V 'i. r r paragraphs marked %. IJNUH-A.. O55 CHECKS. I. DefiHitio7t and description of a check, II., 1566. (i) it is a draft or order, II., 1567. (2) on a bank or banker, II., 1568. (3) purports to be drawn on a deposit, II., 1569. (4) for the payment at all events of a certain sum of money, II., 1 570. (5) and is payable to a certain named person, or to him or order, or to him or bearer, or to bearer, II., 1571. check payable to " the order of bills payable," or to a certain num- ber, is payable to bearer, II., 1571. bank has reasonable time to ascertain genuineness of indorser's sig- nature if the check is payable to order, II., 1571. (6) check is instantly payable on demand, II., 1572. which feature is its essential characteristic, II., 1572. query, whether a draft on a bank, payable at future day named after date, is check, II., 1573. setnble, as to draft payable so many days after sight or date, II., 1 573. draft or order on bank not immediately payable, has the qualities of bill of exchange, II., 1574. check is not entitled to grace, II., 1575. whether particular usage can control general, II., 1576. that a draft payable at future day is not check, II., 1576. 2. Formal parts and varieties of checks, II., 1576. check should be dated, II., 1577. may be ante or post dated, II., 1578. need not be expressed in any set form of words, II., 1579. sufficient if bank be plainly directed to pay, II., 1579. amount should be designated in words and figures, II., 1580. check may be addressed to the bank or to the cashier, II., 1581. must be dehvered, II., 1582, it is issued as soon as it is in hands of party who can demand payment, II., 1582. if lost or stolen, finder or thief can not demand payment of drawer, II., 1582. bank held harmless if it pay lost or stolen check payable to bearer, II., 1582. what are "memorandum " checks, II., 1583. examples of these, II., 1584. ordinary check can not be proved by parol to have been intended as a memorandum check, II., 1584, 1585. crossed checks, and English statutes and decisions, II,, 1585a. when indorsed by party as " surety " considered in Louisiana not to be used in usual manner, II., 1585^5. 3. Preseftiment, protest, and notice, II., 1586. holder has no recourse upon drawer until check is presented and pay- ment refused, II., 15S6. distinction as to presentment and notice between bills and checks II., 1587. drawer not discharged unless injured by delay in presentment or notice II.. 1587. 8^6 INDEX. References are to '-' * paragraphs marked §. CHECKS — continued. if due presentment and notice is not made, burden of proof is on plaintiff to prove no injury to drawer by such default, II., 1588. if bank be solvent and check is refused, drawer is liable as in other cases of debt on protested note, II., 1589. check should be presented within reasonable time, II>, 1590. if drawer and payee and the batik are in the same place, check received in course of one day should be presented the next, II., 1590. stoppage of payment by bank during business hours is excuse, II., 1591- if received at place distant from bank, it should be forwarded by mail the day after, II., 1592. if check is presented on day it is drawn, and payment be tendered, holder's refusal to receive it is at his own risk, II., 1 593. between indorser and indorsee, the rule is same as between drawer and payee, II., 1594. as between indorser or assignee, and the drawer, no transfer or transfers can prolong dravv^er's risk, II., 1595. duty of bank or other collecting agent as to presentment, 332. check intended for immediate payment, II., 1595. what will excuse failure or delay in presenting check and giving notice of dishonor, II., 1596. (i) when no funds of drawer are in bank, II., 1596. (2) when drawer directs bank not to pay, II., 1596. (3) when bank is restrained by order of court, II., 1596. indorser in such case stands on differejat footing from drawer, II., 1596. holder should notify drawer if he be prevented from presenting check by removal of bank or other cause, II., 1596. failure to do so discharges drawer, II., 1596. if bank remove, and check returned, debt remains due, II., 1596. drawer o{ over-check is bound without demand or notice, II., 1597. drawer may waive neglect or delay, II., 1598, time for presentment not prolonged by check being put in agent's hands, II., 1598. bank has right to actual presentment, II., 1599. whether sending check by post with demand of payment is a good pre- sentment, II., 1599. presentment by post to drawee bank is proper, II., 1599a. rule respecting protest of checks, II., 1600. whether on same footing as bills, II., 1600. 4. What is meant by " certification " of checks, II., 1601. effect of certification of checks, II., \6o\a. recent origin of custom to certify checks, II., 1602. bank by certifying becomes principal and only debtor, II., i6oia, 1603. acknowledges funds, II., 1603. certified check is shorthand certificate of deposit, II., 1603. bank certifying can not plead forgery of drawers' names, II., 1603. drawer can not revoke after certification, II., 1603. bank does not warrant terms of check by certification, II., 1603. holder by taking certificate of bank discharges drawer, XL, i6oia, 1604. pJ^asZpl"mark'ed%. INDEX. ©57 CHECKS — continued. certified checi< circulates as cash by usage of merchants, II., 1605. no particular form of certification is requisite, II., 1606. ordinary mode of certifying is to write " good " across face of check, II., 1606. whether promise to pay is equivalent to certification, II., 1606a. when communicated to holder it is, II., i6o6a. if certificate state time of payment, it binds holder, II., 1606b. officer of bank should not certify check unless there be funds to meet it, II., 1607. officer or agent of bank can not certify his own check, II., 1607. special authority required by officer to certify other than commercial, II., 1607. certified without indorsement of payee in hands of third party, II., 1607^!. if holder be assignee for valid consideration entitled to recover money, II., 1607a. bank protected in paying, II., 1607a. certification made through mistake or fraudulent misrepresentation may be revoked, II., 1608. unless in hands of holder without notice, II., 1608. what officers of bank may certify checks, II., 1609. president or board of directors may, II., 1609. cashier and teller may, II., 1610. assistant cashier can not, II., i6iob. limitation on implied power of president or other officer to certify checks, II., 161 1, officer certifying his own check — certificate carries notice, II., 161 1, 5. Whose check should be paid by bank, II., 16 12. bank should require signature to be identical with depositor, II., 1612. in case of partnership, check should be signed in copartnership name, II., 1613. in cases of joint depositors, II., 1613. lawful for bank to show that deposit in name of one partner belongs to firm, II., 1614. as to personal representatives and trustees, II., 161 5. deposits by corporations, II., 1616. usage and custom of corporations may justify payment of checks though not signed by proper officers, II., \6\6a. 6. What checks should be paid by bank, II., 1617. holder can demand payment on presentment, II., 1617, 1617a. checks should be paid in order of presentment, II., 1617a. " first come first served," II., 1617a. must pay in usual course of business, II., i6i8a. must pay to actual payee, II., 1618. bank should not pay check alter notice of loss or before it is due, II., i6i8a. query, whether it should pay after death of drawer, II., 1618^. review of the question and the decisions, II., 161 8a. if not in funds, it should at once refuse payment, II., 161 9. how long bank may retain check, II., 1619. O -O T-M-riTTV Refert'tces are to Oy^ IJNUliX. faragra^hs marked %, QYiYsCYUsi— continued. custom of London, II., 1619. holder is not bound to receive part payment, II., 1620. bank not bound to pay in part unless holder surrenders check, II., 1620. passing amount of check to holder's credit is payment, II., 1620. when so credited, whether bank can return check on discovery of no fund to meet it.? II., 1621. per contra, if discovery of no funds or overdraft is made before drawef is debited and holder credited with amount ? II., 1621. 7. Paymetit by checks, II., 1623. taking check implies that it is regarded as payment only when cashed, II., 1623. rule in England when bank or other agent of collection receives check as payment, II., 1624. in the United States, agent acts at his peril in so doing, II., 1625. certified checks taken for debts are not payment, II., 1626. effect of certification is only to give additional credit and currency to check, II., 1627, bank on which check is drawn can not plead as offset amount due holder, II., 1628. 8. Over-checks, II., 1629. fraud to draw them, II., 1629. if drawn with authority from bank, they are in the nature of a loan, II., 1630. bank officer should not pay, II., 1630^. 9. Cancelled, dishonored, and stale checks, II., 163 1. are taken at holder's peril, II., 1632. what are " marks " of dishonor, II., 1631. when check is deemed " stale " depends upon circumstances, II., 1633, 1634. excuse for want of presentment and notice, 1634^. a declaration that check would not be paid by drawer before maturity would excuse want of presentment and notice, 1634a. 10. Whether holder of tmcertified check can sue bank for refusal to pay, II., 1635- review of conflicting authorities, II., 1636, 1636^, 16361^, 1637. views of text, II., 1638, 1639. general conclusions are — (i) holder may sue drawer and bank in one action, II., 1640. (2) he may sue drawer on the dishonor of check, and the bank for money had and received, II., 1641. depositor may recover nominal damages from bank for dishonoring his check, II., 1642. and a trader substantial damages, II., 1642. 11. How far check is an assignment of the fund in bank, II., 1643. generally deemed assignment /r<7 /a«/£i, II., 1643. English rule, II., 1645. general assignment for benefit of creditors does not defeat checkholder, II., 1643. nor does appointment of receiver, II., 1643. References are to TNnFX 8^0 paragraphs marked §. ^^ Uli A. O V Q.YiY.CYi'S)— continued. nor does garnishment or attachment of fund, II., 1644. English doctrine, II., 1645. 12. Checks as evidence, II., 1646. check imports debt from drawer to payee after payment is demanded and refused by bank, II., 1646. sefnble as to indorsee, II., 1646. the natural inference is that check is given in payment of debt from drawer to payee, II., 1646. what check imports in hands oi bank, II., 1647. in hands oi drawer it is a receipt, II., 1648. custom of banks to rfl:«(r^/ checks when paid, II., 1649. when money is lent by check, statute of limitations runs from time the money is paid, II., 1650. 13. Negotiability of checks, II., 1 65 1. check payable in " bank bills " or in " currency " is not negotiable paper, II., 1651. check when negotiable is subject to same principles as obtain in bills of exchange as to rights oi bona fide holder, II., 1652. check payable to bearer may be transferred by indorsement, II., 1653. effect of such indorsement, II., 1653. 14. Forgery of checks, II., 1654. in what it differs from forgery of other negotiable paper, II., 1654. bank is bound to know signature of the drawer, II., 1654a. not bound to know other signatures, II., 1654a. whether bank can recover back amount paid on forgery of drawer's name, II., 1655, 1655a. doctrine approved that bank may recover where it acts promptly and holder can lose nothing, II., 1656. general application of the doctrine in the United States, II., 1656. views of Chitty and Parsons, II., 1655a. certain exceptions to the rule where bank has certified or paid forged check, II., 1657. 15. Alterations of checks after issue, II., 1658. " raised " checks, II., 1658. generally bank can only credit drawer with original sum, II., 1658. bank may credit drawer with entire amount of " raised " check when drawer by carelessness afforded opportunity for the fraud, II., 1659, 1660. when it may recover back excess paid on altered check, II., 1661. after certification bank may show alteration, II„ 1661. doctrine approved that it may recover back unless holder would be in- jured, II., 1662. bank not bound to know signature of indorser, II., 1663. holder of checks warrants genuineness of all prior indorsements, II., 1663. if bank pays check on forged indorsement of payee's name, it can re- cover back, II., 1663. semble as to special indorsee, II., 1663. Q/^r\ TMnTTY References are to ^^O INDt-X. i,aragraphs marked %. CHOSE IN ACTION. See Assignment, and Equitable Assignment, meaning- of, i, 15. not assignable at common law, i. first relaxation of rule as to non-assignability made as to bills of ex- change, I, 15. rule gradually disappeared, i, 15. difference between ordinary chose in action and negotiable instru- ment, I. certificates of stock are, II., 1708a. CHRISTMAS DAY. See Holiday. CIRCULAR NOTES. description and use of, II., 1657. CIRCUMSTANCES. See EXCUSES. may amount to notice to purchaser of negotiable instrument, 789a. 795a, 795<5, 796, 801, 8i5—cou1imced. place where contract is to be performed is real place in regard to which it was made, and will control, 879. thus if note made in Massachusetts, payable in Virginia, it would not be negotiable unless payable at bank, although if payable in Massa- chusetts it would be negotiable, 879. what law determines negotiability, 879. law presumes paper payable where made, 880. rule as to paper payable generally and negotiated in foreign country, 881. remedy on contract controlled by law of the forum where suit is brought, 882. this rule controls : as to who may sue, 883. the time within which suit may be brought, 884. the form of action, 885. the extent of the remedy, 886. the competency of evidence, 887, 888. the admissibility of set-off, 890. exemption laws are part of remedy, 890. but as to the effect of evidence, the law of place of contract controls. 888. so law of place of contract fixes the relations of the parties, 888, S89. courts take no judicial notice of foreign laws, 891. foreign law, whether presumed same as local, 891. presumption as to the common law, 891^;, 892. real estate, in respect to validity and form of conveyance governed by law of its location, 893. whether mortgage in one State to secure loan in another is governed by law of place where property is located, or that where loan is to.be paid, 894. when married women may bind separate estate, and it consists of realty, law applicable to note given is that where realty situate, 894a. law of place of execution controls liability of maker of note, 895. same rule as to acceptor of bill, 896. and letters of credit, 897. liability of drawer of bill and of indorser of bill or note different from that of maker or ^ceptor, 895. as to maker of note, 895. as to acceptor of a bill, 896. contract of drawer is to pay at place where bill is drawn, 898. rate of interest that of place where bill drawn, 898. indorser undertakes to pay at place of indorsement, 899. even though note expressly payable elsewhere, 899, 900. doctrine as to liability of drawer and indorser subject of criticism, 901. whether transferrer is liable as indorser or as assignor, determined bv law of place of transfer, 902. questions as to what law determines validity and effect of transfer, 903. transfer in country' where note is made not of same efficacy where suit is brought, 904. Vol. II.-55 Q A A T -M rM7 V References are to OOO INDLX. Paragraphs mar ked%. CONFLICT OF l^PC^S—conftmied. suit can not be brought anywhere as between trattsferrer and trans- feree on instrument made in one country and transferred in another, if transfer is not valid by law of latter place, 905. as between transferee and maker, law of place of contract prevails, 905. each holder has same rights against maker or acceptor as original payee, 906. if note is non-negotiable where made and negotiable where indorsed, right of action by indorsee against maker is controlled by law of forum, 907. what constitutes due presentment is governed by law of place in which bill is drawn, or at which note is payable, 908. protest should be at time, in manner, and by persons prescribed, where bill not accepted and note refused payment, 909. notice distinguished in America from presentment and protest, 910. in England, placed on same footing, 911. latter view adopted text, 912. general principle as to revenue laws of different countries, 913. if unstamped bill or note be absolutely void by law of place where made, it is void everywhere, 914. contra, where it is only inadmissible in evidence, 914. whether stamp be necessary to render contract valid, determined by law of place where made, 914, 915. amount to which party entitled depends upon currency of place where, according to contract, the debt is payable, 916. must be calculated by real, not nominal, par of exchange, 916. different rule in some States, 916. rate of interest determined by law where bill or note expressly or im- pliedly to be paid, 918. if no place specified, interest computed by law of place where drawing, making, indorsement, or acceptance was, 918. interest as much part of debt as principal, 919. may be allowed as damages, though note payable " without interest," 919. distinction between drawer of bill and indorser of bill or note, 920. rule as to interest applies to " damages," 921. what rate of interest surety bound for, 921. election of law of place as to interest, 922. 1. Where contract is valid in on^lace and invalid in another, 922. 2. Where rate of interest greater than allowed at the place where contract made, but allowable at place of payment, 923- 3. If usurious at both places, law of place where made governs legal consequences of usury, 924. when contract is a mere shift to cover usury, it is void everywhere, 925, when corporation may plead usury, 925, CONSIDERATION OF NEGOTIABLE INSTRUMENTS. See Re- NEWAL ; Bills of Exchange ; Bona Fide Holder. I. What instruments import consideration, 160. meaning of consideration, 160. the phrase "-valuable consideration," 160. Re/eirences are to INDEX. S67 paragraphs marked \. ' CONSIDERATION OF NEGOTIABLE INSTRUMENTS— — continued. or execute paper for accommodation, 392. but accommodation paper would be valid to bona fide holder without notice, 392. president of bank may take charge of its litigation, 393. receipt for deposits, 393. can not release a debt, 392, 393. query, if he may draw checks, 393. if president of mining company may bind it by note, 393. bank president by authority of directors may indorse bills or notes pay- able to bank, 393. semble, he may indorse bank's negotiable paper, 394. effect of usual course of business as to president of insurance company, 394- power of treasurer, 394. secretary, 396. allegation that corporation contracted by treasurer or other officer suffi- cient, 394. president and cashier of bank can not release its debts, 395. officers have no implied authority beyond sphere of official duty, 396. their authority rests on general usage, 396. joint authority to two or more officers must be exercised jointly, 397. if all agree to the act, it may be carried out by paper signed by one 397. 