44. Guaranty of Bills and Notes.

The following decisions have been recently rendered. In the case of Baker vs. Scott, (5 Rich. 305, S. C.) A. bought goods of the plaintiff, and being required to give security, made his promissory note payable to the order of the plaintiff; the defendant endorsed it in blank, and A. then delivered it to the plaintiff, who afterwards endorsed it also, putting his name above the defendant's. The court held that parol evidence was admissible to explain the circumstances under which the note was executed by A. and the defendant, and endorsed by the plaintiff; that the defendant was liable on the note as an original maker or promissor, and that the plaintiff, by afterwards endorsing the note, did not change its character or absolve the defendant.

So, too, in Missouri, it has been recently held, that one who puts his name on the back of a note to which he is not a party, whether it be negotiated or not, is liable as an original promissor or maker. (Lewis vs. Harvey, 3 Benn. 740; Perry vs. Barret, Id. 140.)

If a party puts his name upon the back of a note before its delivery to the payee, he is an original party; and the consideration for the note will be his consideration for his undertaking. (Carroll vs. Weld, 13 Ill. 682.)

In Michigan, it was held, in the case of Wetherwax vs. Paine, (2 Mich., Gibbs, 555,) that where one endorses a note at its maturity, and before delivering it to the payee, to enable the maker to buy with it certain property of the payee, he is a joint original promissor with the maker.

In Massachusetts, the law of that State was affirmed in Bryant vs. Eastman, (7 Cush. 111.) A debtor, in that case, sent a promissory note to his creditor in payment of his debt, by the hand of a third person, who, before delivering it, at the request of the creditor and for the purpose of giving credit to the note, put his own name on the back of it. It was held, that such third person was liable as an original promissor or maker. But, in 8 Cush. 85, it was said, that one who endorses a note several weeks after it is given, is not liable as an original promissor.

In New York, in Griswold vs. Slocum, (14 Barb. 644,) a note not negotiable was given by the maker to the plaintiff to secure a precedent debt, and the defendant, previous to its delivery, endorsed the same as security, and upon these facts, it was held that the defendant was not strictly an endorser, inasmuch as a legal endorsement can only be made upon a negotiable note, but that he was liable to the payee as maker or guarantor. "I think the law well settled," said the court, by Parker, J., "that under such circumstances the defendant may be held liable as maker or guarantor; unless he is thus liable he escapes all liability on his contract. His name is placed on the back of the note, but he is not strictly an endorser, because a legal endorser can only be made on a negotiable note. The distinction, in this respect, between paper negotiable and not negotiable, has been plainly recognised, and is now well established. All the conflict of authority has been in regard to negotiable paper. There has been none in regard to paper not negotiable." (See p. 98 of Manual.)

45. Lost Bills or Notes.

"In America," (says Story, Bills, § 449,) "there has been some diversity of judgment whether a suit is maintainable at law, upon a lost bill, against the acceptor or not; which doctrine will ultimately prevail here, it is not for me to conjecture. But it may be said with great confidence, that it will be difficult to overturn, upon satisfactory grounds, the reasoning of Lord Tenderden, in Hansard vs. Robinson, (7 Barn. & Cress. 90,) in favor of the negative. But when we come to the case of the endorser or drawer, who is called upon to pay the bill, in default of payment by the acceptor, it will be difficult to find any solid reason upon which the holder can be entitled to recover against either of them, without the bill being produced, upon the mere parol proof of the loss of it; since the endorser and drawer may or must thereby be put to great embarrassment in making out their own title against the acceptor, or against other parties liable to them, without the production of the bill. What right can the holder have to shift upon them the burden of proving the loss of the bill? Or what adequate means can they have of preserving and commanding all the proof for future use, in case of future litigation?" (See p. 103 of Manual.)

46. Forged Bills and Notes. Liability of the Vendor of a Bill Forged, or Note to Refund to the Vendee money paid by the latter therefor.

In a recent case, (Rieman vs. Fisher,) decided in Maryland, the subject was thoroughly discussed, and the liability of the vendor maintained. Here A. brought an action against B. to recover a sum of money paid by the former to the latter upon the sale of a note, of which the signatures of the maker and one of the endorsers turned out to be forged. "The question is," said the court, "as to the liability of a public note or bill broker for the genuineness of a note or bill sold by him-he at the time being ignorant of the fact; in other words, both the plaintiff and the defendant in this case are shown to have been innocent parties, and ignorant of the forgeries on the note in question at the time the sale of it was made. Who shall, in such a case as this, bear the loss?"

