-

called "holders in due course." It follows, if such a holder cannot in a case like the present recover, a fortiori that the plaintiff — who, as named payee, is one of the immediate parties - cannot recover.

In the result, therefore, my judgment must be for the defendant, and the plaintiff must be enjoined from in any way dealing with the notes, and the same must be canceled so far as they purport to be the notes of the defendant.

I. Maker: absolute, primary liability; admissions.

$110

1. PRESENTMENT FOR PAYMENT UNNECESSARY.

See Neg. Inst. Law, § 130, post, pp. 477-480.
2. LIABILITY ON LOST OR DESTROYED INSTRUMENT.

MCGREGORY v. McGREGORY.

107 MASSACHUSETTS, 543. — 1871.

ACTION against makers on notes alleged to be lost. Verdict for plaintiff, who filed a bond for protection of defendants from liability on lost notes, to the approval of the judge.

GRAY, J.-Destruction by fire is one mode by which property may be lost, and an allegation that a note has been lost is fully supported by proof that it has been destroyed by fire.

It is well settled in this commonwealth, that an action at law may be maintained on a lost promissory note, whenever a bond of indemnity will afford complete protection to the defendant; and that such an action may be maintained against the maker of such a note, upon filing a sufficient bond of indemnity. All the makers of the notes described in these three counts are defendants in this action; and they do not stand like an indorser of a promissory note, who is entitled, upon taking it up to the possession thereof, in order that he may have his recourse over against the maker, or negotiate it again; or like the acceptor of a bill of exchange, who may need it as a voucher in settling his account with the drawer. (Fales v. Russell, 16 Pick. 315; Almy v. Reed, 10 Cush. 421; Boston Lead Co. v. McGuirk, 15 Gray, 87; Tower v. Appleton Bank, 3 Allen, 387; Tuttle v. Standish, 4 Allen, 481; Savannah National Bank v. Haskins,2 101 Mass. 370.) Judgment on the verdict for the plaintiff.3

1 Omitting other questions. — H.

2 Holds acceptor of lost bill liable only in equity. Accord: Pierson v. Hutchinson, 2 Camp. 211. - H.

3 If a note or bill is shown actually to have been destroyed, most courts allow an action at law. Des Arts v. Leggett, 16 N. Y. 582; Dean v. Speakman, 7 Blatchf. (Ind.) 317. But not if it is voluntarily destroyed by the holder. Blade v. Noland, 12 Wend. (N. Y.) 173. Some courts make a distinction between instruments lost before maturity and those lost after maturity, allowing an action at law on the latter. Thayer v. King, 15 Ohio, 242; Mowery v.

§ 110

3. ADMISSION OF EXISTENCE AND CAPACITY OF PAYEE.

MCMANN v. WALKER.

31 COLORADO, 261.1903.

THE defendant in error executed and delivered his promissory note, in the city of Denver, payable to the Sprague Collection Agency. The payee was a foreign corporation, and at the time of this transaction had not, nor has it since, complied with the law requiring such corporations to pay certain fees before engaging in business in this state. (Sess. Laws, 1897, p. 157, c. 51.) Before maturity, the plaintiffs in error, for value, and without notice that the payee had not complied with the law relative to foreign corporations, purchased the note from the payee in the city of Denver. In an action by the purchasers against the maker to enforce its collection, the trial court held that the note was void, and rendered judgment for the defendant. The plaintiffs bring the case here for review on error.

The only question neces

GARBERT, J. [after stating the facts.] sary to determine is whether or not a negotiable promissory note in the hands of parties obtaining it for value, in good faith, before maturity, from a foreign corporation in this state, to which, it was given in this state, is invalid as against the maker because such corporation, at the time of the execution and delivery of such note or subsequently, had not complied with the laws relative to the conditions which would authorize it to engage in business within the state. The question is one which has been discussed by the courts of several states, with the result that the decisions on the subject are not altogether harmonious. Whether or not the note in question be invalid as between the maker and payee is a question upon which we express no opinion, because that proposition is not involved, and does not in any manner affect the rights of the parties to this action. The statute which the maker invokes does not provide that a note given a foreign corporation in the circumstances narrated shall be invalid in the hands of third parties, and it should not be given a construction, unless unavoidable, which would result in visiting upon innocent third parties a penalty for its violation by another. In this state the general rule of law prevails that negotiable commercial paper, although invalid as between the immediate parties, is valid as to third persons obtaining it for value before maturity, and without notice of its infirmities, unless so declared by statute. (Boughner v. Meyer,

Mast, 14 Neb. 510. But other courts deny the validity of this distinction. Moses v. Trice. 21 Gratt. (Va.) 556. See in general on lost or destroyed bills and notes, 2 Daniel on Neg. Inst., SS 1475-1485.