3. Interpretation of instrument, 398. if marks of official character predominate, paper is deemed to be cor- porate, 398. corporations may adopt and use several names, 399. misnomer immaterial if corporation identified, 399. firm may style itself as corporation, 399. and may use firm style or corporate name, 399. •corporation may adopt and use agent's name, 399. illustration, 399a. as to who is maker of a Jtofe, 400. corporation name should be signed after words importing corporate promise, 400. if officer or agent add " for company " it suffices, 400. if obligatory tenor of paper indicate corporate obligation, official signa- ture will be deemed affixed for corporation, 400. 4. Effect of words : " I promise — signed for A. B. & Co., C. D. (the agent)," 401. "We, the subscribers, jointly and severally promise " — "signed for A. B. & Co., C. D.," 401. > " We jointly and severally — signed A. & B. for C. D.," 401. " The President and Directors of the A. B. Company promise," 402. other instances, 402. addition of official character at foot of instrument not alone sufficient to indicate intention to bind corporation, 403. but will be deemed an earmark or descriptio persona, 403. numerous cases, 403. Q I-, A T\T\T?-v References are to 074 IxN D EX. ^aragra^hs marked §. CORPORATIONS AS VA.WI\Y,S— continued. Parsons' views, 404. official designation m body of instrument, often deemed sufficient to indicate that instrument binds corporation, 405. numerous cases, 406. ^ English and Kentucky cases, 406. sometimes additional indications of intent to bind corporation are suffi- cient, 407. English and Indiana cases, 407, 408. same principle applies to drawer of bill as to maker of note, 409. where direction is to place to official account on bill, it does not alofn make it bill of corporation, 410. but direction to place to particular account is often material indication, 411. instances, 411. can be but one acceptor of bill unless for honor, 412. who is drawee of bill, often satisfies inquiry who is drawer, 412. if bill be drawn on drawee individually, he can not by official designa- tion, or words of procuration, bind corporation as acceptor, 412. and if bill be drawn on corporation and accepted by officer or agent, with appropriate designation, only corporation will be bound, 412. if drawee's full official character be added to his designation, he is nevertheless bound personally by acceptance, 412. English cases strongly sustaining this doctrine, 413. in United States authorities conffict, 413. if drawee be addressed as "A. B., agent," and accept in like manner, he is personally bound, 414. if drawee addressed personally as H., and he writes across bill, "Ac' cepted ; Empire Mills, by H., Treasurer" he is not personally bound, because it is not his acceptance, 414. nor is company bound, because it is not drawee, 414. as to whether corporation or its agent is payee or indorser, 415, if official designation added to agent's name, he is nevertheless deemed personally the payee, 415. so held where payee designated as "A. B., Treasurer of C. D. Com- pany," 315. and as " A. B., for value received of C. D. Company," 315. contrary decisions in New York, 315. if corporation be payee, and indorsement be by officer with official designation, he is deemed to act for company, 416. instances, 416. cashiers of banks exceptions to general rule, 417. designation of "cas.," "cash.," or "cashier," added to name intimates that signer acts for bank, 417. parol evidence admissible in some cases to explain obscure and am- biguous instruments, 418. as between original parties, it may be shown who was intended to be bound on equivocal and uncertain instruments, 418. instances, 418. doctrine of U. S. Supreme Court, 419. paV/^i;-"ztk:i%. INDEX. 875 COSTS. See EXCHANGE. what recoverable, II., 1459. when attorney's fees recoverable, 62. COUPON BONDS. 5^^ Municipal Corporations; Corporations; and Municipal Bonds. 1. Definiiion and nature of , II., i486. individuals, private and municipal corporations, and governments may- issue them, II., 1487. "coupon bond" is complete in itself, but consists of obligation to pay money, with coupons annexed for interest, II., 1488. meaning of " coupon," II., 1489. may be severed from bond, and pass as separate and independent security, II., 1489. coupon serves as voucher when interest is paid, but contract is in bond, II., 1444- authority to issue bond, implies coupons also, II., 1489. coupons are assimilated to promissory notes, II., 1490. not intended for indefinite circulation, II., 1490. are not intended for acceptance when drawn on banks, II. 1490^. not entitled to grace, II., 1490(3. conflicting decisions, II., 1490, 1506. are simply notes payable on very day of maturity, II., 1490a. bonds and coupons not bills of credit, II., 1491. coupon is part of mortgage debt, when bond is, II., 1491a. all of same series share ratably, II., 1491a. if bond be repudiated, original consideration revives, II., 1491^. the bonds of a county are debts, II., 1491^. 2. Formal farts of bo7ids and coupons, II., 1492. how such instruments are generally framed and signed, II., 1492a. expressions in coupons immaterial if they indicate by whom due, and * amount and time of payment, II., 1493. words of promise in, not essential, II., 151 1. coupons sometimes in form of notes, II., 1493. checks, II., 1493. drafts or bills, II., 1493. ticket, token, or warrant, II., 1493. in all such cases are authority to receive interest, and may be sued on without producing bond, II., 1494, 1509, 1510, 1511. interest on bond not recoverable without producing coupons, II., 1509. no payee need be named in coupon, II., 1494. payee may be blank, II., 1499. bond need not be sealed, II., 1495, 1501. idea that States and corporations must contract under seal obsolete, II., 1495, "501- coupons and bonds may be payable to bearer, or to order, or to holder or to certain party, or his assign, II., 1496. if bond contain no negotiable words, not negotiable, II., 1496, iscxj. may be payable at particular place in or out of State, II., 1497. O.71C TxmTTY References are to ^70 INDEX. paragrai,hs marked %, COUPON V>OY^T)?)—conHmied. must be delivered, II., 1498. if stolen incomplete, not binding, II., 1498. otherwise, if complete, II., 1498. if payee blank, citizen of foreign State may insert his name and sue in Federal court, II., 1499. if coupons refer to bonds, holder chargeable with notice of what bonds contain, II., 1499. figures marking series not part of bonds, II., 1499^. indorsement of bonds, II., 1499(5. where bonds prepared for issue and sale promise payment in lawful money and guaranteed by a State, II., I499(5. that they shall be paid in coin subsequently indorsed, binds only cor- poration, II., 1499^. 3. Negotiability of and rights of Jiolder, II., 1500. bonds and coupons with negotiable words are negotiable, II., 1500. bond not so expressed is not negotiable, II., 1500. necessarily sealed, II., 1495. registered bonds, II., \y:>\b. the provision " registered and made payable by transfer only on the books of the company," II., 1501^. does not of itself make it non-negotiable, II., iz^oib. if for uncertain sum not negotiable, II., 1502. holder stands on same footing as holder of bill or note, II., 1502. should inquire (i) as to right of party to execute, II., 1502. (2) as to right of agent to act for principal, II., 1502. (3) as to formalities being complied with, II., 1502. (4) as to usury in inception, II., 1502. gross negligence will not defeat purchaser or holder of, II., 1503. rules as to right o{ bona fide holder, II., 1503. holder with notice not affected if his transferrer had good title, II., 1503. English decisions about similar instruments, II., 1504. coupon becomes due on very day of maturity, II., 1505. after maturity is dishonored, and purchaser is subject to equi- ties, II., 1505. whether entitled to grace, II., 1505. one instalment of interest being overdue does not disgrace bonds or other coupons, II., 1506^. but terms of bond may alter this, II., i5o6fl. holder of, presumed to be bona fide, before maturity, and without no- tice of defects, II., 1506. lis pe7idens does not apply to this class of securities before maturity, II., 1 506^. coupons need not be presented on day of maturity to bind maker, II., 1507. must be presented in reasonable time to charge guarantor, II., 1507. meaning of words making coupon payable when " presented," " sur- rendered," or "delivered," II., 1508. References are to tmtm?-v 0»t"i ^ragraphs marked §. IJNWtX. 677 COUPON ^O^V>S—contimied. provision by statute in Alabama, II., 1 508a. 4. Action on negotiable bonds and coupons, II., 1509. holder of, may sue in his own name, if payable to bearer or holder, II., 1509. interest on bond can not be collected without producing coupon, II., 1509^. coupons should be identified, II., 15 10. coupon may be sued on without producing bond, II., 1501, 1506, 1509, 1509^, 1 5 10, 151 1, payment or surrender of bond does not affect coupon, II., 15 10. words of promise in coupon immaterial, II., 1512. coupons admissible in evidence, under money counts, II., 1512a. aggregate amount of coupons determines jurisdiction of Federal courts, II., 1512a. interest on coupons recoverable from maturity, II., 15 13. contrary decisions, II., 1513. prior demand of payment not necessary to the recovery of interest on coupons, II., 1 514. semble, as to exchange, II., 15 14. demand at particular place not necessary to recover interest, II., 1514. but if defendant show readiness to pay at such place, interest is abated, II.. 1515- statute of limitations applies to coupon in same manner and time as to bond, II., 1516. but runs against coupon from its maturity, II., 1516. when coupon bonds pledged as collaterals, they may be sold after de- mand and notice, II., 15 17. debtor entitled to notice of time and place of sale, II., 1517. but if he has knowledge, no formal notice is necessary, II., 1517. when negotiable bonds wrongfully put in circulation, purchaser may recover full amount, II., 1517a. COVENANT NOT TO SUE. not to sue maker or acceptor extinguishes debt as to them, II., 1291. and discharges drawer and indorsers, II., 1291. does not discharge joint party, II., 1291. g^ven by one of two creditors does not operate as release, II., 1291. not to sue for limited time will not effect release between the parties, unless stipulated that it may be pleaded in bar, II., 1291. but will discharge sureties, II., 1291. not to sue for limited time is not discharge, II., 1291. COVERTURE. See Married Woman. CROSS-NOTES AND ACCEPTANCES. See Consideration, and 188. CROSSING CHECKS. See Checks, and II., 1585a. CURRENCY. instrument payable in, whether negotiable, 56, 57, 5S. II., 1245, 1651. judgment on such instruments, II., 1245, and notes, what law applies to currency of payment, 916. 0_Q T-v^T-»T?v References are to O / a 1 JN UJi A. paragraphs marked $. CUSTOM. of merchants made bills negotiable, 6. as to presentment by notary's clerk, 579. mode of presentment, 658, 662. mode of notice, II., 1007, 1012. grace, 621, 622. grace on drafts, and as to whether draft is check, II., 1576. DAMAGES, See EXCHANGE, and II., 1438, 1460. for negligence in collection, 329. for breach of agreement to accept for accommodation, 564. what law applies to, 918, 921. on coupon bonds, II., IS'S- for laches in respect to presentment and notice, II., 1277a. DATE OF NEGOTIABLE INSTRUMENTS. See Sunday. delivery on day of date presumed, 65. or at least before maturity, 65. presumption may be rebutted, 65. law of place of delivery controls paper dated elsewhere, 867, 868, 869. if delivery subsequent to date, instrument only binding from delivery, 65 but time computed from date by relation, 66, 630. not necessary to aver, but sufficient to state it was drawn, or made on certain day, 66. on Sunday does not vitiate, if delivery on other day, 69. usually written in right-hand corner of instrument, 83. is usual, but not essential, 83. no consequence where it is written, 83. if no date, will be presumed to have been dated when executed 83, 630. evidence admissible to show when executed, or to show mistake in date, 83. if note be made for accommodation, and undated, party accommodated may fill in date as he sees fit, 83. indorsee may prove mistake of date, 83. even though it cuts off defense valid against payee, 83. maker can not show mistake of date against innocent holder without notice, 83, 630. mistaken date may be rectified in equity, 83, 630. may drawee refuse to accept undated bill ? 84. negotiable instruments may be post-dated or ante-dated, 85, II., 1578. negotiation prior to date not a suspicious circumstance, 85. if party die before ostensible date, holder not affected, 85. if dated before maker comes of age, but really executed afterward, in- strument is valid, 85. so in respect to other incapacities, 85. if instrument is void for incapacity when executed, date as of time when incapacity did not exist will not cure it, 85. if date be false to evade law, instrument is void in hands of all having notice, 85. References are to TvrTtirv Q ►'^ paragraphs marked %. IJNJJISA. 0/9 DATE OF NEGOTIABLE INSTRUMENTS— r^«/z«z^^r^. if date does not accord with declaration, discrepancy must be ex- plained, 85. no variation to allege instrument to have been made on certain day, when it bears date on another, 85. holder may fill in true date if it be omitted, 143. and though he put wrong date, bona fide holder without notice not affected, 143. of acceptance. See Acceptance, and 494. if date of paper be impossible — as for instance, 31st September, com- putation will be from 30th, 625. place oi prima facie place of payment, 639, 879. alteration of. See Alteration, and II., 1376. of bank notes not evidence when issued, II., 1666. of checks, II., 1577. checks may be post-dated or ante-dated, II., 1666. as evidence of drawer's residence, II., 1030. indorser's residence, II., 1031, 1032. misdate as e.xcuse in respect to presentment and notice, II., 1180. DAYS. See Sunday ; Holidays ; Grace. how computed, 626. day of date excluded in computing number of days paper has to run, 626. if paper payable so many days after sight, demand, or certain event, the day of sight, demand, or happening of event, excluded, 626. if paper presented one day and accepted on another, day of acceptance excluded, 626. " in thirty days " — " in thirty days from date " — " at thirty days " — and " thirty days after date " — mean same thing, 626. DEATH. See Delivery ; Excuses. revokes agency not coupled with interest, 288. dissolves partnership, 369^. right of surviving partner, yjob, y]\b. of drawer no revocation of bill, if delivered before, 498^. otherwise if paper not previously delivered, 64. of party as excuse for non-presentment and notice, II., 1177. of joint party. See II., 1298. DEBT. See Pre-existing Debt. drawer and indorser released from, by failure in respect to demand and notice, 452. II., 971, 1276. execution of note imports contemporaneous debt, 71. also imports settlement of previous demands — this presumption open to rebuttal, 71, and does not include previous notes, 71. DEBTOR. effect of making debtor personal representative, 269. DELAY. 5^1? Excuses ; Diligence. in presentment for acceptance when excused, 469, 473, 474, 478. payment when excused. II., ic6o, 1068a. QQ,-. T-MT»T?v References are to «oO 1JMJ11.A. iiaragrapis marked % DELAY — continued. in giving notice when excused, II., 1060, \o6?>a, 1069, 1070, when cause of delay ceases, diligence should be exercised, II., 1070. DEL CREDERE. agent acting under del credere commission, how bound, 314. in Pennsylvania only warrants solvency of principal, 314. in England and generally in United States regarded as bound for debt, and on indorsement of bill remitted, 214. DELIVERY. See Sunday ; Assignment ; Sale. bill, note or check, or other negotiable instrument must be de- livered, 63. bill or note in hands of agent not delivered, 63. not necessary to aver, 63. by indorser necessary, 664. if maker die before delivery, instrument void, 63. even though he leave directions to deliver, unless they are valid as a testament, 63. may be constructive, 63. drawee accepting, but detaining bill, delivery unnecessary, 64. bill or note in payee's hands presumed to have been delivered, 65. presumed to have b'een on day of date, or at least before maturity, 65. presumption may be rebutted, 65. law of place of delivery, controls, and not that of place of date, 868^ 869. exception to rule as to holder without notice, 869. instrument takes effect by and on delivery, 65. if delivery after date, only binding then, 65. but time of maturity is computed from date, 65. instrument should be described as dated, 66. if no date, time computed from delivery, 66. not necessary to aver date, 66. sufficient if to father of minor son, (>"]. trustee of cestui que trust, 67. agent, 67. both minds must concur in assent to, 67. insufficient to leave check on clerk's desk, or bank counter, without knowledge of clerk or officer, 67. when sufficient to deliver to postman, 67. deposit in post-office, 67. right of stoppage in transitu, 67. a party to a note after delivery and passage of consideration between original parties, incurs no liability, 67^. unless there be a new consideration and a redelivery of the note, 67a. signing in presence of payee is not redelivery, 67^. delivery as escrow, 68. difference between negotiable and other instruments delivered as es- crow, 68. by common law may be on Sunday, 69. Re/i'rences are to TTvTr\-cv OO, paragraphs marked §. *-^ iJ£.A. C) O I DELIVERY— £-<7«//«?^ 1? v Q < \ *» paragraphs marked,%. l-NUCA. 09/ FIDUCIARIES AS V KKY\£.S~coitimued. how such note should be sued on, 268. effect of making debtor executor, 269. effect of representative giving note not negotiable for decedent's debt, 270. 2, Guardian can not bind ward's estate by bill or note, 271. are personally bound to pay bills and notes, although signing " as guardians," 271. 