when there is no such person, and the maker knows it, must have been intended to be payable to bearer, than to hold that somebody must assume the name of such fictitious person and make a false indorsement in order to give title to the note." There is much common sense in that. But the trouble is that title to a note payable to order is derived through the indorsement on the back of it. What "must have been intended" by a maker who names a fictitious payee it is extremely hard to say. Moreover, both commercial practice and legal theory tend more and more to disregard everything except that which actually appears on the instrument. When A. makes his note payable to "John White or order" all our notions about negotiable paper require that John White be written on the back of this note, even though no such person as John White exists. It seems necessary for form's sake. To dispense with the necessity for it gives. a decided jolt to our ideas. Aside from this, however, it is difficult to see how any harm can result from the change. In the first place (and though this does not touch the theory of the criticism, it does touch its practical worth) notes payable to fictitious payees and unindorsed, will be about as plentiful as counterfeit dollars labelled "counterfeit." Either the maker or the person to whom he delivers the instrument will indorse it in the name of the fictitious payee. Why? Because otherwise no one would discount it. It would be patently irregular on its face. An indorsement is necessary to give such a note any commercial value.

(c) When the name of the payee does not purport to be the name of any person.

§ 28

GORDON v. LANSING STATE SAVINGS BANK.

[Reported herein at p. 107.]

(d) When the only or last indorsement is an indorsement in blank. $ 28

CURTIS v. SPRAGUE.

51 CALIFORNIA, 239. 1876.

THE defendant, Thomas Sprague, executed, and delivered his promissory note to the plaintiff, Dennis. Dennis indorsed the note in blank, and delivered it to F. Maguire. Subsequently, Maguire assigned the note to Dennis by indorsement, without recourse, and redelivered the same to him. Afterwards, Dennis delivered the note to the plaintiff Curtis, without receiving any value, but with an agreement that Curtis should bring suit and divide with him what he recovered. The plaintiff recovered judgment and the defendants appealed.

2. There was no error in the refusal of the court below to nonsuit the plaintiff on the motion of the defendants. When the note was delivered to Curtis, it had on the back the blank indorsement of Dennis, the payee; and "the first effect of an indorsement in blank, is to make the paper payable, not to the transferee as indorsee, but as bearer." (2 Parsons on Notes and Bills, 19.)

Curtis. therefore, acquired the legal title to the note, with a corresponding right of action, when it was delivered to him by the payee, indorsed in blank. We attribute no importance to the fact that the note had before been delivered by Dennis with the blank indorsement to Maguire, and that the latter had redelivered it to Dennis, with a special assignment. The title would have been as effectually reinvested in Dennis by mere delivery, without the assignment, as with it; and when Dennis afterwards delivered the note to Curtis, there was no need that he should again indorse it in blank, in order to convey the legal title, as the blank indorsement already on it was effectual for that purpose.

3. The legal title and right of action being wholly in Curtis, the court erred in permitting Dennis to be joined as a co-plaintiff. But it was an error which has wrought no substantial injury to the defendants. Nevertheless, in order to preserve a proper consistency in the record, we deem it better to remand the cause for further proceedings.

It is therefore ordered that the judgment be reversed, and the cause remanded, with an order to the court below to vacate the order allowing Dennis to be joined as a co-plaintiff, and to enter a judgment in the findings in favor of the plaintiff Curtis.1

CARROLL, J. In the state of New York on July 3, 1905, the Buffalo Carriage Top Company executed to Newton J. Baxter the following note: "January 15, 1906, after date we promise to pay to NewtonJ. Baxter two hundred and fifty dollars at 58 Carroll St., Buffalo, N. Y." On the back of the note Newton J. Baxter wrote his name, and before its maturity it was discounted by appellant, Wettlaufer, and delivered to him by Baxter. When the note fell due it was presented to the Buffalo Carriage Top Company for payment, and payment refused. Thereupon the note was protested by a notary, and notice of its dishonor mailed to Baxter at his residence, in Owensboro, Ky. Baxter declining to pay the note, suit was brought on it

1 Accord: Middleton v. Griffith, 57 N. J. L. 442. — H.

NEGOT. INSTRUMENTS—10

against him in the Daviess Circuit Court.

A general demurrer was sustained to the petition, and, declining to plead further, the petition was dismissed.

* * *

The questions involved in the case are: Was the note before its indorsement by Baxter a negotiable instrument within the meaning of the negotiable instrument act? Or, if not, did Baxter, by signing his name on the back of the note and selling and delivering it before maturity to Wettlaufer, convert it into a negotiable note and make all the parties to it subject to the negotiable instrument act the same as if it had been a negotiable note in the first instance?

The contention of counsel for Baxter is that the note was not a negotiable instrument, and that Baxter by signing his name on the back of the note became merely an assignor.