English and American authorities have been cited, which, I think, apart from a sound rule of public policy, determine the liability of the proper party here; and without referring particularly to all the authorities, I will name the last leading case in England, of Gurney vs. Worinsby, decided in November, 1854, by the Court of Queen's Bench, in which Lord Campbell decides that the vendor of a bill of exchange, though no party to the bill, is responsible for its genuineness; and if it turns out that the name of one of the parties to it is forged, he is liable to the vendees.

The defendants in that case were bill-brokers, who received the bill to be discounted and took it to the plaintiffs, who were money-lenders, with whom the defendants, as bill-brokers, had previously had similar dealings; the defendants did not disclose their principal, and were regarded as principals, and it was held by the court, all the judges con

curring, that they were liable, and the plaintiffs should recover back the amount paid by them for the forged bill. "Here that which purported," said Lord Campbell, (28 Eng. Law and Equity Rep. 259,) "to be the acceptance of one of the parties to the bill, and upon which the plaintiffs gave credit and relied, was a forgery, and of no value whatever; there was a failure of consideration, therefore, entitling the plaintiffs to recover."

The case at bar is like the case just cited, and the same rule should apply, in my opinion, to its determination.

No decision in England, before or since, is in conflict with that decision, and in America (except the case of Baxter vs. Duren, 29 Maine Rep. 440,) no authority can be found to impair or conflict with the judgment of Lord Campbell. In the case of Canal Bank vs. Bank of Albany, (1 Hill Rep. N. Y., p. 290,) Judge Cowen says: "no doubt the parties are equally innocent in a moral point of view; it was the duty, or more properly, a measure of prudence in each to have inquired into the genuineness of the note; the defendants have obtained the plaintiffs' money without consideration, and the plaintiffs have a right to recover." This was a case of forged bank notes, passed by the defendants to the plaintiffs. Other decisions in Massachusetts and New York sustain the same view.

It is true, the case of Baxter vs. Duren is invoked to establish a different rule from that laid down by Lord Campbell and confirmed by many American authorities. With due respect for the court, it will be found, on examining the authorities upon which it rests its decision, that they do not sustain the doctrine of the learned judge, viz.: "That where no debt is due or created at the time, and the paper is sold as other goods and effects are, the purchaser cannot recover from the seller the purchase money. There is in such case no implied warranty of the genuineness of the paper; the law respecting the sale of goods is applicable; the only implied warranty is, that the seller owns, or is lawfully entitled to dispose of the paper or goods." This decision, I submit, cannot be sustained by authority, or on principles of public policy.

"My conclusion is, that if the plaintiff and the defendant, as it is conceded they did, acted in good faith and in ignorance of the forgery, then the loss must fall on the vendor; he is nearest the inception of the transaction, and if acting as principal, must be clearly liable, if he disposes or sells an invalid bill or forged note; or, if acting as agent, he must be presumed to know the party who employed him, and the circumstances of the case; at all events, as principal or agent, he comes under an implied guarantee to the vendee of the genuineness of the paper sold, unless he discloses at the time his principal, if he acts as an agent." (See p. 184 of Manual.)

47. Days of Grace on Checks.

The case of Bowen vs. Newell, cited in the text, is reported in 4 Selden, p. 190, and again in 3 Kernan, p. 190, and settles the law in the State of New York. (See p. 113 of Manual.)

CHAPTER THIRD.

OF THE TRANSFER OF BILLS AND NOTES.

I. WHO MAY TRANSFER.-1. Transfers by Infants. 2. Transfers by Married Women. 3. Transfers by Executors, Assignees, Trustees, Partners, &c.

II. TO WHOM THE Transfer may be MADE.—Transfers to prior Endorsers. III. MODES OF TRANSFER.-1. Transfers of Non-Negotiable Bills or Notes. 2. Transfers of Negotiable Bills or Notes. 3. Transfer of bills, &c., payable to a fictitious person. 4. Assignment of Negotiable Bills. 5. Effect of Omission to Endorse. 6. Form of Endorsement. 7. Form of Endorsement by Agent. 8. Kinds of Endorsement. 9. Blank Endorsement. 10. Endorsements in full and partly in full. 11. Restrictive Endorsements. 12. Qualified Endorsements. 13. Conditional Endorsements.