3. Trustees, same rule applies to them as to guardians, 271. FIGURES. amount or sum payable usually specified in, 86. when they differ from words in instrument, words prevail, 86. if amount be expressed in figures alone it suffices, 86. marginal no part of bill or note, 86. coupon bond, II., I499<7. if amount be only expressed in marginal figures, instrument defective, 86. FINDER. See Lost Instruments. in general acquires no rights, II., 1468. liability of, II., 1468. of bank note may recover from depositary on proving genuineness, and value claimed, II., 1674. FIXED INDORSERS. See Reissue, and II., 1240, 1241, 1242. are those whose liability has been established by demand and notice, II., 997. if they reissue bill or note after liability is so established, with their names upon it, they are bound without demand or notice, II., 997. but this may be question of intention, II., 1242. are still sureties of the debt, II., 1305. FORBEARANCE. to sue is good consideration, 760, 830. FOREIGN BILLS. See Bills. FOREIGN LAWS. See CONFLICT OF Laws. not judicially noticed, 891. presumptions as to, 891. enforced only by comity of nations, 866. FORGERY OF NEGOTIABLE INSTRUMENTS. See CHECKS. I, Definition and nature of fo7-gery,\\., 1344. special exemplifications of what amounts to, II., 1344. habitual use of assumed name is not, II., 1345. when use of fictitious name is, II., 1345. procuring signature of innocent party, II., 1345. making material change in completed instrument, with intent to de- fraud, is forger}', II., 1346, 1347. the making of bill or note must be counterfeit or false to be forgery, II.. 1348. intent to defraud is essential element of forgery, II., 1349. Vol. II. — 57 898 INDEX. M^'47:,TZtL%. % FORGERY OF NEGOTIABLE INSTRUMENTS— f^^^/Zw^^^. " uttering " of bill or note is necessary to complete crime of forgery^ II., 1350. what amounts to uttering, II., 1350. not competent to show similar forgery in evidence, JL, 1350. 2. Liability of party who adopts a forged signature as his own, II., 1351. ordinarily can not deny its genuineness, II., 1351. bound by admissions, II., 1351. but if he states it to be genuine through mistake, and corrects error before holder has changed his relations to instrument, forgery may be pleaded, II., 1352. whether deliberate adoption of forged signature binding, II., 1352a. observations on conflicting views, II., I352<5. admission with knowledge is binding, II., I352«. party by his acts or course of conduct may be bound, though signa- ture is forged, II., 1353. customary payment of similar paper, II., 1353. 3. When one party is estopped from denying genuineness of another's signa- ture, II., 1354. (i) in respect to maker of note, he may generally deny other signatures to be genuine, II., 1354. when he may not, II., 1355. (2) drawer of bill stands in same relation, ordinarily, as maker of note, II., 1356. (3) indorser is bound though prior names be forged, II., 1357. (4) transferrer by delivery comes within rule of implied warranty of genuineness of article sold, II., 1358. (5) when drawee or acceptor is bound, though drawer's name be forged, II., 1359. cases and opinions cited, II., 1360. distinction taken between bill received after acceptance and an unac- cepted bill, II., 1361. where drawee is estopped from denying genuineness of drawer's name, the loss is thrown on him, II., 1361. unless (i) holder has preceded him in negligence, and (2) he was de- ceived as to genuineness of signature, 11., 1362. admission of acceptor extends only to the signature of drawer, and not to terms of instrument itself, II., 1363. 4. Whe7i one party is estopped from denying another's signature, II., 1354. maker can generally deny payee's signature, II., 1354. and recover back money paid to indorsee, if forged, II., 1355. but if name on note when he delivered it, he can not deny its genuine- ness, II., 1356. drawer generally stands in same position as maker, II., 1356. indorser warrants genuineness of all prior signatures, II., 1357. if he pays under subsequent forged indorsement, may generally recover back the amount, II., 1357, 1358. drawee must know drawer's signature, II., 1359. generally held that if he pays money on forgery of drawer's name, he can not recover it back, II., 1359. References are to INDEX. ^^99 para^aphs marked §. FORGERY OF NEGOTIABLE INSTRUMENTS— f^«//«/^^^. distinction between drawee recovering from party who received bill be fore acceptance, and party receiving it afterward, 11., I3&i- acceptor's admission extends only to signature of drawer, II.. 1363. and not to terms of bill, II., 1363- if amount altered, acceptor may generally recover back from holder II.. 1363. how far negligence deprives him of this right, II., 1363. drawee who accepts or pays is not thereby regarded as admitting gen- uineness of signature of indorser, II.. 1364. extent to which distinction between drawer's and indorser's signature has been carried, II.. 1365. circumstances under which acceptor who has paid bill under forged in- dorsement can not recover amount of holder. II.. 1336. payee whose indorsement is forged may recover on instrument, 11., 1 366. thus if forged indorsement were on bill when issued by drawer, II.. 1366. for then drawee or acceptor could charge it on account against drawer, II., 1367. if acceptor accept and negotiate bill with knowledge of forged indorse- ment on it, he is bound, II., 1366. 5. Exceptions to general rule that drawee or acceptor can not recover back money paid on forgery of drawer's 7iame, II., 1367. (i) when payment is made to payee, II., 1367. (2) when holder peculiarly, or parties mutually in fault, II., 1367. (3) when party has paid for honor without negligence, II., 1368. 6. Recovery of 7notiey paid on forged instrument, II., 1369. generally money paid under mistake of fact may be recovered back, II., 1369. if valid, surrendered for forged paper, it is no payment, II„ 1369. and will not discharge fixed indorser, II., 1369. bank paying forged draft of depositor is still bound to him, II., 1370. depositor not bound to examine pass-book, II., 1370. party paying without opportunity of inspection may recover amount, II., 1370. party collecting on forged indorsement liable to owner, II., 1370. 7. When notice of forgery must be given and demand of restitution made, II., 1371. if holder surrenders indorsed paper for forged, must discover it in time to notify indorser, else he is discharged, II., 1371. number of days considered too long delays, II., 1371. doctrine approved that restitution may be demanded in reasonable time after discovering forger>', II., 1372. when forged paper need not be returned, II., 1372^. if party has paid money for or upon forged instrument when some parties thereto are genuine, II., 1372^. if bill or note wrongfully converted, owner may sue in tort, II., 1372*5. or may waive tort and recover money as received for his use, II., 1372(5. 8. Of checks. See Checks, and II., 1654 to 1657. ^r\r\ T-vmrv References are to 900 IIsDtX. paragrai>hs marked \, FOREIGN PROMISSORY NOTES. protest of, II., 928. FORMAL REQUISITES OF BILLS AND NOTES. See Date; Sign a- TURE ; Amount ; Time of Payment ; Place of Payment Drawer ; Drawee ; Maker ; Payee ; Negotiability ; Ad- vice ; Attestation ; Consideration. no particular words essential, 73. order under note, "please pay above note and hold against me in our settlement," held a good bill, 73. so, such an order under an account, 73. so, an indorsement on a bond ordering contents to be paid for value received, 73. signature may be on any part of instrument, 74. how signature may be made, 74. See Signature. the name is not necessary if it be sufficiently indicated who the party is, 75. informality of expression or grammatical error immaterial, 76. "I promised " construed as " I promise," T^i, "pound " construed as "pounds," ^d. other instances, 76. instrument may be written on parchment, leather, or any convenient substitute for paper, 'j'], whether may be on metal, stone, or wood, 'j']. may be printed and similar to bank notes, 78. whole of bill or note must be written or printed, 79. memorandum on any part of instrument may qualify it, 79. there may be stipulations affecting instrument on detached paper, 79. evidence inadmissible to vary, 80. instances, 80. FRAUD. See Bona Fide Holder. vitiates consideration, 193. fraud in inception of paper shifts burden of proof, 769, 810, 819. when consideration evidence of, 779. notice of, impeaches holder's title, 789. what notice suffices — affects holder if he gets it before payment, 789. constructive notice sufficient, 789. instruments obtained by, 177, 847. in drawing without funds, II., 1074 to 1084. what damages party defrauded into execution of note may recover 776a. FRAUDS. See Statute of. FUNDS. Want of as excuse. See EXCUSES, and II., 1073. GAMING CONSIDERATION. when note given for is void in all hands, 195. GARNISHMENT. when assignment takes priority, 16 to 23a. vyhether payee of negotiable note subject to, 800a. References are to TTMnTTY r\r\l paragraph! marked %. INDEX. 9O I GIFT. See Donatio Mortis Causa ; Consideration. of negotiable instrument, not negotiation in usual course of business 181. but holder without notice could recover, l8i. GIVING TIME. effect of in discharging surety, II., 1312, 1317. GOVERNMENTS AS PAKTIES TO NEGOTIABLE INSTRUMENTS. Set Coupon Bonds. when officer of Federal or State government is authorized to bind it by negotiable instrument, validity can not be questioned against bona fide holder without notice, 436. government in such case bound like individual, 436. at present no Federal officer can bind government as party to negoti- able paper, 436. the Floyd acceptances, 437. order by Government of United States on Government of France not bill of exchange, 438. foreign governments may be parties, 439. difference between governmental and private agents, 440. powers of governmental agents defined by statute, 440. coupon bonds of Federal and State governments negotiable, 441. 'treasury notes of United States negotiable, though under seal, 441. after maturity, subject to equities, 441. when not negotiable, 441. State pledging fund to pay interest on bonds can not divert it, 442. if agent or officer authorize to sell bonds at par, sale below par would be void, 442. when public officer contracts in scope of authority, he is presumed to act officially, 443. as where bill payable to " T. T. T., Treasurer of United States," 443. other instances, 443. who are deemed public agents, 443^. books are destitute of cases precisely in point, 443a. officer or agent can not ratify contract unless empowered to make it, 444. governmental officers and agents not personally bound on contracts, even though if they were private persons they would be bound, 445. reason and theory of the distinction, 445. if officer or agent does not disclose official character, he is bound by contract, W^a. GRACE, DAYS OF. allowed by favor to drawee of foreign bill, to enable him to provide for payment, 614. called "days of grace," or "respite days," because gratuitous, 614. by custom universally recognized now as matter of right, 614. demand before or after their expiration unavailing, 614. interest chargeable for period of, 614. apply to all parties to the paper, 615. and to inland bills and promissory notes, 616. r\r>o TMnTTY References are to 9*-^ 2 1 JN DiiX. ^aragraphi marked % GRACE. DAYS OY —continued. and to all bills and negotiable notes except those payable on demand 617. if no time of payment specified, on demand understood, 617. bills and notes payable at sight, entitled to grace, 617. conflicting views, 617, 618. rule affected sometimes by statute, 618. bill payable " one day after sight " is due four days after sight, 617. " after sight " in bill means after acceptance or refusal, 619. "on demand at sight" equivalent to "at sight," 621. " at or after sight " in note means that it must be again exhibited tc maker, 619. only negotiable instruments entitled to, 620. apply to each instalment when paper payable in instalments, 621. are calculated exclusive of day of payment, 621. generally confined to three days in England and United States, 622. courts judicially notice, 622. usage in different places may fix different periods of grace, 622. rules respecting usages of banks as to number of days allowed in par- ticular localities, 623. may be dispensed with, 633. words "without grace," or "no grace," or "fixed," dispense with grace, 633. " without defalcation " does not, 633. nor does marginal note of day of maturity, 633. but if acceptor fix day of maturity without grace, it does, 633. allowance of, and number of days fixed by law of place of payment, 634. law merchant, allowing three days, presumed to prevail, 634. if last day of grace fall on Sunday, paper becomes due the day before, 627. so if last day of grace be a legal holiday, 627. and if Sunday be last day of grace, and Saturday be legal holiday, paper falls due on Friday, 627. rule is different as to paper not negotiable, 627, if Sunday or holiday intervene in days of grace, it does not affect them, 627. latest business day within or before period of grace is day of payment, 627. days of religious observance of particular sects, how regarded, 628. what days are legal holidays, 629. usage of banks as to holidays, 629. whether suit may be brought on last day of grace, II., 1207 to 121 1. GREENBACK CURRENCY. whether instruments payable in are negotiable, 57. held negotiable in Arkansas and New York, 57- GROSS NEGLIGENCE. See Bona Fide Holder. whether, and how far, affects holder's title of bills and notes, 774, 775, 776. of coupon bonds, II., 1502. of bank notes, II., 1680. References are to T V n TT v r\r\'> paragraphs ma rked % IJNJJtX. 9O3 GUARANTIES. I. Definition a7id nature of guaranty, II., 1752. guaranty and warranty are synonymous terms, II., 1752. guaranty is a peculiar kind of suretyship, II., 1753. but differs from indorsement and from the ordinary contract of surety- ship, II., 1753. the difference defined, II., 1753, 1754. surety's obligation is primary and direct like that of principal, II., 1753. guarantor's is secondary and collateral, II., 1753. guarantor contracts to pay if, by exercise of due diligence, the debt can not be made out of the principal debtor, II., 1753. surety is an insurer of the debt, guarantor of the solvency of the debtor n., 1753. guarantor's liability is more onerous than an indorser's, II., 1754. he is not absolutely discharged by failure to make presentment and give notice within reasonable time, II., 1754. opposite rules for the interpretation of guaranties laid down in the cases, II., 1755. reasons why they should receive a fair and liberal interpretation, II., 1755- main object should be to ascertain and effectuate the intentions of the parties, II., 1755. if the guaranty propose a credit, that particular credit must be granted or the guarantor is not bound, II., 1755. held in Massachusetts that one authorized to draw drafts "at ten or twelve days," had an option to draw either after date or after sight II., 1756. effect of writing one's name on back of note payable to a particular payee before such payee's name, II., 1757. when note is not negotiable such party is to be deemed a guarantor, II., 1757. when note is negotiable the opposite presumption arises, II., 1757. guarantor of payment by payee, becomes vested, on paying the note, with the same rights which payee had against maker, and no more, II., 1758. when guaranty of note made after its execution, upon a new and suffi- cient consideration, is valid, II., 1758. 2. As to the consideration of guaranties, XL, 1759. valuable consideration is necessary to validity of guaranty, II., 1759. three classes of cases to be discriminated, II., 1759. (i) when guaranty is contemporaneous with principal contract, II.. 1759. in which case it is necessary for the consideration of the guaranty to be distinct from that of the bill or note, II., 1759. when the guaranty is made prior to delivery of bill or note, it will be presumed to be upon consideration of the credit, and will be valid, II., 1759. (2) when the guaranty is made after the contract is completed, and is not for benefit of guarantor, II., 1760. in which case there must be some new and sufficient consideration to support it, II., 1760. and plaintiff must prove such new consideration, II., 1760. rule does not apply where there are circumstances to show that the nn A T xr m? V References are to 9*^4 INDtX. ^aragrai>hs marked % G\5P^^hKYY£JS>— continued. guaranty was intended to relate back to the delivery of the in- strument, II., 1760. (3) when the guaranty is made after the contract is completed, and is for the benefit of the guarantor, II., 1761. in which case it becomes his own debt which gi.i,arantor promises to pay, II., 1761. 3. As to operation of statute of frauds (29 Charles II.), II., 1762. special provision requiring promises to answer for another's debt to be in writing adopted generally in all the States, II., 1762. construction of, in England and United States, II., 1762. and herein (i) when the guaranty is a promise to answer the debt ot another, II., 1763. distinction between real and apparent promise to answer for an- other's debt, II., 1763. verbal guaranty that note passed by guarantor in part payment for a horse "was good and collectible," held to be valid, II., 1763. where one sells a note and guarantees its payment, the guaranty need not be written, II., 1763. (2) as to the terms of the guaranty, II., 1764, in England, the word " agreement " construed to embrace both the consideration and the promise, II., 1764. in this country the opinion predominates that if the promise be written it is sufficient, II., 1764. where the consideration is not required to be expressed, the name of the party in blank is sufficient writing to satisfy the statute, II., 1765. where the statute only requires the promise to be in writing, it is not necessary for the consideration to appear, II., 1765. sufficient in any case that the consideration appears by reasonable intendment, II., 1766. rule formerly in New York, where original contract and guaranty were contemporaneous, II., 1767. now, by statute in that State, the consideration must be expressed in writing, II., 1767. words " value received " sufficient expression of the consideration, II., 1767. if guaranty be under seal, that imports consideration, II., 1767. 4. Guaranty of bill or note need not be in any particular form, II., 1768. though generally written, there may be valid verbal guaranties, II., 1768. when written, it may be by separate instrument or by writing on the instrument guaranteed, and may be sealed or unsealed, II., 1768. when on separate paper, it should accurately describe bill or note to which it refers, II., 1768. a general guaranty is to whomsoever may accept the proffer made, II., 1768^'. a special guaranty is one to a particular person, IL, 1768^. what is an absolute and what a conditional guara.niy, II., 1769. any extraneous event besides mere default of principal makes guaranty conditional, II., 1769. import of phrases, " I guarantee the collection of the within note,'' '• I promise that this note is good and collectible after due course ot law," and " I warrant this note good," II., 1769. References ire to „ paragraphs marked %. IJNUiLX. g05 jUARANTIES — continued. guarantee in such cases must act with due diligence in collecting note II., 1769. what is due dili;jence, II., 1769a. otherwise, if principal be insolvent or has removed from State where contract was made, II., 1769^:. but guarantee must proceed against principal first if he resided in a foreign State when the contract was made, II., 1769a;. 