The matter is governed by statute in New York. Code Civ. Proc. § 1917.-H. NEGOT. INSTRUMENTS — 26

5 Colo. 71.) See, also, Sondheim v. Gilbert, 117 Ind. 71, where the subject is quite fully discussed and many authorities cited.*

The defendant, by giving a note which is not the subject of statutory enactment, thereby conclusively admitted as to third parties purchasing before maturity, and in good faith, the legal existence of the payee, and its authority to take such note, and to negotiate and transfer it by indorsement. Section 60,5 Negotiable Instruments Act (Sess. Laws 1897, p. 223, c. 64); 4 Enc. Law (2d Ed.) 474, 475; Wolke v. Kuhne, 109 Ind. 313; 1 Edwards' Bills and Notes (3d Ed.) § 363; Bigelow on Estoppel (4th Ed.) 512.

The plaintiffs were in no manner connected with the original transaction, and they violated no law in purchasing the note from the payee. They purchased it in good faith, before maturity; it was negotiable in form; and the maker cannot be heard to say, as against them, in these circumstances, in the absence of a statute to the contrary, that the payee committed an illegal act in taking, or had no authority to dispose of, it, in the usual course of business, because by its execution and delivery he is precluded from raising any of these questions as against the purchasers, who obtained it for value, before maturity, without notice of the fact upon which he relies to defeat it. The courts cannot undertake to render the statute relied upon by defendant effective by imposing penalties which it has not provided, or placing them where they do not belong. If defective because no sufficient provision is made for its enforcement, that is a matter for the Legislature to remedy. According to the undisputed facts, the plaintiffs were entitled to a recovery on the note. The judgment of the County Court is therefore reversed, and the cause remanded, with directions to render judgment in favor of the plaintiffs.

Judgment reversed.

4 See also Alexander v. Hazelrigg, 123 Ky. 677, ante, p. 375, and Arnd v. Sjoblom, 131 Wis. 642, ante, p. 383. — C.

• Maker of a note payable to the order of “A. B. Attorney-General" cannot dispute his right to transfer it. Wolke v. Kuhne, 109 Ind. 313. Maker of a note payable at "A. B." cannot deny the existence of such a place when the statute requires negotiable instruments to be payable at a place certain. Brown v. First N. B., 103 Ala. 123. Contra, where the statute requires it to be payable at a bank. Parkinson v. Finch, 45 Ind. 122. H.

[In Castor v. Peterson, 2 Wash. 204, it was held that the maker of a promissory note payable to the order of a married woman guarantees her capacity to indorse and transfer the same; and the fact that the note is community property will not affect the title of a bona fide indorsee for value before maturity, where he has no notice that the note is community property. HOYT, J., said: "The maker promised to pay Mrs. Eliza E. Pool, or order, and in making the note so payable he guaranteed, to every person taking such note in good faith, her ability to order the same paid to another- - that is, to indorse it and as to every such person buying in good faith and for value such guaranty was conclusive. That the maker of negotiable paper thus guar

§ 110

FRAZIER v. MASSEY.

[Reported herein at p. 220.] T

II. Acceptor: absolute, primary liability; admissions.
1. PRESENTMENT FOR PAYMENT UNNECESSARY.
See Neg. Inst. Law, § 130; post, pp. 477-480.
2. ADMISSIONS AS TO DRAWER AND PAYEE.

§ 112

FIRST NATIONAL BANK OF LISBON v. BANK OF
WYNDMERE.

15 NORTH DAKOTA, 299. — 1906.

ACTION by the First National Bank of Lisbon against the Bank of Wyndmere. Judgment for defendant, and plaintiff appeals.

ENGERUD, J. This is an appeal from an order sustaining a demurrer to the complaint on the ground that it does not state a cause of action. The complaint states the following facts: The plaintiff and defendant are banking corporations, located, respectively, at Lisbon and Wyndmere, in this state. On July 1, 1905, the defendant caused to be presented to plaintiff for payment a forged check purporting to have been drawn by Bixby & Marsh upon the plaintiff bank in favor of Theodore Larson for $60.25, dated June 27, 1905, and indorsed in blank by the payee. It also bore the indorsement of the defendant, and each of the several banks through whose hands it had passed in the usual course of transmission from defendant to plaintiff. Each indorsing bank had expressly guaranteed the genuineness of previous indorsements. Bixby & Marsh were depositors in plaintiff bank, and had to their credit subject to check a sufficient. amount to pay the check in question. The plaintiff bank believing the check genuine, paid it and charged it to the account of Bixby & Marsh. The name of this firm had been forged, but this fact was

antees the capacity of the payee to indorse and transfer the same seems to arise from the necessity of the case, and the rule is therefore founded upon reason. It is likewise abundantly supported by authority. See Daniel, Neg. Inst., § 93, and cases there cited. This rule has been frequently applied to notes made to and transferred by infants. See section 227 of the authority above cited. Likewise to married women under the disabilities of the common P. 207.-C.]

law."

7 In like manner the drawer (Grey v. Cooper, 3 Doug. 65, post, p. 418), and acceptor (Taylor v. Croker, 4 Esp. 187; Smith v. Marsack, 6 C. B. 486), admit the existence of the payee and his then capacity to contract. See two following sections of Neg. Inst. Law. — H.