[Held: That where A. deposited a bill with B. indorsed "for. deposit to the credit of A," and B. indorsed it, "Pay C. for collection account of B," and C. collected it, the funds were subject to garnishment in C's hands by the creditors of A., for as yet they had not actually been deposited in the hands of B. The legal import of the indorsement is to make B. an agent for collection and deposit. "The proceeds would be impressed with A.'s ownership until they were actually so deposited."] 8

§ 68

4. QUALIFIED INDORSEMENT.

RICE v. STEARNS.

3 MASSACHUSETTS, 225. — 1807.

ASSUMPSIT by indorsee against makers, upon a note payable to Jonathan Symonds, or order, and indorsed by him in these words: "for value received I order the contents of this note to be paid to Merrick Rice at his own risk." The defendants denied their signatures, and Symonds was offered as a witness to prove the execution of the note, and was objected to as a witness on the ground that he was interested. Objection overruled. Judgment for Plaintiff. Defendants appeal.

PARSONS, C. J.-The interest of Symonds must depend on the effect of his indorsement.

A security negotiable in its creation must, during its negotiation, preserve its negotiable quality; otherwise, when assigned, the assignee would hold a contract by the assignment different from the contract assigned. It is for this reason settled that a negotiable note indorsed in blank, or by a direction to pay the contents to A. B., omitting the words, "or his order," is further negotiable by the holder under such indorsement. It is also settled that when a negotiable security is indorsed, "pay the contents to my use," or, "to the use of a third person," or, carry this bill to the credit of a third person," such an indorsement is not an assignment of the security, but is only an authority to pay the money agreeably to the direction of the indorsement. There are other restricted indorsements also made: as pay the contents to A. B. only." Whether this indorsement is only an authority to A. B. to receive the money for the use of the

There is some conflict as to the legal effect of an indorsement "For Deposit." Some courts hold that title passes under such an indorsement. Ditch v. Western N. B., 79 Md. 192; s. c., 47 Am. St. Rep. 375 and note. Others hold that title does not pass, but that the bank is a bailee for collection until the money is actually in its hands, when it becomes a debtor as in the usual case of money deposits. Beal v. City of Somerville, 50 Fed. Rep. 647. -— H.

indorser, or for his own use, if made for value received, or whether this last case the restriction is not void, and A. B. may further negotiate it, seems not to be settled. If the property of the note be vested in A. B., perhaps he will hold it with its negotiable quality notwithstanding the restriction. But of this we give no opinion.

The case at bar is a restricted indorsement of another kind, and which in practice is very common. The promisee of a negotiable note indorses it to a third person, or his order, for value received, stipulating that the indorser is not to be responsible, if the maker does not pay it. If, notwithstanding this stipulation, the indorser is answerable, if the maker do not pay the note, then the witness, Symonds, is interested, and ought not to have been sworn.

Upon consideration we are of opinion that the promisee, indorsing the note under this express stipulation, is not eventually holden to pay the note, if the maker should not. As the promisee had the property of the note, he might dispose of it on what terms he pleased, with the assent of the purchaser, and the latter cannot complain of the necessary effect of his own agreement; and the indorser cannot be charged upon his own contract, directly against the express intent of it. If this opinion is correct, Symonds, after this restricted indorsement, had no interest in the event of the suit, and was a competent witness.

Another point of some importance arises, which involves the question, whether, by this restricted indorsement, the property of the note passed to the indorsee, so that he may sue upon it in his own name. If the restriction applied to the quality of the contract, so as to render a negotiable security no longer negotiable, there would be some difficulty in allowing, consistently with legal principles, an indorsement of this effect to operate as a transfer of the note. But this is not the effect of the restriction; the note remains negotiable in the hands of the indorsee, although he has no remedy against the indorser; and in whose hands soever the note may come, the maker is still liable, according to the terms of his original contract, to pay to the promisee or his order. The note, therefore, being the absolute property of the plaintiff, and Symonds being a competent witness, the verdict must stand, and judgment be entered accordingly.

$68

EVANS v. FREEMAN.

142 NORTH CAROLINA, 61. — 1906.

PLAINTIFF sued upon a negotiable instrument which had been transferred to him by the following indorsement: "For value received, I hereby transfer and assign all my right, title and interest in and to the within note to J. D. Evans," etc. Judgment for plaintiff and defendant appeals.

There is one other matter which requires some attention. The defendant contended that the plaintiff was not a holder in due course, because, by the terms of the indorsement, he was put on notice of any and all equities and defenses of the maker as against the payee, Askew, the reason being that only the right and title of the payee was transferred and the indorsee acquired no better title under such indorsement than his indorser himself had, but, ex vi termini only his right and title, which were subject to the defense set up in this action.

There was at one time very strong and convincing authority for such a position, Aniba v. Yeomans, 39 Mich. 171, and there was much also said against it, 1 Daniel Neg. Inst. (5th ed.) § 688c. But we think the controversy has finally been settled by the "Negotiable Instruments Law" as recently adopted, Revisal 1905, c. 54.

Ours is a qualified indorsement, under Revisal 1905, section 2187,• and while the indorser is constituted a mere assignor of the title to the instrument, it is provided that such an indorsement shall not impair its negotiability. A qualified indorsement may, by the express terms of that section, be made by adding to the endorser's signature the words "without recourse, or any words of similar import." It has been settled in commercial law that a transfer by indorsement of the right and title" of the payee or an indorser to a negotiable note is equivalent to an indorsement "without recourse and words such as were used in this case are therefore in their meaning or "import" similar to such an indorsement, and this is their reasonable interpretation. 1 Daniel, supra, §§ 700 and 700a; Norton on Bills and Notes (3d Ed.) 120; Hailey v. Falconer, 32 Ala. 536; Rice v. Stearns, 3 Mass. 225; Randolph Com. Paper (2d Ed.), §§ 721, 722, 1008; Goddar v. Lyman, 14 Pick. (Mass.) 268; Borden v. Clark, 26 Mich. 410; Eaton & Gilbert on Commercial Paper, § 61.