5. A guaranty may be limited or unlimiti'd in respect to amount guaranteed, II., 1770. it may be limited to a single transaction, II., 1770. and within a certain period of time, II., 1770. and it may be a continuing and standing guaranty, II., 1770. examples of each, II., 1770, 1771. expression " from time to time," or " at any time," or for " any debt," how construed, II., 1772. guaranty in such case is not confined to one instance, but applies to debts successively renewed, II., 1772. doctrine in the United States, II., 1773. 6. Negotiability of guaranties, II., 1774. (^i) not generally negotiable when written on separate paper, II., 1774. if addressed to a particular person, it is a contract limited to such person, II., 1774. the party to whom the guaranty is made may in equity assign it when he transfers the bill or note, II., 1774a. views of Senator Verplanck of New York respecting negotia- bility of guaranties on separate paper from instrument guaran- teed, II., 1775. (2) rule when guaranty is written upon the paper at time of its execu- tion, II., 1776. if such guaranty be not expressed in negotiable words, held in some cases that its being written upon a negotiable instrument does not make it negotiable, II., 1776. in others, the contrary view is maintained, II., 1777. the latter seems the better doctrine, II., 1777. views of Judge Story and Prof. Parsons on this question, II., 1778. doctrine in New York that guarantor is liable as a joint and several maker not sustained, II., 1779. distinction in these cases between secondary and absolute obligation by guarantor, II., 1780. what words of indorsement will make guarantor an original prom- isor, II., 1780. (3) as to effect of guaranties written on the paper by the transferrer at time of transfer, II., 1781. better opinion is, that such transferrer is liable, both as indorser and guarantor, II., 1782. but other authorities say such guaranty operates only in favor of the party who first took the instrument on faith of it, II., 1782. what was held in Massachusetts where payee transferred note with the words, "I guarantee the payment of this note within six months," II., 1783. holder who transfers note and guarantees collection, makes a special contract, and is not liable as an indorser, II., 1784. n ri ^ T XT n TT V Re/erenc es a re to Q,\5 K^k^'Y\Y.'~>— continued. 7. Requisites to establish and preserve guarantor's liability, II., 1785, and herein (i) as to notice of acceptances of guaranty, II., 1785. no notice of acceptance is required where there is a personal treaty between guarantor and guarantee as to specific existing demand, II., 1785. but where a proposition for a guaranty is made, it must be accepted before it is binding, II., 1785. and when addressed generally to any person, notice of its acceptance should be given by the party acting upon it, 11. , 1785. doctrine of U. S. Supreme Court in reference to letter of credit which contemplates future guaranties, II., 1785^. notice of acceptance by particular person to whom it is addressed is necessary, II., 1785a, decision of State courts, II., 17851^. knowledge deemed from circumstances equivalent to notice in such case, II., 17851^. when guaranty has been accepted, it is not necessary to give notice of each particular advance made in accordance with it, 11. , 17851^. (2) demand upon the principal and notice of default of guarantor, II., 1786. when guaranty depends on happening of contingent event, notice of its happening should be given the guarantor within reasonable time, II., 1786. query, whether demand and notice required in case of absolute guaranty ? II., 1786. the correct doctrine seems to be that the guarantor is entitled to have demand made upon the maker, and notice of his default, II., 1787. same strictness as to demand and notice which obtains in case of indorser is not required to charge guarantor, II., 1788. guarantor will only be discharged provided he has suffered loss, and to the extent of such loss, II., 1788. guarantor presumed to receive no injury from delay as to demand and notice, where principal is insolvent at maturity of debt and so remains, II., 1788. injury is sufficiently proved if guarantor was solvent when debt matured, and became insolvent before demand and notice, II., 17S8. guarantor, by writing, may waive notice of acceptance, and also de- mand and notice of default, II., 1788. also he may waive by a promise to pay after maturity, II., 1788. (3) as to what will discharge guarantor, II., 1789. he is effectually discharged by a release of his principal, II., 1789. by the guarantees allowing extension of time to the principal upon consideration, II., 1789. by a renewal which suspends the original debt, II., 1789. by the surrender of any security held by the creditor, II., 1789. revocation by death, II., 1789. GUARDIANS, See Fiduciaries. GUARDIANSHIP. persons under can not contract, 259. References are to TVmrv nn*? paragraphs mar ked%. INDEX. QO/ HALF NOTES. See Bank Notes, and II., 1695, 1697. HANDWRITING. proof of, when necessary, II., 1219. whether, and when comparison of sigpnatures may be made, II.. 1219. HOLDER. See BONA Fide Holder. HOLIDAYS. See GRACE. what days are legal holidays, 629. usage of banks as to holidays, 629. law making legal holidays, and thereby affecting grace, does not im pair obligation of contract, 629. HONOR, ACCEPTANCE AND PAYMENT FOR. acceptance for honor or supra protest, II., 1254, 1258. payment for honor qx supra protest, II., 1254 to 1258. HOURS OF BUSINESS, what are, 464, 600. HUSBAND AND WIFE. See Married Woman. IDENTITY. of parties of same name, II., 1218, 1607, 1612. when party is marksman must be shown, II., 1218. ILLEGALITY OF CONSIDERATION. See Consideration ; Renewal Bills and Notes. how purged, 207. ILLNESS. as excuse for want of presentment, protest, and notice. See Excuses, and 478. II., 1066, 1125, 1126, 1127. when epidemic disease operates as excuse, II., 1066. sudden illness and death of, or accident to holder, as excuse, II., 1125, II 26. must prevent due diligence, II., 1127. when necessary is over, usual steps must be taken, II., 1125. IMBECILE. See Lunatic, and 109. IMMATERIAL ALTERATIONS. See Alteration, and II., 1398. 1403, 1411, 1416. IMMORAL CONTRACT. See Consideration, and 195 et seg. void at common law, 195. illustrations, 195, 196. bill or note based on, valid in hands of bona fide holder without no- tice, 197. otherwise if statute declares contract void, 197. no nation will enforce contracts made in another country based upon immoral consideration, 866. illustration, 866. o T-KT-n.T7-v References are it) gOo IWDli-X. /laragraphs marked % IMPLIED. authority of agent. See Agent, and 278, 289. of copartner to bind firm. See Partners, and 355, 358. of corporation. See Corporation, and 379. acceptance. See Acceptance, and 499, 501. consent to alteration. See Alteration, and II., 1401. notice. See Bona fide Holder, 789^, 795a, 795'5- IMPRISONMENT. See EXCUSES, and II., 1120. no excuse for delay as to presentment and notice, II., 1120. INABILITY TO FIND PARTY. 5^,? Excuses, and II., 11 14, 1 123. as excuse for delay in presentment and notice, II., 1 1 14 to 1 123. INCAPACITY. See Capacity ; Infants ; Aliens ; Lunatics ; Married Women; Bankrupts; Guardians. INDEMNITY. See Excuses, and II., 11 28, 1480. as excuse for non-presentment and notice, II., 1128 to 1131. when paper lost, II., 1480. INDORSEMENT, and transfer by indorsement. See COUPON BONDS, II., 1500. I. Forms of transfer, and transfer by indorsement, 663. bill or note payable to bearer or indorsed in blank, may be transferred like currency by delivery, 663. other bills and notes by indorsement of transferrer's name, and de- livery to party named, 663. if not expressed to be payable to order of any person or to bearer, they are not negotiable in the United States or England, unless by statute, 663. payee who puts his name on paper payable to bearer or indorsed in blank, is liable as indorser, 663a;. when such indorsement is alleged, it must be proved, 663a. note payable to " A. B. or bearer " is same as if simply to bearer, 663a. party renders himself liable when he indorses a non-negotiable note payable to him only, 664. when instrument is payable " to order," payee's indorsement is necessary to transfer legal title, 664a, of corporation with seal is good, 664^. delivery by indorser is necessary to complete contract, 665. implies acceptance by indorsee, 665. offer to indorse must be accepted in reasonable time, 665. meaning of the term " indorsement," 666. technically, it is applicable only to negotiable paper, 666. literally, it means writing one's name on the back of instrument, 666. technically, it means writing one's name on instrument with intent to incur liability in certain contingencies, 666. term indorsement includes deliver)', 667. indorsement can not be partial in respect to amount, 668. indorsement is a new contract embodying all tiie terms of the instru- ment indorsed, 668. is equivalent to drawing new bill, 669. INDOP ^YMY.'^'Y—co7iti7tued. indorser of instrument warrants (i) that it will be accepted or paid according to its purport, 669^, 671. (2) that it is genuine, 669.'?, 672. (3) that it is valid, 669^, 673, 674. (4) that the ostensible parlies are competent, 669a, 675, 676. (5) that indorser has a lawful title to it, 669^, 677. indorsement " without recourse " implies that indorser declines to assume any responsibility as a party to bill or note, 670. holder may recover against indorser "without recourse," (i) if any of the prior signatures are not genuine ; (2) if note is invalid between original parties ; (3) if any prior party is incompetent ; and (4) if the indorser is without a title, 670. indorser of bill contracts to pay at maturity if bill be not accepted according to purport, and he be notified of its dishonor, 671. of accepted bill, or of a note, contracts to pay it if not duly paid by the acceptor or maker, 671. contracts that the bill or note is neither forged, fictitious, nor altered, 672. engages that the bill or note is a valid subsisting obligation which binds all prior parties, 673. wherein considered and cases cited, 674. indorser contracts that the original parties were competent to bind themselves, whether as drawer, acceptor, or maker, 675. query, whether this engagement extends to all antecedent parties, 676. indorser contracts that he has a lawful title to bill or note, and a right to transfer it, 677. indorsement, as to its obligation, is determined by the law of the place of its execution, 678. circumstances which invalidate any other contract apply to indorse- ment, 678a. there must be a consideration for the indorsement between the im- mediate parties, 679. 2. Who may indorse or assign bills and notes, 680. any person legally capable of contracting, maybe the indorser or trans- ferrer by delivery of negotiable paper, 680. indorsement by assignee in bankruptcy, 680. personal representative, 680, 686. other fiduciaries, 680. marriage o{ f etna le payee, or indorsee of bill or note, vests property thereof in her husband, 681. by married woman of note assigned before marriage, 681. an infant, by his indorsement, may transfer paper to any subsequent holder against all parties thereto, except himself, 6S2. if instrument be payable or indorsed to copartnership, any member may transfer it and indorse it in name of firm, 683. but if partnership is dissolved otherwise than by the death of a partner the survivor can not indorse in name of firm, 683. if several persons, not partners, are payees, all must indorse, 684. note payable to executor may be transferred for a debt of the estate, 685. , _^ T VTi T7 V References are to y ' ^ ^^^ ^"^* paragraphs marked \. INDORSEMENT— (T^w//;/?/^^. indorsement by agent, 301. transfer of bill or note may be made to any one capable of contracting with transferrer, 686, it may also be made to an infant or a married woman, 686. or to a trustee or personal representative, 686. by president or cashier, binds bank, 685. in which case, though it is a transfer to him personally, the trust attaches to proceeds, 686. if to A. for use of B., A. is indorsee, 685. promissory note payable to "J. C, Sh'fif," and indorsed "J. C, Sh'ff," does not of itself impart notice to indorsee that the money is pay- able to J. C. in his official capacity as sheriff, 686. if a bill or note is payable to a party as cashier, it will be regarded as payable to his bank, 687. 3 Forms and varieties of indorsement . transferrer's name is generally written on the back of instrument, 688. but " indorsement " is good if name be written on any other portion ot the paper, 688. initials, or any mark to indicate name, will suffice, 688«. examples of what is sufficient indorsement by figures or other indicia, 688«. whether party who writes sale or assignment is indorser, or mere as- signor of instrument, 688i5. peculiar expressions used in transfers, 688i5. amounts to ordinary indorsement in an elaborate form, 688(5. American decisions in similar cases, 688^. indorser may authorize another to write his name, 689. as a general rule, indorsement must be on the paper, or attached to it, 689^. promise to indorse for valuable consideration will support an action for its breach, 689a. transfer of a note with a guaranty is good, though the guaranty be void under statute of frauds, 689^:. not necessary for indorsement to be on the original paper, 690. may be on sHp of paper attached thereto, 690. called allonge, 690. various liabilities evidenced by terms of indorsement, 691. (i) indorsement in full, 691, 692. (2) indorsement in blank, 691, 693. no difference between note indorsed in blank and one payable to bearer, 693. indorsement of blank paper is a "letter of credit for an indefinite sum," .- 694. when there are several indorsers in blank, holder may strike out any he pleases, 694^. but if there be a special indorsement to a particular person, holder can not strike it out and insert his own name, 694a. subsequent indorsers are not discharged when holder fills up a prioi blank indorsement, payable to himself, 694^. blank indorsement does not per se transfer a title, 695. References are to t xT t-> -c v paragraphs marked %. INUbX. Oil INDORSEME ^T—cojitittned. bill or note once indorsed in blank, and afterward in full, is still pay- able to bearer against all parties, save special indorser, 696. title of latter must be made through his indorsee, 696. holder can not fill up blank so as to make note payable partly to one and partly to another person, 696d. indorsement " for niy use," or, " for collection," may be recalled at pleasure, 699. indorsement "without recourse," or "at the indorsee's own risk," makes indorser a mere assignor of the title to the instrument, 700. ' security continues negotiable notwithstanding such indorsement, 700. cases cited, 701. some peculiar cases, jooa. without recourse must be clearly indicated, 700a. samples of different modes or forms of indorsement, 702. successive indorsers are liable to each other in the order they indors' 703. contribution between successive indorsers does not arise, except b> special agreement, 703. indorser may be first in point of contract, though second in point ot time, 704. it may be shown by parol proof who are actually prior indorsers, 704. joint payees who indorse are not regarded as " successive indorsers." 704. examples oi irregular intervening indorsements, 705, 706. party who indorses after payee a note payable to his (payee's) order, can not show by parol that he did not intend to be bound as in- dorser, 707. intention to become liable as surety or guarantor must be cleariy indi- cated, 707. party placing his name on a note payable to bearer, in fact or effect, is an indorser only, 707a. query, whether party who writes his name- before that of payee on note is an indorser, 709. when the intention in such case may be shown by parol evidence, 710. when not, 712. grounds for admission of parol evidence, 711. whether party signing on back before payee is presumably joint maker 7iZa. view that third party is presumed to be surety or guarantor in the form of joint maker, 7i3<5. g 1 2 INDEX. . ^'f'^'^f'' '"■''''. . y paragraphs tnarked % mDORSEME^T—conh'nued. view that such third party is prhna facie only secondarily liable as guarantor, 713^. view that such third party is second indorser, Ti^td. reasons for regarding such person, as a general rule, to be a first in- dorser, 713^. rule in New York, 7 1 3^. comments and conclusions, 714. English cases cited, 714a. opinion diverse as to what parol evidence determines liability of person who signs before payee, 715. if party describes himself as surety, guarantor, or indorser, he thereby gives notice of his character, of which other parties should take cog- nizance, 716. what is a material alteration by maker, 716. query, how far parol evidence is applicable to ascertained indorsements, 717- Mr. Byles' views as to indorsements in blank, 717. controverted by text, 718. general rule stated, to wit : that in an action by indorsee against his in- dorser, no evidence is admissible save such as would be in suit against drawer by one in privity with him, 718. instances of exclusion of parol evidence between indorser and indorsee, 719. whether contemporaneous waiver of demand and notice may be shown by parol evidence, 7i9fl. what parol evidence permissible between indorser and indorsee, 720. limitations to rule as to evidence in an action by indorsee against his indorser, etc., are : (i) it may be shown that indorsement was without consideration, 7200;. (2) that it was upon trust for a special purpose, 721. (3) that fraudulent representations were made to indorser at time of indorsement, 722. cases illustrating these views, 723. distinction taken between indorsement for value and for accommoda- tion, 723. after maturity negotiable paper circulates, but transferee only acquires the right and title of transferrer, 724a. negotiable paper may be transferred by indorsement, or by delivery, either before or after maturity, 724. dishonor for non-payment or non-acceptance does not destroy its nego- tiability, 724. indorsee of overdue paper takes it subject to existing equities, 725. what equities are pleadable, 7250. must be those inherent in paper itself, 725^. exception in case o{ accommodation paper, 726. indorsee of overdue paper may recover if his indorser could, 726^. as to equities of third parties, ^iSa. rule as to equities applies to party who indorses " without recourse,*' # and reacquires bill or note after maturity, 727. equity will not compel surrender of past due note, 727. References are to TMnW r\t n paragraphs marked §. 