IV. TIME OF TRANSFER, -1. Effect of Transfer before maturity. 2. Endorsements upon Blank Paper.

V. OBLIGATIONS OF ENDORSERS.-1. Obligations upon Transfer by Endorsement. 2. Obligations upon Transfer by Delivery. 3. Revocation of Endorsement.

OF THE TRANSFER OF BILLS AND NOTES.

1. Who May Transfer.

A transfer by endorsement of a bill or note will convey no title, except against the person making it, unless it be made by him who has a right to make the transfer. A transfer by delivery, on the other hand, will convey a title, if the person to whom the note is transferred, take the bill or note in good faith for a valuable consideration and before maturity. In case, therefore, of a loss of a bill or note by theft or accident, the thief or finder may confer a title by transferring it, if it be assignable by mere delivery; if it be assignable by endorsement he cannot. (Bayley, Bills, chap. 5, § 2.)

2. Transfers by Infants, &c.

An endorsement by an infant payee or endorsee of a bill or note will not pass any interest therein as against himself; but it seems well settled that the endorsee by a transfer and endorsement by an infant, will acquire a good and valid title to the bill or note against every other party thereto, except the infant, since it is not a void but a voidable title only. The infant may indeed avoid it, and intercept the payment to the endorsee, or, by giving notice to the antecedent parties of his avoidance, furnish to them a valid defence against the claim of the endorsee. But, until he does so avoid it, the endorsement is to be deemed, in respect to such antecedent parties, as a good and valid transfer. (Story, Prom. Notes, § 80.)

3. Transfers by Married Women.

In case of the marriage of a female, who is payee or endorsee of a bill, the property thereof vests in her husband, and he becomes solely entitled

to negotiate it, as holder, and to endorse it in his own name. If a bill cr note be made payable to a married woman, it is in the contemplation of the law, payable to the husband, and an effectual endorsement should in general be in his name. But if the husband permit his wife to act as his agent, or to carry on trade as a single woman, his authority to an endorsement by her may be presumed; and if a bill or note be made payable to a married woman, and she endorse it for value in her own name, and the acceptor or maker afterwards promise to pay it, in an action against him by the endorsee, it will be presumed that she had authority from her husband to endorse in that form, and the endorsement will be considered as vesting a legal title to the note in the plaintiff.

4. Transfers by Executors, Assignees, Trustees, Partners, &c.

In case of the death of the holder, the right of transfer is vested in his executor or administrator. And in case of the bankruptcy of the payee or endorsee, all his rights of transfer become vested in his assignees, who may, by law, transfer the same in their own names.

In case of a bill or note payable or endorsed to a trustee for the use of a third person, (such as a bill payable or endorsed to A. for the use of B.,) the trustee alone is competent to convey the legal title to the bill or note by a transfer or endorsement. In the case of a partnership, a bill or note payable or endorsed to the firm may be transferred by any one of the partners, in the name of the firm, at any time during the continuance of the partnership. But, where the partnership is dissolved during the lifetime of the partners, neither partner can afterwards endorse a bill or note, payable to the firm, in the name of the firm. But where the dissolution is by the death of one partner, there the survivor may endorse a bill or note, payable to the firm in his own name. If a bill or note be made payable or endorsed to several persons not partners, (as to A., B. and C.,) there the transfer can only be by a joint endorsement of all of them. (Story, Bills, § 197.)

II. TO WHOM THE Transfer may bE MADE

The transfer of a bill or note may be made to any person of full age, who is not otherwise incompetent. It may also be transferred to an infant, and thereby the interest will vest in him, or to a married woman, and there the interest will vest in her husband, who thereby becomes the legal owner thereof, and may treat it as payable to himself. If the transfer be to a person who is an idiot or a lunatic, there does not seem to be any legal incapacity in holding it to be valid in his favor, if it be clearly and equivocally for his benefit. If the transfer be to an executor or administrator, or to any person as a trustee for another, it will operate as a transfer to them personally; although the trust may attach upon the proceeds in their hands. If the transfer be to an agent, by an endorsement of his principal in blank, he may treat the bill as between himself and all the other parties, except his principal, as his own, and fill it up in his own name, or he may hold it for his principal, and act in his name. If the endorsement be filled up to the agent by the principal,