However the law may have been, it is now true, as it appears from the statute and the authorities just cited, that such an indorsement does not, in law, discredit the paper or even bring it under suspicion, nor does it in any degree affect its negotiability. The indorsee is supposed to take it on the credit of the other parties to the instrument, Revisal 1905, § 2187, though the indorser may still be liable on certain warranties specified in the statute. Revisal 1905, § 2214.1 This conclusion we believe to be in accord with the intention of the Legislature in enacting the Negotiable Instruments Law, as the leading purpose was to afford as much protection to the holders of commercial paper as is consistent with a just regard for the rights of other interested parties, and, by freeing its transfer of unnecessary fetters, to

N. Y., § 68. — C.

1 N. Y., § 115. On this point, see also State v. Corning St. Sav. Bk., 139 Iowa, 338. C.

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promote its easy circulation and to give it greater currency as a medium of exchange. Our decision on this part of the case is confined to the particular evidence rejected and does not extend to any other offer of proof made by the defendant. If the defendant is able to show that the note was indorsed to the plaintiff after its maturity or that the latter is not, in fact, a purchaser for value and without notice, his defense will be available to him, but the burden to establish either of those facts is upon the defendant, as the plaintiff is deemed prima facie to be a holder in due course if he has possession of the note under the indorsement.2

[On other grounds, however, the judgment was reversed and a new trial granted.]

$69

5. CONDITIONAL INDORSEMENT.

JOHNSON v. BARROW.

12 LOUISIANA ANNUAL, 83.— 1857.

SPOFFORD, J.-This suit is brought against the indorser of a promissory note of the following tenor:

DONALDSONVILLE, 30th Oct., 1851. One year after date, I promise to pay to the order of Robert R. Barrow the sum of five hundred dollars, for value received, payable at the office of the Recorder, Donaldsonville.

[The indorsement is in these words:]

(Signed) JOHN HUTSON.

HOUMA, PARISH OF TERREBONNE.

I indorse the within note for the benefit of Mrs. Hutson in the purchase of a tract of land from Gov. H. Johnson.

(Signed) R. R. Barrow.

The defendant pleaded that this restrictive indorsement does not bind him, inasmuch as the special object for which it was given was never consummated, Mrs. Hutson not having purchased a tract of land from the plaintiff Johnson.

There was judgment in the defendant's favor, and the plaintiff has appealed.

It is needless to recapitulate any other facts than that Mrs. Hutson did not buy a tract of land from Henry Johnson, nor contract to do so in any manner that could bind her.

The condition with which the defendant clogged his indorsement of the note never having been accomplished, the plaintiff has no action against him.

The judgment is, therefore, affirmed with costs.3

Pay the

2 Accord: Lomax v. Picot, 2 Randolph (Va.) 247. — C. In Robertson v. Kensington (4 Taunt. 30), the indorsement was within sum to A., or order, upon my name appearing in the Gazette' as

IV. Indorsement: Methods and effect.

§ 70

1. INDORSEMENT OF INSTRUMENT PAYABLE TO BEARER.

RIDER v. TAINTOR.

4 ALLEN (MASS.) 356. 1862.

CONTRACT upon the following promissory note:

$107.

LEE, Dec. 1, 1860.

Six months from date, for value received, I promise to pay Stephen E Avery, or bearer, one hundred and seven dollars, with use.

[The note bore the following indorsement:] Pay E. A. Bliss, cashier, or order.

WARREN NEWTON, Cashier.

ALBERT J. TAINTOR.

At the trial in the superior court, it appeared that the plaintiff had purchased the note in suit before it became due for a full consideration, but the bill of exceptions stated that "there was no evidence that E. A. Bliss, to whom said note had been indorsed, had transferred or indorsed said note to the plaintiff;" or "that the plaintiff had any title in said note from said Bliss, or that said note was sued with the knowledge or assent of said Bliss." Rockwell, J., ruled that the plaintiff was entitled to recover, and the jury returned a verdict accordingly; and the defendant alleged exceptions.

BIGELOW, C. J. —The contract of the promisor of the note declared on is to pay the sum due on the note at its maturity to the person who shall then be the bearer. The production of the note by the plaintiff is therefore evidence of his title; and, accompanied as it was in the present case with proof that the plaintiff had become the owner of the note by purchase before it became due, established a conclusive right to recover against the defendant.

ensign in any regiment of the line, between the 1st and the 64th, if within two months from this date." In this form the bill was accepted by defendants, who subsequently paid the bill to E., a remote indorsee of A. The payee's name did not appear in the Gazette,' and he brought an action against the acceptor. Held: plaintiff could recover. It is the rule of this case that, is changed by § 69 of the Neg. Inst. Law. A conditional indorsement does not affect the negotiability of the instrument. Tappan v. Ely, 15 Wend. (N. Y.) 362. The indorsee is a trustee for the conditional indorser if the condition is not fulfilled.

H.

["The payee indorses to A., specifying in the indorsement that it is upon the express condition precedent that the indorsee shall within two days deliver to indorser a certain horse. The condition is not fulfilled. At maturity the maker pays the indorsee. At common law the maker's payment would not be availing, and the indorser could collect from him. Robertson v. Kensington, 4. Taunt. 31. The section changes this and protects the maker. The indorser must look to the indorsee for redress." Professor L. M. Greeley in 2 Ill. Law Rev., at p. 151. — C.]

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