1 IN U i. A . V * O INDORSEMENT- cojithiucd. undated indorsement is presunned to have been made at time of execu- tion, or before maturity and dishonor, 728. indorsement will be presumed to have been made at place where in- strument is dated, 728. bill or note is merged in a judgment, and can not be thereafter indorsed or assigned, 728. may be transferred pending suit, 728. INDORSER. See Indorsement. when agent is deemed, 301, 416, 417. bound as, 314. of forged paper, II., 1355. may require receipt on payment, II., 1229. notice to, II., 970, 1038. how bound on bill or note reissued by him, II., 997, 1241. whom he may sue, II., 1204. when may be sued, II., 121 2. liability of, for re-exchange, interest, and damages, 918. II., 1448 to 1452. what law applies to indorser, 898 to 902. INFANTS. persons under 21 years of age are, 223. how contracts of, have been classified, 223. distinction as to void and voidable contracts obsolete, 223. may bind themselves for necessaries, 224. whether they may execute notes for necessaries, 224. can not bind themselves absolutely as drawers, acceptors, makers, or indorsers of negotiable instruments, 225. doctrine generally accepted that they can not be parties to negotiable instruments, 225. views of that text — that instrument executed by infants not necessarily void because negotiable in form, 226. and that if for necessaries, such instruments are valid to extent of their value, 226. Scotch law on the subject, 226. payee indorsing paper executed by, warrants validity, 226. if payee be infant, maker, drawer, or acceptor is bound to his indorsee, 227. whether payment may be made to infant payee, 227. infant not bound by his own indorsement, 228. indorser may rescind contract, 229. views of Story, 228. remarks thereon, 228. infant's indorsement voidable, not void, 229. if he disaffirms contract after age, must return consideration, 229. ratification by adult validates instniment in all respects, 230. instrument may be sued on in such case without alleging ratification.. 230. ratification may be after action brought, 230. it inures to benefit of every subsequent holder, 230. Vol. II.— 58 _T. T-\TT»r— continued. verbal ratification sufficient unless written required by statute, 231. what words amount to ratification, 231, 232. promise of adult must be made to party or his agent, 233. if promise conditional, condition must be fulfilled, 233. part payment does not amount to ratification by adult, 234. what does not amount to ratification, 234. effect of adult keeping property purchased when infant, 234. or retaining consideration for contract, 234. whether ignorance of law exonerates adult, 235. statutory enactments respecting ratification by adults, 236. comparison between ratification by adult, and by principal of agent's act, 236. adult retiring from firm of which he was a member when infant must give notice, 237. but if he continues in firm it is no ratification of its prior contracts as to himself, 237. whether infant making joint note with adult, should be sued jointly, 238. INFORMALITY. mere informalities of expression do not afifect negotiable instruments, 76. INITIALS. of maker suffice for signature, 74. so of drawer, indorser, or acceptor, 688. must be shown to whom they apply, II., 12 18. INJUNCTION. lies to restrain illegal subscriptions by corporations, II., 1522^. INJURY. lack of, no excuse for want of presentment, protest, and notice of bills and notes, II., 11 70, 1175. See Checks. INLAND BILLS. See BILLS OF EXCHANGE, and 6 to 14. as to protest of, see Protest, II., 926. INSANITY AND INSANE PERSON. See Lunatic. INSOLVENCY. See EXCUSES. no excuse for non-presentment and notice, II., 117 1, 1172. INSTALMENTS. note payable in, with condition that if default made in payment of first, the whole shall be due, is negotiable, 48. grace allowable on each instalment of bills and notes payable in, 621. action lies on, as they fall due, II., 1213. when note payable in, is overdue, 787. if instalment of principal of overdue note subject to equities, 787. otherwise as to instalment of interest, 787. INTERDICTION of commerce and intercourse as excuse for non-presentment, protest, and notice. See EXCUSES, and II., 1063. References are to T x- r» 17 V r\\ t. paragraphs marked §. 1 AU t, A . y I ^ INTEREST. See EXCHANGE ; CONFLICT OF Laws ; USURY, when recoverable on bank notes, II., 1687. alteration in amount of, II., 1384. recoverable against all parties to bills and notes, II., 1458. need not be specially claimed, II., 1458. what law applies to, 918. when contract rate prevails, II., 1458a. on coupon bonds, II., 1513, 1515. recoverable on coupons, II., 15 13. prior demand of payment not necessary to recovery of, II., ISH- but readiness to pay at time and place abates interest, II., 1515- INTERPRETATION OF CONTRACTS. See Conflict of Laws. by what laws governed, 871. INTOXICATION. See DRUNKENNESS, 214, 215. I. O. U. whether negotiable, 36. IRREGULAR AND AMBIGUOUS INSTRUMENTS, 128. ambiguities may in general be explained, 87, 88. drawer and payee may be same person, 128. drawer may draw bill on himself payable to his own order, 128. or to order of third person, 128. when drawer and drawee are same, paper may be treated as a note, 128, or as an accepted bill, 128. drawer in such case bound without notice, 128. identity of drawer and drawee must be proved, 128. usual to regard such papers as bills, and to declare accordingly, 128. where partnership has two places of business, and draws on itself from one place to another, it is same as note, 129. same rule applicable to corporations, 129. note by maker to himself a nullity, 130. but if he indorse it, it becomes payable to bearer, or to order, 130. if paper so ambiguous that it is doubtful whether it be bill or note, it may be treated as either, 131. instances, 131, 132, effect of substituting '* at" for "to " in address of bill, 133. notes sometimes certified as checks, 134. bank becomes debtor when it certifies notes, 134. when bank may retract certificate, 135. JOINT DRAWEES. if not partners all must accept, 488. otherwise bill should be protested, 488. but party accepting will be bound, 488. JOINT AND SEVERAL NOTES AND BILLS. See Joint Parties. note by two or more makers may be joint, or Joint and several, 94. II., 1294. if note running, " I promise," signed by several, it is joint and several, 94. References are to Q I O ^-^ 1Jl.\. paragraphs fnarked %. JOINT AND SEVERAL NOTES AND 'QUJLS— continued. so note running, " we or either of us promise," 94. note signed " A. B., principal, C. D., surety," and running. " we prom« ise " — is joint, 94. if such note run, " I promise," it would be joint and several, 94. a joint and several note is joint note of all, and several notes of each, 94. as joint note it may be valid, and as several invalid, 94. how note of firm should be signed, 95. delay in presenting to joint maker when excused, II., 1089. JOINT OWNERS. no implied authority in one to bind others, 358. JOINT PARTIES. See COVENANT not to Sue; Principal and Surety how discharged, II., 1294. discharge of one discharges all, II., 1294. but not if holder's rights are expressly reserved, II., 1295. rule as to partners, II., 1295. must unite in action if living, II., 1183^;. on death of one remedy survives to those living, II., 1183a, judgment against one is bar to suit against all others, II., 1296. but not if liability is several also, II., 1296. whether giving time to one discharges others, II., 1297. effect of death of one, II., 1298. when note of one discharges all, II., 1299. whether joint party may be shown by parol to be surety, II., 1336. JUDGMENT. power to confess in bill or note, whether it impairs negotiability, 61. how rendered on instruments payable in currency and in coin, II., 1247. , when good offset. II., I425> 1426. effect of, as merger, II., 1283, 1285. JUDICIAL NOTICE. taken of almanac, 70. not taken of laws of foreign countries, 865, 891. JUDICIAL SALE. purchaser of note at, may recover full amount of accommodation m- dorser, 767 T paragraphs marked §. 1 JN U H- A. y -i 1 MARRIED WOMAN— rwz//««^^. authorities conflicting in United States, 248. in New York held essential either (i) that intention to charge sep* arate estate be declared in contract, 248. or (2) that consideration be for direct benefit of separate estate, 248. but in latter case, not necessary that bill, note, or other contract specify particular property, 248. in United States, general rule is that separate estate is liable in equity, on all debts expressly or impliedly charged thereon, 248. in New York rule at law same as in equity, 248. how intent to charge separate estate inferred, 248. construction of note to husband, 249. rule in Massachusetts under statute, 249. when separate estate charged, all held at time of judgment liable, 249. promise by widow to pay debt contracted in marriage void, 249. but otherwise if she had separate estate, 249. (3) when wife is sole trader, she is liable by custom of London, but hus band must be joined in suit, 250. statutes in United States, 250. without husband's consent can not generally bind herself in trade, 250. (4) if husband fail to supply her with necessaries she may bind him, 251. (5) husband using wife's name, bound by it, 252. thus, if he sign note in wife's name, 252. so if she signs her name with his assent, 252. so if he authorizes, or ratifies contract in her name, 252. so if husband conducts business in her name, 252. (6) may bind husband as his agent, 253. must use husband's name as his agent unless authorized to use her own, 253. authority to bind husband must be clearly proved, 253. if agent, can not delegate authority, 253. husband may make same defences, when she has used his name by authority, as if he used it himself, 253. 3. Marriage entitles hicsband to bills a7td notes of wife possessed before, 254. husband may indorse note made to her when single, 254. or may sue on it in his own name, 254. or allow wife to indorse in her name, 254. in last case it may be sued on as indorsed by wife with his consent, or as indorsed by him, 254. if husband loaning money, takes note to self and wife, it purports gift to her if she survives, 255. if note made after marriage to husband and wife as joint payees, legal interest on it goes to survivor, 255. husband must reduce wife's choses in action to possession, 256. if he dies without doing so, right survives to her, 256, if wife die, her representative may sue on her choses in action, but pro- ceeds go to husband, 256. husband entitled to be her personal representative, 256. T -NT T^ tr V References are to 922 1-1> Uii-'^- paragraphs marked §. MARRIED WOMAN— continued. if husband after her death gets possession of her choses in action, they belong to him, 256. if husband dies without qualifying as representative of deceased wife, right to administer passes to his next of kin, 256. what amounts to reduction into possession by husband of wife's choses in action, 257. husband liable for contracts made by wife when single, 258. husband and wife must be sued jointly on such contracts, 258. if husband dies, wife only bound by her contracts made when single, 258. if wife dies, her representative only liable, 258. creditors of wife may follow her unreduced choses in action in hus- band's hands, 258. MECHANICS' LIENS. not generally waived by taking bill or note for debt, II., 1282. nor by taking bond, II., 1282. such securities are cumulative, II., 1282. MEMORANDUM CHECKS. See CHECKS. MEMORANDUM ON NEGOTIABLE INSTRUMENTS, 149- it does not affect certainty of the paper, does not prevent negotiability, 49. purport of paper must be collected from all eight corners, 149. instances of memoranda aflfecting operation of instrument, 149, 150. IL, 1383. conflicting decisions, 152. memorandum merely earmarking instrument does not affect it, 153. when, by whom, and under what circumstances memorandum written may be shown, 154. will be presumed to have been contemporaneous with execution of in- strument, 154. if contemporaneous is constituent part of it, 154. if subsequent and with consent of all parties will bind them, 154. if made by stranger, and without parties' consent, is spoliation, 1 54. if made by subsequent party, without others' consent, is spoliation as to his predecessors, 154. when part of instrument can not be varied by parol evidence, 154. when questions concerning, are for jury to decide, 154. if evidently intended not to affect instrument, it will not do so, 155. instances, 155. as to place of payment, II., 1383. when material, and effect of obliterating, II„ 1383, 1384, 1385. MERGER. See DISCHARGES. at common law appointment of debtor as executor merges debt, II., 1285. this principle does not obtain in United States, II., 1285. bill or note merged in bond or covenant because of higher nature, II., 1293. but no merger if face of bond or covenant shows it is mere additional security, IL, 1293. Re/crencis are to INDEX. Q 2 3 parag'raphs marked §. J yJ MESSENGER. See Notice. employment of, to give notice, II., 1004. 1033, 1034. MISDATE. of bill or note as excuse for failure in respect to presentment ana notice, II., 11 80. MISDATING BILL OR NOTE. See Excuses. as excuse for non-presentment and notice, II., 1180. MISDESCRIPTION. See Notice, II., 974, 981. of bill or note in notice will not vitiate unless it misleads, II., 974, 979^2. of payee's name may be explained, 100. MISLAYING BILL OR NOTE. See Excuses. as excuse for non-presentment and notice, II., 1173, 1 174. MISNOMER. immaterial, 399. MISSTATEMENT. whether notice vitiated by, II., 984. MISTAKE. See FORGERY ; ALTERATION ; Bona Fide Holder ; Checks. in amount between privy parties may be shown, 813. of fact, money paid under may be recovered back, 732, 733. II., 1226, 1243, 1269, 1655, 1661. but not if paid under mistake of law, II., 1226. if note be surrendered by mistake, only part being paid, balance may be recovered, II., 1243. negligence in paying under mistake of fact does not divest right ot recovery, II., 1362, 1369, 1655. holder of instruments executed under, 850, 853. MONEY. See Payment ; Promissory Notes ; Conflict of Laws. negotiable paper must be payable in, 56, 59. whether negotiable if payable " in Canada money," 58. legal tender decisions, II., 1246 to 1249. agent to collect can take nothing else, 335. II., 1245. MONTH. by common law, lunar month is applied in construing ordinary con- tracts and statutes, 624. by law merchant, calendar month applied to negotiable instruments in England and the United States, 624. how months computed in respect to negotiable instruments, 625. how impossible date — for instance, 31st September — corrected, 625. MORTGAGE. whether mortgage to secure bill or note passes with it clear of equities. 834, 835. party who can enforce note may enforce mortgage, 834a. deed of trust on same footing, 684. prior liens on land protected, 834-^. _^. TxT-mjV References are to 9^4 liN-Ui-A. paragraphs mar ked%. MOR TG AGE— ,cO^V)'^— continued. usury impeaches bonds in all hands, II., 1533. but seller bound for the consideration paid, II., 1533. case of usury where bonds sold for larger sum in depreciated currency II-. 1534- how question of municipal subscription submitted to popular vote. II.. 1535. construction of conditions that voters must assent, II., 1535^. various cases, II., 1535^. how election impeached, II., 1536. 3. Powers of mjinicipal officer or agent to bind t he corporation, II., 1 537. views of the United States Supreme Court, II., 1537. qualifications of its doctrines, II., 1538 to 1544. decisions illustrating its views, II., 1 539. township has no inherent authority to contract a debt, II., 1544a. not included in " corporate bodies," II., 1544a. 4. How invalidity of bonds cured by acquiescence or ratification, II., 1 545. general principles which have been adopted : (i) by failure of members of corporation to enjoin issue, II., 1545. (2) by their submitting to taxation to pay them, II., 1545. (3) by voting for, or submitting to payment of principal or interest, II., 1^545- (4) by receiving or keeping proceeds, II., 1545. decisions illustrating these views, II., 1546, 1547, 1548, remarks upon them, and qualifications, II., 1549. (5) to be capable of ratification, bonds must be constitutional, and not illegal, II., 1547. 5. General principles of municipal liability, II., 1550. series of propositions on the subject, II., 1550. series of decisions illustrating them, II., 1551, 1552, 1553. where statute points out particular course, it must be pursued, II.. I555«. 6. Legislative control over 77iunicipal obligations, II., 1556. may legislature compel municipal corporation to discharge indebted- ness which it did not contract? II., 1556. can legislature authorize municipal officers to contract debt without popular vote in its favor? II., 1557, 1558, 1559. may legislature validate municipal securities invalid when issued? II., 1560, 1 561, 1562, 1563. may legislature authorize municipal officers to ratify invalid securities without popular vote ? 1 1„ 1 564. may legislature abolish right of municipality to plead defence of illegal- ity ? II., 1565. MUNICIPAL CORPORATIONS AS PARTIES TO BILLS AND NOTES. See Corporations ; Coupon Bonds ; Municipal Bonds ; Drafts or Warrants. have no implied power to execute negotiable instruments, 420. but may receive express or implied power, 420. ordinary warrants, orders, etc., not negotiable, 420. Q26 INDEX. . References are to V paragraphs marked % MUNICIPAL CORPORATIONS AS V >CSCY\Y.?