*

**

On the other hand, the contention for Wettlaufer is that the liability of Baxter upon this note is to be determined by the negotiable instrument act, and that by the provisions of this act Baxter occupies the position of an indorser and not as assignor of the note. Or, in other words, that, although the note may not have been negotiable when first executed and delivered, Baxter by his indorsement converted it into a negotiable note. * * *

[After quoting sections 1, 8, 9, 30, 34, and 184 of the Kentucky act, the court continues:]

For the purpose * of ascertaining what bills and notes it was intended should be negotiable within the meaning of this act, we may with propriety inquire what words were generally considered necessary to make a bill or note negotiable before this act went into effect, with a view of noting what change if any was made in this particular. In an article in 7 Cyc., p. 606, by a well-known writer on commercial paper, it is said: "the usual form of negotiable paper is a provision for payment to 'order' or 'bearer.' These or similar words are in general necessary to its negotiability, and are often required by statute, but a note which is non-negotiable for want of such words is still a valid note and may be declared on as such. Bills payable to bearer were formerly held to be non-negotiable, as being without words of transfer; but they are now recognized as negotiable and transferable by delivery. Making the instrument payable to the order of a person named is the same as to such person or order'; and in like manner to a person named ' or bearer' is the same in effect as to bearer.' Without words of negotiability purchasers take the bill or note subject to all defenses which were available between the original parties; and if it was originally non-negotiable, as against the original parties, it will not be rendered negotiable by subsequent transfer in negotiable form." The same rule is announced in 4 Am. & Eng. Ency. of Law, 133; Story on Bills of Exchange, § 60; Daniel on

Negotiable Instruments, § 105; Bank v. Butler, 113 Tenn. 574, 83 S. W. 655; Westburg v. Chicago Lumber Co., 117 Wis. 589, 94 N. W. 572.

It will thus be seen that it was uniformly held that, in order to make a note or a bill negotiable, the words " to order " or " to bearer," or equivalent words, must be used in the body of the note. It will be kept in mind, however, that the absence of these words do not affect the validity of a note or render it non-transferable or non-assignable. Their only effect is to make the instrument negotiable, and thereby cut off defenses that the maker or either of the parties to the paper might have and make against a holder in due course if the note was not negotiable. The negotiable instrument act does not apply to or affect the rights or liabilities of persons on paper that is not within its meaning negotiable. This note in our opinion, which was payable to Baxter alone, and did not contain the words "to order" or "bearer," was not a negotiable instrument. These words by sections 1 and 1843 are indispensable to make the paper a negotiable instrument within the meaning of the act.

*

*

But the argument is further made that as Baxter indorsed the note in blank that is, signed his name on the back of it without any other words he thereby converted the note into a negotiable instrument. It is true that section 9 of the act provides that "the instrument is payable to bearer when the only or last indorsement is an indorsement in blank;" but this does not mean that an indorsement in blank converts a note non-negotiable on its face and by its terms into a negotiable note. This construction would enable the person who last signed his name on the back of the note to change entirely the contract as entered into between the parties, and have the effect of making the maker, payee, and all prior indorsers liable upon a negotiable instrument when they intended to and only became liable upon a note that was not negotiable, and this, as can readily be seen, would be a most important and material change in the obligation assumed by them when they signed the paper. To give the act this construction would place it in the power of any indorser who chose to sign his name in blank to change by this act the entire character of the paper as well as the rights and liabilities of the parties to it. It would make the character of the paper depend upon the manner of the indorsement and not upon the terms expressed in the paper. Thus, if A. indorsed it in blank to B., it would be negotiable; but, if B. indorsed it specifically to C., it would be non-negotiable. Manifestly it was not intended that the mere indorsement of the note by a remote or other indorser should have this effect. When a paper is started on its journey into the commercial world, it should retain to the end the character given to it in the beginning and written into its face. If it

N. Y., §§ 20 and 320.-C.

was intended to be a negotiable instrument, and was so written, it should continue to be one. If it was intended to be a non-negotiable instrument and was so written, it should so remain. Then every one who puts his name on it, as well as every one who discounts or purchases it, will need only to read it to know what it is and what his rights and liabilities are.

In our opinion section 9 was merely intended to describe or designate the conditions under which a note negotiable on its face might become payable to bearer, and was not intended to apply to a note not on its face or by its terms negotiable. To illustrate, if this note was payable to "Newton J. Baxter or order," then the paper upon its face would be a negotiable instrument, although payable only to Baxter or order, and the only effect of the indorsement on the note by Baxter in blank would be to convert the note from a note payable to order into an instrument payable to bearer. But this indorsement would not in any manner change the negotiability of the note, nor change the attitude of any of the prior parties on the note, or increase their liability or cut off any defenses that they might have made, as it was at all times a negotiable instrument. Then, too," when the only or last indorsement is an indorsement in blank," the payee without notice of any defect in the title of the holder may pay the same to him, as it will be presumed it came into his hands in due course; no indorsement being necessary. Although the note under our construction of the Negotiable Instrument Act was not a negotiable instrument, yet Baxter had the right to indorse it and transfer it by delivery, and pass whatever title he had to the transferee or assignee. But the assignee would then take the note, not subject to the provisions of the Negotiable Instrument Act, but under the law applicable to non-negotiable paper.

The judgment is affirmed."

V. Drawee must be certain. § 20

WATROUS v. HALBROOK.

39 TEXAS, 573.— 1873.

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

$2771.62

MONTEVALLO, June 1, 1858.

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

To

Mobile, Ala.

D. E. WATROUS.

4 For further discussion of § 28, see extract from McKeehan's Negotiable Instruments Law, post, pp. - C.