>~contmued. what officers or agents may act for them, 421. as to mayors of cities, 422, 427. supervisors have no implied power to bind municipality by negotiable paper, 422. nor have trustees of towns, villages, and townships, 422. nor selectmen, 422. nor auditors, 422. nor police juries of parishes, 422. nor clerks of county courts, 422. nor clerks of boards of supervisors, 422. nor county judges, 422. nor recorders, 422. difference between municipal and private corporations as to liabilities for official acts, 423. NATIONAL BANK. as purchaser of note, 769, note. NECESSARIES. See INFANTS, 225, 226. when and how infant bound for, 225, 226. NEED. provision in case of, iir. NEGLIGENCE. See MISTAKE; BONA Fide HOLDER; AGENT; ALTERA- TION ; Checks. liability for, of agent for collection, 327, 329. party carelessly framing instrument so as to admit of alteration, II., 1405, 1409, 1659. in mistaken payment does not bar recovery, II., 1362, 1369, 1655. carrier can not stipulate for exemption from liability for. effect of gross negligence, 774, 775, 'j'jd. II., 1503, 1680. line of demarcation between negligence and notice, 779. NEGOTIABILITY. meaning of term, i,\a. words of, 104. by what law ascertained, 903. NEGOTIABLE INSTRUMENTS. See Bills of Exchange , Promissory Notes ; Bonds ; Coupon Bonds ; Checks ; Certificates of Deposit ; Bank Notes ; Certificates of Stock ; Municipal Corporations ; Drafts ; Warrants ; Bills of Credit ; Cir- cular Notes ; Bills of Lading ; Guaranties ; Letters of Credit. when instrument is called negotiable, i. meaning of term, \a. peculiar characteristics of, i. at common law, choses in action not transferable, I. bills of exchange, first relaxation of rule, i, 2. bills first negotiable instruments, 2. Re/erencet an to INDEX. QS 7 paragraphs marked \. ' ' NEGOTIABLE INSTRUMENTS— \^Y{.0^0^—cotitinued. notice must give correct description of bill or note, II., 973, 974. if party knows instrument referred to, it suffices, II., 975. description must be reasonable, II., 975, 976. in ascertaining sufficiency of notice to identify instrunjent, parties are not confined to its face, II., 975, 976, 977. circumstances of each case looked to, II., 976. rule where several notes of same person, of same date, are payable at different times, II., 976, 977. omission of maker's name is fatal, II., 978. notice describing bill as " drawn by you," suffices, II., 978. description of note as bill, or drawer as acceptor, or indorser as maker, not defective, II., 978. if note is payable to two persons jointly, notice may be given either jointly or severally, II., 978. need not state who is holder or at whose request it is given, II., 979. nor v^here demand made, nor hour of presentment, II., 979. other cases, II., 979. should indicate whence it comes, II., 979. when description void for uncertainty, II., 979. when without date it is defective, II., 979. but extraneous evidence admissible to perfect it, II., 979. misdescription of date does not vitiate, unless it misleads, II., 979(7. nor does misstatement of amount, nor names of parties, nor time when due, II., 979^. particular instances, II., 980, 981. presentment and dishonor must appear from notice by " reasonable in- tendment," II., 982. demand for payment must be stated in terms, II., 982. or legal excuse alleged for failure to make demand, II., 982. statement that note is "unpaid " is not sufficient, II., 983. except when payable at bank, II., 983. enough to say note is " dishonored," which implies presentment and demand, II., 983. and generally to use any words which indicate dishonor, II., 983. query, whether indorser is discharged by misstatement of time of pre- sentment, II., 984. notice need not state expressly that the party is looked to for payment, II., 985. when notice must state that bill was protested, II., 986. if bill were tioted for protest, no statement of protest necessary, II., 986. not necessary that copy of protest of foreign bill shall accompany no- tice of dishonor, II., 986. 3. Who may give notice of dishonor, II., 987. It is duty of holder to give notice of dishonor to all parties liable to him, II., 987. but he is entitled to benefit of notice given by others, who would be liable to him if he had given notice, II., 987. intermediate indorser is substituted to rights of holder on paying hiro II., 987. References are to INDEX. 9^9 paragraphs marked §. NOTICE OF TiY^WdyiO^— continued. conflicting decisions, II., 987. notice from a mere stranger is not good, II., 988. must come from party whose liability is fixed, or who on paying is en- tilled to reimbursement, II., 989. query, whether acceptor who fails or refuses to pay can give notice, II., 990. notice by his agent is sante as if given by holder himself, II., 991. factor or attorney may give, II., 992. banker with whom instrument is deposited, or other agent for collec- tion, is holder for purposes of notice, II., 992. notary not bound to give notice, II., 991. if holder is dead, personal representative must give notice, II., 994- sending note to bank for collection implies authority to give notice, II-, 993- such bank may use its own or holder's name, II., 993. holder as collateral security may give notice, II., 993. 4. To whom 7iotice should be given, II., 995. all indorsers, whether for value or mere agents for collection, must have notice of dishonor, II., 995. bank or other agent indorsing for collection, entitled to, II., 995^. drawer of bill entitled to notice, II., 995. acceptor and maker not entitled to, II., 995. not sufficient to inclose notice to subsequent indorser, 995^. nor is transferrer by delivery entitled to, II., 995^7. accommodation drawer or indorser entitled to notice, II., 995^. not so if accommodated, II., 995'^- if note payable on demand be indorsed, though overdue, notice of de- fault must be given within reasonable time, II., 996. if indorser before maturity reissues after paying note, when liability of all parties is fixed, no new demand and notice are required, II., 996, 997. decision in California, II., 996. notice to general agent of party is same as to principal in person, II., 998. but not to party's attorney or solicitor, II., 998. agent signing his own name entitled to, but otherwise principal only, II., 998. agent to indorse not necessarily agent to receive notice, II., 998. war does not dissolve agency, II., 998. notice to copartner good even after dissolution, II., 999. semble, where one member is distant from and another at place of pro- test, notice must be given to the latter, II., 999. case of separation by war, II., 999. if drawer be partner of acceptor, no notice necessary, II., 999a. if partner die, notice to sun'ivor suffices, II., 999«- if joint indorsers be not partners, all must have notice, II., 999^. if party dies before note is due, notice must be given to executor or administrator, if ascertainable, II., 1000. how notice should be addressed, if representative unknown, II., 1000, Vol. II. — 59 -_ TTM-n-CV References are U 930 IJNDtX. paragraphs marked §. NOTICE OF DISHONOR— \ Paragraphtmarked%. IJNUiSA. 9j I NOTICE OF Vil^ViO'^O'R— continued. if party has residence in one place and place of business at another may be sent to either, II., 1022, 1024. place where party actually resorts for his mail is always appropriate address, II., 1022. residence need not be domicile, II., 1022. indorser may direct where notice shall be addressed, II., 1023. notice should not be directed generally to parish or county where there are several offices, II., 1024. rule where there are two offices in same town, II., 1024, whether delivery to bellman suffices, II., 1024. what is place of residence, II., 1025. notice should not be sent away from place of residence to place of busi- ness, II., 1025. rule in respect to temporary residents or sojourners, II., 1027. rule in respect to members of Congress and legislative bodies, II., 1027. when a party has several post-offices, notice may be sent to either. II., 1028. as to notice addressed to party living in a large city, how name should be written, II., 1029. party holding out a certain place of residence can not deny it, II., 1029a. when party gives information to holder of intended absence, notice should be sent to place mentioned, II., 1029a. notice put in keyhole of residence sufficient, II , 1029a. place of date of instrument is prima facie evidence of residence of drawer of bill, II., 1030. but not of that of indorser, II., 1030, 1031. English and American decisions, II., 1030, 1032. at maturity of bill, party is presumed to reside at same place where he resided when it was drawn or indorsed, II., 1032. notice may in all cases be sent by a special messenger, II., 1033, 1034. in which case holder must prove safe arrival of letter in due time, II., 1033- what in such case is due time, II., 1033, 1034. when messenger is necessary or most convenient, his expenses are chargeable to party notified, II., 1034. when special messenger must be employed, II., 1034. 7 Time within which notice may and fnust de given, II., 1035. notice implies that dishonor has taken place, II., 1035. knowledge by anticipation not equal to notice, II., 1035. as soon as demand is made after dishonor, holder need not wait till close of business hours to send notice, II., 1036. Mr. Chitty's views, II., 1036. holder is not obliged to give notice on the very day of dishonor, although he may, II., 1037. when holder and party reside in same place, he has till expiration of following day to give notice, II., 1038. if given at place of business, must be during business hours, II., 1038. if at residence, may be at any time before hours of rest, II., 103S. when not in same place, notice must be sent in time to go by first mail al"ter day of dishonor, provided mail does not close before early and convenient business hours, II., 1039. Vv)- ^__„ References are to IJN U l!y A.. paragraphs marked \, NOTICE OF V)\^\iOViQ^— continued. what is meant by " next practicable mail," II., 1039. views of Chancellor Kent, Parsons, Story, and Chitty, II., 1040. no precise hour arbitrarily fixed, II., 1041. what are reasonably early and convenient hours, II., 1041. if drawer or indorser throw difficulty in the way, time is extended, 11^ 1042. Christmas-day, Sunday, fourth of July, and other days on which trans^ action of business is forbidden, are not computed in giving notice, II., 1043. each holder has a day to give notice to his predecessor, II., 1044. safe rule for indorser to pursue, II„ 1045. over-diligence in one party does not excuse want of diligence in an- other, II., 1045. if party dwell beyond the seas, it is sufficient to send notice by first regular ship, II., 1046. what ship should be selected, II., 1046. what ship will not suffice, II., 1046. 8. Allegation a7id proof of notice, II., 1047. what declaration on instrument must allege with reference to facts which dispense with presentment and notice, II., 1047. views of Byles, II., 1047. in the United States, evidence of due diligence to obtain payment is ad- missible under the general averment of due demand, protest, and notice, II., 1048, 1049. views of Greenleaf and Edwards, II., 1048. burden of proof as to notice rests on plaintiff, II., 1050. plaintiff must prove due diligence in giving notice on proper day, II., 1050. or that notice was actually received, II., 105 1. will not do to show that notice was sent on one of two days, II., 1051. contents of notice must be shown, II., 105 1. always suffices to show due deposit in office where mail may be used, II., 1051. postmark \s prima facie evidence of notice being mailed on that day, II., 1052. how genuineness of postmark shown, II., 1052. due course of mails must be shown by plaintiff, courts do not notice them judicially, II., 1053. any party bound prima facie when notice received in such time as it would occupy for intermediate parties to transmit it, II., 1053. ocular evidence of posting letter not required, II., 1054. what is sufficient evidence of deposit of notice in office, II., 1054. protest of foreign bills is evidence of presentment and dishonor, but not of notice, II., 1055. how rule is varied by statute or local usage, II., 1055. decisions upon sufficiency of testimony, II., 1056. entries in notary's book good secondary evidence after his death as to giving notice, II., lo57- even when protest is not required by law, II., 1057. in what other cases, and what, secondary evidence is admissible, lU J058. References are to INDEX. 933 paragraphs marked %. ' " NOTICE OF DISHONOR— (ro«//««^^. clue diligence, when facts ascertained, is a question for the court, II., 1058. otherwise for the jury, II., 1058. when due diligence exercised, no further notice necessar)-, II., 1058a. what law applies to notice, 910. NOTING. See Protest, and II., 939. OCCUPATION OF COUNTRY BY ENEMY. as excuse for non-presentment, protest, and notice. See EXCUSES and II., 1064. OFFSET. See Set-OFF. ON DEMAND. meaning of, 89. ONUS PROBANDI. 5^^ Burden OF Proof. OPERATION OF LAW. assignment by, 748. discharge by. See Discharges, and II., 1283, 1286. ORAL. See Verbal. " OR ORDER." meaning of words, 104. ORDER. when for whole fund operates as assignment, 21. when for part of fund it operates as equitable assignment, 22, 23. New York cases, 23— continued. within scope of business express assent of all to acts of one unnecessa- ry, 356. the fact of partnership creates each member an agent of all within scope of its business, 356. each member of firm engaged in trade, may bind it as party to nego- tiable instruments, 357. joint owner of property can not bind other joint owners by negotiable instrument, 358. nor can partner bind firm otherwise than in scope of business, 358. partner can not bind firm by bill or note, unless partnership be in trade or concern to which the issuing or transfer of such paper is necessary or usual, 357, 358^. what are trading and non-trading partnerships, 357, 358a. of farming partnership has no implied authority to bind it by negotia- ble instrument, i^'^a. nor can one of a firm engaged in mining, 358a. gaslight concern, 358^?. law practice, 358. medical practice, except for necessa- ries, 358^. nor can partner in keeping tavern, except strictly in the business, 3583. if firm is engaged in trading as well as farming, one partner has im- plied authority to bind it, 358^7. rule when firm engaged in business requiring large capital and credit, general authority of one partner exists only by implication, and may be rebutted, 358^. but if authority implied to one partner, it can not be denied against party not having notice that it did not exist, 368. if firm hold proceeds of transaction made by partner in excess of au- thority, it is bound, 359. and this rule applies whether paper be signed in partner's or firm's name, 359. delay of firm to disaffirm contract of partner, may amount to ratifica- tion, 359. if firm repudiate contract exceeding authority as soon as it is heard of, it is not binding, 359. 3. Formal signature of firm' s tiame, 360. style of firm should be used, 360. by " A. B." the signing partner may be added, 360. should clearly appear that signature was intended for firm's, 360. in general, name of one partner will not bind firm, 360. the words; " I, A. B., promise, for A. B. C. D.& Co.," would sufficiently indicate firm as bound, 361. so "I promise," signed in firm's name, 361. if partner draws in fictitious name, and indorses firm's name, latter is bound by indorsement, 361. immaterial variation from firm's name unimportant, 361. partner executing joint and separate note in firm's name would bind il jointly only, 361. c\'if\ TKSTWV References are to Vo^ liNUE-A. paragraphs marked %. PARTNERS AS V ARTIES— contmued. bill drawn on firm may be accepted by one partner, 362. See Accepta7ice, and 362, 488. and his own name in such case shows he acted for firm, 362, 488. conflicting authorities, 362, 488. bill drawn on " E. M. and others, trustees," and written on " accepted E. M.," binds all as acceptors, 362. firm may conduct business in one partner's name, 363 ; see also 304. 360, 399- hw\. prima facie single name binds single partner only, 363. Story's views, 363. if paper signed by single partner's name be used in firm's business, it presumptively binds firm, 363. if bank account kept in single partner's name, his check will bind firm, 364- if firm adopt single partner's name, bill or note signed by him for indi- vidual purposes will bind him only, 364. otherwise if used for benefit of firm, 364. 4. Accommodation, private, and prohibited transactions, 365. no member of firm can bmd it as accommodation drawer, acceptor, maker, or indorser, 365. holder knowing character of paper must prove assent of all the partners, 365- if paper shows its character on its face, holder can not recover without proving assent of all, 365. if word " surety " be added, that gives notice, 365. if bill be carried to bank for discount by drawer or maker, with partner- ship name on it as indorser, it shows that it is accommodation in- dorsement, 365. if one partner gets firm paper discounted, having it put to his credit is not notice that there is fraud on firm, 365. if partnership indorsement is for firm's benefit, it is valid, 365. where A., B. & C, partners, indorsed for accommodation, and A. dying, E.&C. renewed it; held, A.'s estate discharged on old paper for want of notice, and not bound on renewal for want of authority, 365- but if A., B, & C. were makers of note, rule would be different, 365. no member can bind firm for his private debt, 366. party taking firm's paper for partner's debt, must prove assent of firm, 366. English authorities, and views of Parsons and Chitty, 366. what proof necessary of firm's assent, 366. may be implied by circumstances, 367. admissions of partner who used firm's name for his own debt not ad- missible, 367. one partner has no authority to bind firm by blank acceptance, there being no drawer to bill, 367. partner's implied authority to bind firm may be limited by agreement, 368. it is fraud to violate such agreement, 368. but it does not affect bona fide holder without notice, 368. References are to INDEX. 937 paragraphs marked %. PARTNERS AS Y hKll^'^— continued. the burden of proof in respect to partnership paper, 369. rules as to shifting of burden from one side to the other, 369. 5. The effect of dissolution of firm, by retirement or agreement, 369a. dissolution may occur by agreement, 3693. change of membership, 369a. retirement of partner, ^Sga, operation of law, 369a. death or bankruptcy of partner operates dissolution, 369a. notice of dissolution by operation of law necessary, 369^. unnecessary when dormant partner retires, 369a. otherwise if dormant partner be known as member, 369^. notice of dissolution necessary when it occurs by agreement or retire- ment, 369^. , , continuing members bound by bankrupt member if they so hold out. 369^. method of giving notice of dissolution, 369^. strangers entitled only to general and constructive notice, 369^. customers entitled to particular notice, 369^. how effect of notice is done away with, 369^. indorsee with notice may get good title from indorser without, 369^. dissolution operates revocation of authority to make new contracts, buf not authority to arrange, liquidate, settle, and pay those before created, 370- ex-partner can not give note or accept bill in firm's name. 370, 37oa. nor indorse bills and notes given to firm before dissolution, 370, 370^. nor renew bills and notes of firm, 370. rule in New York, 370. ■ y a when dissolution not caused by death, ex-partner has no implied authority to indorse bills or notes of firm, 370^:. otherwise when dissolution is caused by death, 370^. reason of distinction, 370CJ!. note antedated can not bind firm after dissolution, unless holder not affected with notice, 371. , • j rule as to instruments signed in firm name before dissolution and issued afterward, 37 1«, 372, 372^. various decisions, 372, 372^;. one ex-partner may bind firm after dissolution as party to bill or note, if authorized verbally or in writing, 373- authority to give or renew note in firm's name not implied by authonty to settle up or close business, 373. nor will such authority be implied by authority "to settle business of firm, and sign its name for any purpose, 373- nor by authority " to use the name of the firm in liquidation only of past business," 373. nor " to settle all demands in favor of or against firm, 373- cases in England and Pennsylvania, 373- how partnership debt taken out of statute of limitations, 374. doctrine in Massachusetts, 374. 9^)0 TMnVY References are t9 0<-> liNiJ£.A. Paragraphs mar ked% PARTNERS AS V K^TlY.S—contmued. notice of dissolution siiould be given, 369^, 375. otherwise nrm bound by use of its name by one partner, 369a, 375. 6. Discharge of firm' s debt by bill or note of one partner, II., 1299. generally, bill or note of one partner is good discharge of consideration for firm's debt, II., 1299. but such bill or note may be taken as collateral merely, II., 1300. burden of proof is on party alleging to show separate note of partner was taken in extinguishment of firm's debt, II., 1300. effect of delivering up firm's note on taking note of separate partner II., 1300, renewal in firm's name after dissolution, 1300a. mere promise to look to one partner not binding, where no new security taken, II., 1301. effect of third parties entering into the arrangement, II., 1301. effect of partner changing his situation, II., 1301. PAYEE. See AGENTS ; CORPORATIONS ; COUPON Bonds ; Negotiable Instruments. must be indicated, 99. sufficient if paper payable to A., or order, or bearer, or holder, or to order, 99. or to certain persons " or assigns," 99. so if payable " to administrators of A.'s estate," it suffices, 99. so if to " trustees of A.'s will," 99. or to " heirs of A.," 99. or to " A. or his heirs,'' 99. or to " the order of indorser," 99. whether " to estate of A." suffices, 100. of father and son of same name, father presumed to be payee, 100. but son in possession could recover, 100. misdescription or misspelling immaterial, 100. to " secretary for time being of certain society," insufficient, loi. but to " the now secretary," sufficient, loi. so suffices if payable to " treasurer of corporation," loi. or to "treasurer, or his successors in office," loi. note payable to people of Illinois means State of Illinois, loi. if no one named as payee, and no bJank left, it is fatal defect, 102. thus, " good for $100; value received," is waste paper, 102. but "received of A. $100, which I promise to pay on demand," suffi- ciently indicates A., 102. payee's name may be left blank, to be filled up by holder, 145. as to rights of holder to fill up blank, 145, 146. not good negotiable note if payable to A. or B., 103. See Alternative Payees, and 103 et seq. if payable to " bearer A.," same as payable to A. simply, 104. to " order of A." same as to " A., or order," 104. "A., or bearer," same as bearer, 104. to "A. only," not negotiable, 105. but A. would be bound on his indorsement, 105. References are to INDEX. 939 paragraphs marked \. VAY'EE— continued. no precise words necessary to negotiability, io6. . , , maker can not show payee to be infant, married woman, lunatic, bank- rupt, or fictitious, 93, 227, 242. PAYMENT. See Presentment for; Conditional, and Absolute Payment; Discharges; Checks. 1. Nature of payment, 11., 1221. what is meant by payment, II., 1221. it is not a contract, II., 1221. difference between payment and sale, II., 1221. credit given by drawer, or other party liable, to holder at his request is equivalent to payment, II., 1221. does not necessarily mean payment of money, II., 1221. party to instrument who pays can not show he paid as secret agent of another, II., 1222. and where stranger pays overdue note and says nothing as to purchase, it is payment, II., 1222. payment by checks, II., 1623. 2. Who may make, II., 1222. any party to bill or note may pay it, II., 1223. stranger can not pay so as to acquire the rights of a holder, II., 1223. but he may always purchase, II., 1223. of what indorser should be assured before he pays, II., 1224. of what maker of note or acceptor of bill must satisfy himself when it is presented for payment, II., 1225. monev paid with knowledge of facts, but under mistake of law, can not' be recovered back, II., 1226. party who pays should be sure instrument is in possession of whomso- ever demands payment, II., 1227. receipt ought always to be taken on back of bill or note, II., 1228. indorser who pays should take receipt and require delivery of mstru- ment, II., 1229. ■X To whom may be made, II., 1230. payment should be made to legal holder or his authorized agent to re- ceive same, II., 1230. if payable to bearer or indorser in blank, party in possession is pre- sumed to be entitled to payment, II., 1230. payment to special indorsee, II., 1230^. payments to assignee of bankrupt, personal representative, guardian, and husband of female payee, II., 1231. others to whom payment may be made, II., 1231. when/^;;z^ sole holder marries, payment to her does not exonerate ac- ceptor though ignorant of marriage, II., 1232. 4. When may be made, \\.,\^^^. r , u , u. a payment before maturity must be with consent of both debtor and creditor, II., 1233. different if paid holder at maturity, II., 1 233«. • in making payment after maturity, payor must be certain who is then holder, II., 1233a. payment may be demanded any time after business hours on day of maturity, II., 1235. r-\jT\-cv References are to QAO INDbX. paragraphs mar ked\ PAYMENT — continued. payor has whole day to pay in, II., 1235. if not paid in business hours, paper should be dishonored, II., 1235. if made after action brought, holder may proceed for his costs, unless included, II., 1235. rule when paper long dishonored, or torn and pasted, II.; 1235. payment to wrong party, II., 1235. 5. Effect of, and who may reissue bill or note, II., 1236. payment by maker or acceptor discharges drawer and indorsers (who are liable as sureties), and cancels instrument, II., 1236, if drawer pay part, holder may yet sue acceptor for whole amount, II., 1237. in which case he is trustee for drawer for what he paid, II., 1237. on a bill or note reissued by acceptor or maker, drawer and indorser are not liable to even bona fide holder, II., 1238. when last of several indorsers pays and reissues, prior parties remain liable, II., 1238. drawer can not reissue bill so as to bind acceptor, (i) where acceptance was for his accommodation, II., 1239. and (2) where name of any indorser to whom he is liable remains upon it, II., 1240. in all other cases drawer or indorser may reissue bill or note, II., 1241. parties who knowingly negotiate instruments after payment, thereby only charge themselves, II., 1242. meaning and effect of agreement to " retire " a bill, II., 1243. if paper surrendered by mistake, part only being paid, balance may be recovered, II., 1243. otherwise not, II., 1243. 6. Meditim of payment and legal tender cases, 11., 1244. money paid must be that current at place of payment, II., 1244. terms construed as of time and place of contract, II., 1244. if coin alloyed after contract, debtor must make good full value, II., 1244. so if name of coin changed to apply to a lesser value, II., 1244. medium must be that of face of paper, II., 1245. agent can take nothing but money, II., 1245. if paper payable "in currency," not negotiable, II., 1245. meaning of " in currency," II., 1245. what is legal tender. See Tetider, and II., 1246, 1247, 1248, 1249. 7. Appropriation or application of paytnent, II., 1250. question as to how credit should be applied arises when debtor is in- debted to same creditor in various items of account, and pays a cer- tain sum, II., 1250. general principles as to : (i) debtor may appropriate as he pleases, II., 1250. after once appropriating, can not change, II., 1250. if but one debt, no question as to apphcation, II., 1250. after controversy arises, can be no election as to, II., 1250. (2) if debtor makes no application, creditor may, II., 1251. silence of debtor leaves matter to creditor, II., 1251. References are to TTSinPY rxAt paragraphs marreed%. liNiJlLA. 94* VPC{W£.WY—conttmied. can not apply to debts not due, II., 1251. can not apply so as to peculiarly injure debtor, II., 1251. appropriation can not apply to compulsory payments, II., 1251. if once made by creditor, can not be changed, II., 1251. if debtor deny one debt, creditor can not apply payment to it in exclusion of acknowledged debt, II., 1251. if creditor receive money, must apply it as directed, II., 1251. (3) if neither party appropriate, law will, according -to equity and probable intent of parties, II,, 1252. various cases illustrating legal application, II., 1252, 1253. 8. Pay7ne7it supra protest or for honor, II., 1254. generally stranger can not pay debt and require reimbursement, II., 1254. exception as to bills and negotiable notes, II., 1254, after protest stranger may pay bill or note for honor of drawer, in- dorser, acceptor, or maker, II., 1254. or may pay for \xox\ox ge7teraUy, that is, for honor of all, II., 1254. such payment does not discharge paper, II., 1254, but transfers holder's rights to party paying, II., 1254. if for honor of an indorser, payor may sue him and all prior parties, II., 1254. if for honor generally, he may sue all parties, II., 1254. so if for honor of last indorsee, II., 1254. how to declare in such cases, II., 1254. party paying for honor of drawer can not sue acceptor unless drawer could have done so, II., 1255. acceptor can not pay for honor of indorser because himself bound to him, II., 1256. but acceptor may sue drawer if he pays for honor, provided his accept- ance were for drawer's accommodation, II., 1256. party desiring to pay for honor must be ready and offer to do so at time and place of payment, II., 1257. party should not pay for honor, without ascertaining genuineness of signatures, II., 1257. such party can not recover back money paid for honor, unless he dis- covers mistake and gives notice in time to prevent loss, II., 1257. when notice must be given in case of forgery, II., 1257. as to liability of acceptor for honor, II., 1258. the formal mode of making payment supra protest, 1258. PENCIL. signature may be made by, 74. PENNY POST. use of, for transmission of notice, II., 1008, 1009, loio, 1012, 1013. "PER ADVICE." meaning of phrase, 109. PERSONAL REPRESENTATIVE. See Fiduciaries; Presentment Notice. . _ T"MT»Ti" V References are to 94- lINUiiA. Paragraphs marked \ PERSONS UNDER GUARDIANSHIP, can not contract, 259. PLACE OF PAYMENT. See Presentment for Acceptance, and Pre- sentment FOR Payment; also, Memoranda and Altera- tion. need not be, but often is specified in paper, 90. effect of making paper payable at certain place " only and not else- where," 90, 459. 563. 635, 643. place of maker's residence understood, if none named in note, 90. and of drawee's residence, if none named in bill, 90. circumstances may alter this rule, 90. if note payable on face at bank in certain town, but name of bank left blank, payee may insert particular bank in such town, 90, maker bound to holder, though payee exceed his authority, 90. date as evidence of, 639. alteration of, II., 1378, 1383. place of payment of coupon bonds, II., 1497. POLITICAL DISTURBANCE. as excuse for non-presentment, protest, and notice. See Excuses, and II., 1065. POSSESSION. See Presentment for Payment ; Assignment ; Action. when sufficient evidence of ownership, 573. of unindorsed paper not in hands of payee not in usual course of busi- ness, ^Z\a, 812. whether possession of drawer or acceptor is in ordinary course of busi- ness, 78 1 a:, 8x2. eftect of, by personal representative, 812. POST. See NOTICE. remittance by, 287. II., 1474- presentment of check by, II., 1599. notice by, II., 1005, 1008, 1013, 1015, 1020. POST DATE. 5^^ Date. POSTMARK. as evidence, II., 1052. POST NOTES. See BANK NOTES, and II., 1670. POUND STERLING. value of, II., 1441. POWERS OF ATTORNEY. See Attorney, and 274. II., 1708^. PRECEDENT, OR PRE-EXISTING DEBT. See COLLATERAL SECURITY good consideration for bill or note, 184. bill or note transferred as security, 82 5. See Collateral Security, and 824 to 831. PRESENTMENT FOR ACCEPTANCE. I. Nature and necessity for, 449. holder may present bill for acceptance as late as day before maturity 449. References are f» INDEX. 943 paragraphs marked %. PRESENTMENT FOR ACCEPTANCE-r^«/'/««^^. on clay of maturity presentment for acceptance is merged m present- ment for payment, 449. if acceptance refused, bill dishonored, 449- and all parties may be at once sued, 449- suit in Federal court in such case, not affected by State statute, 449- presentment to drawee for. necessary, even though drawer has re- quested him not to accept, 450. sometimes relations of parties excuse failure of 45o. ,. , ,„,,^. acceptance must accord with tenor of bill, else .t should be dishonored. 450. effect of acceptance as assignment, 451. if holder bound to present for acceptance fails, he forfeits not only remedy on bill, but also original debt. 452. 2.For}naliiiesof,JitSA' ,- . ^^ ^r-^ bills payable on demand need not be presented for acceptance. 454- if payable at bank, rule not allowed, 454- is usual when bill payable at future day, 454- if acceptance refused, must be protest and notice. 454- rule as to bills payable at or after sight, or after other event. 454- unreasonable delay discharges drawer and indorsers, 454- acceptance may be waived in body of bill, 454- in such case proceedings merged in presentment for payment, 454- presentment must be made by holder or authorized agent. 455- party in possession presumably holder, 455. protest will inure to benefit of rightful holder, 455- if drawee not found, presentment should be to person indicated m case of need, 455. if there are two drawees not partners, must be to both, 453- but query? 455- , to one partner suffices, even if firm is bankrupt, 455- if drawee not found, holder should assure himself of agency of partj actin"" for him, 456. , difference between person to whom presentment for acceptance and for payment should be made, 456. may be to clerk at drawee's counting-room, 457- if drawee dead, whether should be made to his representative. 458. at what place should be made, 459. Sero-eant Onslow's act in England, 459. stat^utes as to place of presentment in United States, 460. should be at place of drawee's domicile, 460. if drawee has removed, should be at new place of residence, if ascer- tainable, 460. may be at dwelling or place of business, 461. bill should be actually exhibited, 462. if drawee can see bill, and give intelligent response, it suffices, 462. drawee may require production of bill, 463- but may waive it, and accept, 463- if holder leave bill with acceptor, and by nec^igence enable third party to get possession, can not sue acceptor in trover, 4&3- 944 INDEX. vs '^^-^^''T/"'"'wR -' "^T paragraphs marked $4 PRESENTMENT FOR ACCEPTANCE- r(9«/z««^^. either of a set of bills may be presented, 463. indorsement of one of set carries all, 463. 3. Time of, 464, should be during business hours, 464«. ^ what are business hours, 464. if bill payable at day certain, need not be presented until maturity, to charge drawer and indorsers, 465. exceptions to this rule : (i) when there is express direction to payee or holder, 465. (2) when bill put in hands of agent for negotiation, 465. if bill not payable on day certain, it must be presented in reasonable time, 465, when question of law and when of fact, 466. due diligence must be exercised, 467. distinction between bills payable at certain time after date, and certain time after sight, 467. circumstances affecting question, 468. (i) passing of bill into circulation, 468. (2) falling or rising of exchange, 468. (3) facility of communication between places, 468. question not affected by solvency of drawer, 475. agent's duty in presenting for acceptance, 476. must act speedily, without unreasonable delay, 476. has not same latitude as principal, 476, 477. effect of war, sickness, accident, and other reasonable causes of delay, 478. PRESENTMENT FOR PAYMENT. See Grace; Checks; Conflict OF Laws ; Guaranties. I. Nature of, bywhom and to whom made, 571. nature of acceptor's and maker's engagement, 571. drawer's and indorser's, 571. presentment may be made by any bona fide holder or person lawfully in possession, 572. mere possession sufficient evidence of right to present, 572, 573. except where unindorsed by payee or indorsee, or indorsed specially, 574- when payment to agent valid, 573. may be made by agent, 572, but mere possession of instrument not indorsed by payee, or special indorsee, is not evidence of agency, 574. Mr. Chitty's views, 575. what evidence of ownership suffices without indorsement, 573. rule where indorser presents bill or note bearing subsequent special in- dorsement, and no prior indorsement in blank, 576. rule in case of note not originally negotiable, 577. if holder die, representative must make, 578. if no representative at time, must be made in reasonable time, 578. in case of bankrupt, assignee must make, 578. References are to INDEX. 945 paragraphs marked §. • T^ ^ PRESENTMENT FOR V kY^X^'^T— continued. \{feme sole marry, husband must make, 578. if copartner die, survivor must make, 578. whether or not demand of payment of foreign bill by notary's clerk is sufficient ground of protest, 579. English authorities, and Mr. Chitty's views, 580. authorities in United States, 581, 582. generally held that demand in such cases must be at common law, by notary in person, 581. distinction, in Kentucky, between deputy and clerk, 583. rule applies to protest of inland bills and promissory' notes, 584. statutory authority or general custom for clerk to present, may be proved, 586. clerk can not make the protest, 586. custom as to clerk's authority must be shown to relate to foreign bills, 587. must be made to drawee, acceptor, maker, or agent, 588. personal demand not necessary, 589. sufficient if at residence, place of business, or to wife or agent of payor, 589. may be to clerk at counting-room, 588. what sufficient statement as to presentment, 590. distinction taken between presentment for acceptance and for payment, 589. whether holder must see drawee personally in presentmg for accept- ance, 589. opinion expressed in negative, 589. ■" to what persons, at place of payment, it may be made, 588. presentment to cashier suffices if paper payable at bank, 511. general principles as to time of, and what constitutes " reasonable hours," 590. rule where acceptor or maker is dead, 591. rule in partnership cases, 592. sufficient if to any partner, even after dissolution, 592. if to agent of one partner in absence of other, 592. if to sur\'ivor, where one partner dies, 593. rule where there are several promisors not partners, 594. semble, sufficient if to one on day of maturity, and as speedily as prac- ticable thereafter to others, 594. sufficient if to one oi several 2& well as joint promisors, 594. if joint maker die, should be to survivor, 596. 2. When must be made, 597. need not be made on day of maturity to bind acceptor or maker, 597. rule where paper payable at particular place, 597. must be on day of maturity to charge drawer or indorser, 598. if paper payable in instalments, should be as each instalment falls due, 599. unless whole amount falls due on default as to one instalment, 599. if no time named, " on demand " is understood, 599. " on demand at sight " is same as " at sight," 599. Vol. II.— 60 ^ ^ p^ References are to QAO liNiJtLA. paragraphs marked %, PRESENTMENT FOR V KYWS.'^T— continued. "on call," or " when called for," is same as " on demand," 599. if paper payable at bank, should be made during banking hours, 600. insufficient after such hours unless officer there, or some one who gives response, 600. how rule affected by usage, 600. if paper payable " at bank," usual banking hours of the place will con- trol, 601. what are "business hours" is question for jury, 601. how far courts take judicial notice of such hours, 601. "business hours," when paper not payable at bank, range through the day to hours of rest, 602. retirement to rest of payor does not affect question, 602. if at place of business must be when such places are customarily open, 603. sufficient at any hour if response be given, 603. if no time of payment be specified, " reasonable time " is understood, 604. what is " reasonable time " depends on circumstances, 604. rule as to bills payable on demand, 605. notes payable on demand, 606. given for a loan, 607. payable on demand with interest, 608. what delay discharges indorser, 609. the true principles to be deduced, 610. rule when instrument is indorsed after maturity, 611. how question of reasonable time determined, 612. 3. Place of prese}itme?it for payment, 635. should be made at city, town, or other place where maker or acceptor has domicile or place of business, 635. if place designated in bill or note, should be there, 635. averment of presentment there suffices, 635. if maker or acceptor has residence and place of business in same place, may be at either, 635. so may be at either place, if residence in one place and business place in another, 635. if paper payable in particular town, presentment at all banks there suf- fices, 635. at private dwelling suffices, 635, 636. drawee must pay immediately, or bill be dishonored, 635. business house most suitable place for, 636, if business house closed, sufficient if at dwelling, 636. so if business place can not be found, 636. if bill payable at bank, and bank is holder at maturity, that amounts to presentment, 636. if business place closed, party holding paper should go to residence, 637. so if no place of business, 637. " usual place of business " is meant by " place of business," 637. place not important if there is actual presentment and response, 638. whether' presentment on street sufficient, 638. References are to INDEX. ^^ ' paragraphs marked §. PRFSENTMENT FOR Y hX^Y.-^-^ -continued. 1 -.. rsi rl^tp ^iritna facie place of payment, 639. pane? not necessarily payable at place of date 640. due diligence in seeking maker or acceptor. 640. if paper payable in particular city, but at no specified place. sufRc.ent to have it there at maturity. 640. whetheTacceptance to pay at particular place is absolute or quahfied. 641. decisions and statutes in England. 641. decisions and statutes in United States, 643. views of U. S. Supreme Court, 643. ,• u „^^ when paper payaile a. particular place, drawer and mdorser d,scharged hv failure to present there, 644. _ , u u-^ ave^ent and proof of demand when paper payable •• on demand or ■■ on demand after a certain time, 645- T,:;X^:':Tlt^l'of two places, presentment at either suffices, 648. so if payable at either of two banks, 649- . "le when drawee or acceptor resides in one place, and bill :s payable m another. 651. . ,, place of payment material part of description of paper. 6,3. 4. Mode of, 654. paper must be actually exhibited, 654. or at least it must be clearly indicated to be at hand. 654. "refusal to pay be on other grounds, its presence or absence imma- writttndtmand delivered to servant at promisor's house insufficient, 654- by letter through post-office insufficient, 654^. must be according to tenor of instrument, 654. whether physical presentment implies demand of payment, 655. if paper in bank named as place of payment, that suffices, 656. but mere physical presence in bank insufficient, if bank ignorant of it. 656. if naoer be property of bank it suffices, 657. com-entiona'; dLaL by notice that bill or note is held tn bank for pay ment, 658. _ ,, nile as to maker, acceptor, drawer, and indorser, 639. t)t)0. Tot far cuTtom ;ontrols in the matter of presentment for payment, 6 59 what law applies to, 660, 662, PRESIDENT OF CORPORATION. See Corporations ; Checks. has implied authority to take charge of litigation, 393- employ counsel, 393. of bank has implied authority to receipt for deposits, 393 whether bank president has implied authority to draw on tunds, 393- .Q T^rnTTY References are to 94" IJNUtX. paragraphs mar ked% PRESIDENT OF CORPORATION— f^;z/'z«?^^^. general and special power as to negotiable paper, 394. ~ may certify checks, XL, 1609. has no authority to release debts, 395. effect of signature as "A. B., President," 403, 405, 41Q, PRESUMPTION. See Bona Fide Holder; Burden of Proof; Evi- dence; Judicial Notice. in favor of holder of negotiable instruments, 810. of payment; II., 1205, 1271. as to foreign laws, 891. as to common law, 891a. in favor of protest, II., 964. PRINCIPAL. See Agent. PRINCIPAL AND SURETY ; AND WHAT DISCHARGES SURETY. general remarks as to law of principal and surety, II., 1302. 1. Who are principals attd who sureties, II., 1303. acceptor and maker are principals, II., 1303. drawer and indorsers are sureties for maker and acceptor to holder, II., 1303- but not as between themselves cosureties liable for contribution, II., 1303- if drawer and indorser for accommodation agree each to pay half, they are bound by the agreement, II., 1303. in New York held that indorser, though he be surety, is answerable on independent contract, II., 1304. though liability of drawer and indorser be fixed by demand and notice, their relation as sureties is not altered, II., 1305. final judgment against them destroys suretyship, II., 1305. what discharges maker and acceptor, discharges drawer and indorsers, IL, 1306. whatever discharges prior indorser discharges all subsequent indorsers, II., 1307. when surety may be bound, though principal not, II., 1306. 2. Acts of creditor which discharge surety, II., 1308. misrepresentation, concealment, duress, diversion, and alteration, II., 1309. payment by maker or acceptor, II., 1310. release and satisfaction, II., 1310. extinguishment distinguished from satisfaction, II., 1310. covenant not to sue prior party discharges surety, II., 1310. so parting by creditor with security for debt, II., 131 1. as to withdrawal of execution, II., 1311. and extension of time or forbearance to sue, II., 1312. effect ©(taking renewal note, H., 131 2. if legal impossibility of injury, principle does not apply, II., 1313. principal may have defence not available to surety, II., I3i4- elements which constitute indulgence, II., 1315- (i) must be consideration for promise to indulge, II., 1316. References are to INDEX. 949 paragraphs marked %. PRINCIPAL AND aragraplis marked %. PRINCIPAL AND '=>\5KY.TY—co7itmued. English cases at law and in equity, II., 1334. general rule in United States that parties may be treated according to ostensible relations, II., 1335. query, whether joint promisor can be shown by parol evidence to be only surety, and holder to have known the fact, II., 1336. English decisions, II., 1337. in U. S. weight of authority is in favor of allowing evidence that joint party is surety, and that holder knew it when he took the paper, II., 1338. 5. General summary of sureties' remedies, II., 1339. as to contribution between cosureties, II., 1340. accommodation indorser as surety, II., 1342. when cosurety may sue for contribution, II., 1341. surety who pays bill or note may recover back from principal with in- terest, II., 1342. whether payee who is accommodation indorser can recover whole amount against maker, II., 1342. limit of recovery is amount necessary to indemnify him, II., 1342. surety making payment is entitled to benefit of all the principal's se- curities, II., 1343. PROCURATION. authority under written instruments by, 280. signature " by procuration " puts party dealing with instrument on in- quiry, 280. and such party is chargeable with notice of extent of agent's au- thority, 280. PROMISE TO ACCEPT BILL OF EXCHANGE. See ACCEPTANCE; Statute of Frauds. written promise to accept existing bill, made to drawer and commu- nicated to third party, operates as acceptance, 550. same as to non-existing bill, 551. effect of such promise respecting existing bill, not communicated to third party who takes bill, 552. effect of such promise as to non-existing bill, not communicated, 553, 554. verbal promise to accept existing and non-existijig bills, communi- cated and not communicated, 555, 556, 557, 558. verbal generally as efficient as written promise, 559. review of adjudicated cases and remarks on conflict of authority, 559. difference between promise to accept and actual acceptance, 560. promise must be made in reasonable time before bill drawn, 560. must sufficiently describe and identify the bill or bills referred to, 560. what particularity of description necessary, 560. particular cases, 561. semble, applies only to cases of bills payable on demand, 562. whether mere promise to accept applies to bills not payable at drawee's or payee's place of business, 562. when offer to accept may be withdrawn, 562. if acceptance written on bill, every holder may avail of it, 563. References are to TX^nrv r> r T paragraphs marked §. 1 iMJ t, A. y ^ 1 PROMISE TO ACCEPT BILL OF EXCHANGE— ftf«//««^^. so if acceptance be on separate paper, 563. and same rule applies to parol acceptance, 563. damages recoverable for breach of promise to accept, 564, 565. measure of damages for breach of agreement to accept is incon- venience and loss, 564. if bill lost by agent's negligence, damages /r/wa facie amount of bill, 564. extent of damages, and who may recover them, 565. promise to pay bill at maturity amounts to acceptance, 565. PROMISE TO MARRY. is legal consideration, 187a. delay in fulfilling promise and service rendered during engagement good consideration for note, 187a. in Scotland bill given a woman as security for a pr6mise to marry valid, 187a, PROMISE TO PAY. 5^^ Excuses. as waiver of non-presentment and notice, II., 1147 to 1164. as waiver oi proof oi, II., 11 56 to 1164. PROMISSORY NOTES. See Negotiable Instruments. 1. Nature and history of, \a, 3, 28. in vogue before bills, but not negotiable so early, 2. obscure in origin, 5. history of, 5. whether negotiable at common law, 5. declared negotiable by statute of Anne in 1705, 5. definition and essential requisites of, 28. parties to, 28. term " credit drawer," 28. similarity to bills, 29. 2. Must be open, that is unsealed, to be negotiable, 31. seal must be recognized in body of note to render it sealed instru- ment, 32. conflicting decisions, 32, statutes changing this rule, 33. scroll generally same as seal, 34. instrument may be sealed as to one party, and unsealed as to other, 34. one action of debt in such case may be brought against both parties, 34, 3. Promise to pay must be certain, 35. whether due-bill is negotiable, 36, 37, 38, 39, 40. 4. The fact of payment must be certain, 41. conditional terms which destroy negotiability of, 41, 42, 43, 44. effect of promise to pay " as soon as realized," 45, 45a. " in course of season now coming," 45, " on return of this certificate," 45. " on return of my guaranty," 45. " as soon as crop can be sold," 45. _-« T"\rnFV References are to VD-^ liMur-A, paragraphs mar ked%, PROMISSORY '^OTY.^i— continued. in Massachusetts essential to negotiability that it be payable at a definite time at the elec- tion of holder, 45a. this view approved in Missouri, 45a. " when A. shall come of age," 46. " when A. shall die," 46. " one day after date, or at my death," 46. " when government ship is paid off," 46. effect of words to pay at certain time after happening of two events, one of which may not happen, 46. " certain sum as required within thirty days after demanded, or notification in news- paper," 47. " by or on a certain day," 46. " in such manner and proportions, and at such time and place as A. shall require," 47. if a note be in part for a sum certain, and part upon contingency, not negotiable, 47. if made payable by instalments conditional that if default in first pa}ment whole im- mediately payable, 48. negotiable within the statute of Anne, 48. " six months after peace is declared between the United States and the Confederate States," 49. if payable out of particular fund not negotiable, 50. certificates of receiver of court not negotiable, though framed in ne- gotiable words, zpa. indication of mode of reimbursement does not vitiate, 51. nor does memorandum of consideration, or security, 51. effect of words " ne varietur," 52. 5. Amount to be paid must be certain, 53. when amount is not certain, 53. if amount ascertainable from face of paper, it is certain. 53. words " current exchange," whether they affect negotiability, 54. when these words may be rejected as surplusage, 54. whether an instrument payable " with exchange " on another place can be regarded a bill or note, 54a. 6. Medium of payment must be money, 55, 56. not negotiable if payable : " in cash or specific articles," 55. " in merchantable whisky at trade price," 55. " in ginned cotton at eight cents per pound," 55. " in work," 55. " in good East India bonds," 55. " in foreign bills," 55. " in notes of the United States bank or either of the Virginia banks," 55. " in current bank bills or notes," 55. " in office notes of a bank," 56. effect of payability " in currency," 56. References are to t vn T~ V n r •> paragraplis marked %. l^NJU.A. y^jj PROMISSORY ^OTY.?,— colli imied. "good current money" or " current money " do not affect negotiability, 56. effect of the words " in currency " not affected by legal tender act, 57. decision as to words " in greenback currency," 57. words " in Canada money " held to destroy negotiability, 58. but see contra, 58. 7. Contract ?nust be otily for payment of tnoney, 59. if additional contract added, instrument not negotiable, 59. it destroys negotiability to add promise: " to deliver up horses and a wharf," 60. " to take up a note," 60. " to pay all fines according to rule," 60. " that note shall be void if dispute arises," 60. " that note is only security for certain balance," 60. effect of authority to confess judgment contained in note, 61. cases denying negotiability in such case, 61. cases upholding negotiability in such case, 61. effect of promise to pay collection fees, 62. why instruments illustrated in preceding section should be upheld as negotiable, 62a. 8. Note vtitst be delivered. See Delivery, and 63. protest of foreign notes as evidence, II., 928. note imports contemporaneous debt, 71. settlement, 71. PROTEST FOR BETTER SECURITY. peculiar kind of protest, when it occurs, 530. PROTEST OF BILLS AND NOTES. I. Nature and necessity of protest, II., 926. in England and the United States, protest is essential only in case of foreign bills to charge drawer and indorser, II., 926. by statute, in some States, inland bills and promissory notes may be protested, II., 926. whether checks subjects of, II., 1600. protest is indispensable as evidence of dishonor in case of foreign bills of exchange, II., 926. statutes permitting protest of notes not compulsory, II., 927. bills must be negotiable by custom of merchants to require protest, II., 927. not so negotiable when payable " in currency" or other legal money, II., 927. notice not necessary to charge maker of a foreign promissory note, II., 928. when indorsed it partakes of nature of bill of exchange, II., 928. query, whether protest is evidence against indorser of foreign note, II., 928. what is meaning of " protest," II., 929. in what cases necessary, II., 930. what is refusal to honor a bill, II., 931. „ T-NTTM?v Referencei (ire to 9^4 IJNUtA. paragraphs mar ked%. PROTEST OF BILLS AND '^OTYJ^— continued. absence from home of drawee does not amount to such refusal, IL, 931 no difference as to protest whether bill is payable at a certain time after date or sight, IL, 932. bill protested for non-acceptance need not be presented for payment^ IL, 932. query, whether notarial fees are not chargeable against indorser when protest not indispensable, IL, 933. 2. By whom and where protest mitst be made, 1 1., 934. as general rule, protest must be made by a notary public, IL, 934. notary must follow instructions, 1 1., 934. •when it may be by a private person, 1 1., 934«. place of dishonor is place for protest, IL, 935. English statute and decisions, IL, 935. law of protest is law of place of presentment, IL, 936. 3. Forjnalities of protest, IL, 937. presentment and demand must be by notary in person, 581, 583. IL, 938. effect of custom for clerk or deputy to act, 581 to 587. dishonor must be noted on very day of non-acceptance or non-pay- ment, IL, 939. what is meant by " noting," II. , 939. when protest may be extended, IL, 940. what is meant by extending protest, II. , 941. as to extending when there is payment supra protest, IL, 941. extended protest only available in evidence, IL, 942. simple notice without copy or memorial of instrument is sufficient, IL, 943- copy of bill usually accompanies. IL, 943. notary's official seal \'=, prima facie proof of its authority, IL, 945. seal not needful, but protest without seal does not prove itself, IL, 946. impression on paper sufficient seal, IL, 947. if State law require seal, protest without, not evidence elsewhere, IL. 948. protest should be signed by notary, 949. 4. Contents of protest ; what the certificate should set forth, IL, 950. should state time of presentment, II. , 951. if hour of the day not stated, proper hour will be presumed, IL, 951. if place of payment be specified, it ought to be stated in protest- II., 952. exhibition of bill or note should be set out, IL, 953. whether mere "demand" is enough, II. , 953. statement of " presentment " merely not sufficient, IL, 953. refusal to accept or pay must be stated, IL, 954. must inform party of dishonor, IL, 954. must state name of person on whom demand is made, IL, 955. need not name officer of bank at which paper was presented, IL, 955. party for whom protest is made, IL, 956. need not state reasons of refusal to honor, IL, 957. verbal mistakes do not vitiate certificate of protest, IL, 958. n./erence^areto INDEX. 955 PROTEST OF BILLS AND NOTES— <: