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By the holder of negotiable paper is meant, in law, the owner of it; for if it be in his possession without title or interest, he is, in general, considered only as the agent of the owner.(p)

His first and principal right is to demand payment of the note. And the various methods of payment, and the effect of such payment, will be considered in the chapter on the Payment of a Note

a or Bill.

The right of the owner to transfer his note or bill, by indorse. ment, or by delivery without indorsement, and the manner of such transfer, and its effect, will be considered in the succeeding chapters on Indorsement, and on Transfer by Delivery.

His principal obligation is to make a proper presentment for acceptance or for payment; and this topic also will be con. sidered hereafter.

The subject of this chapter is different from these.

It has already been stated, and variously illustrated, that promissory negotiable paper differs essentially from all other contracts or instruments in the protection which the holder may claim. Thus, it has been shown in the chapter on Consideration, that while the common law refuses to enforce any other contract which does not rest either on a consideration or on a seal (which implies consideration), it makes a distinct exception in reference

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(p) Pettee o. Prout, 3 Gray, 502, where a note was payable to a person named or bearer, it was held that the production of the note at the trial by the plaintiff, he not being the party named, was sufficient evidence of his title, although he was the general agent of the payee who was alleged in the answer to be the owner of the note See also infra, p. 255, note 8. VOL. I.


to negotiable promissory paper, by the adoption of the principle of the law merchant, which forbids inquiry into the consideration which passed between any distant parties, hr: permits it if the owner demands payment from the party from whom he received

the paper.

The general exception to this is when the paper, not being accommodation paper, would be subject to the defence of want or failure of consideration, if the action were brought by the promisee against the promisor, and a distant party, deriving title from the promisce, is chargeable with having notice or knowledge of this defence when he took the paper. For if so chargeable, the fact that he paid value for the paper does not give him any claim.(9)

It is, however, quite certain that no person is entitled to this privilege; that is, is entitled to hold the paper without reference to the original consideration, or to any equities of the defendant, unless lie is a bona fide holder of the paper. And the principal purpose of this chapter is, first, to ascertain who is a bona fide holder of negotiable paper, for the purpose of this rule; and, secondly, what peculiar rights such a holder possesses, or what rights he has, although the party from whom he derives his title did not himself possess them.



THE definition of such a holder may be, he who acquires the paper, in good faith, for valuable consideration, from one capable of transferring the paper.(r)

Such a holder may have taken the paper in either of two ways;

(9) Bank of Tennessee v. Johnson, 1 Swan, 217. Thus, in an action by a partner as indorsee of a note given to another partner, upon a sale by such other partner to the maker, of partnership property, the plaintiff stands in 220 better position to resist a claim of set-off than the payce of the note himself would, if the action had been brought in his name. Otis v. Adams, 41 Maine, 258. See also cases infra.

(r) The protection which the law extends to a bona fide holder is not limited to those who deal in negotiable paper as a part of their regular and ordinary business, but extends to every person to whom such paper may be lawfully transferred, and to every per. son who bv tlic payment of value may acquire a title. Gould v. Segee, 5 Duer, 260, 269

or, as it may be better expressed, at either of two periods of time; he may have taken the paper before its dishonor, or he may have taken it after its dishonor. In many cases which treat of this question, no one is considered a bona fide holder who did not take the paper before dishonor. But while we shall see that he who takes it after its dishonor stands upon very different ground from him who takes it before dishonor, still he may take it after dishonor in good faith, and thereby acquire valuable rights. We shall therefore consider these two modes of obtaining the property of the paper separately.

1. Of one who takes the paper before its dishonor. In the first place, it is to be remarked, that there is a prima facie presumption of law in favor of every holder of negotiable paper, to the extent, that he is the owner of it,(s) that he took it for value,(t) and before dishonor,(u) and in the regular course of business.(v) But this presumption may be rebutted on either of these points. And the burden of proof lies on the party who alleges, as his defence against the claim of the holder of the paper, that there was a fatal defect in the consideration, or in the time of transfer.(w) If a note not negotiable is sued upon by a person other

(s) Pettee v. Prout, 3 Gray, 502; Hunter v. Kibbe, 5 McLean, 279; Ellicott v Martin, 6 MU. 509; Warren v. Gilman, 15 Maine, 70; M'Gee v. Prouty, 9 Met. 547 ; Picquet v. Curtis, 1 Sumner, 478. In an action by an indorsee against an acceptor, the fact that the acceptance was for accommodation does not throw the onus on the plaintiff to show that he gave value for it. Ellicott v. Martin, supra. And if the person who brings the action is an acceptor or first indorser, and there are subsequent names on the instrument, the law presumes that he has been obliged to pay it, and that he is rightfully in possession of the instrument. Page v. Lathrop, 20 Misso. 589 ; Hunter v. Kibbe, 5 McLean, 279; Dugan v. United States, 3 Wheat. 172. In Henry v. Scott, 3 Ind. 412, it was held that, in a suit by the assignee of a note against the maker, the latter may plead and prove that the plaintiff holds the notes merely as the trustee of the payee, in order to let in as a set-off an indebtedness due from the latter to the defendant.

(1) Goodman v. Simonds, 20 How. 343; Kelly v. Ford, 4 Iowa, 140. See also cases infra.

(u) Lewis v. Parker, 4 A. & E. 838 ; Low v. Burrows, 2 A. & E. 483 ; Masters v. Barrets, 2 Car & K. 715; Walker v. Davis, 33 Maine, 516; Burnham r. Wood, 8 N. 11. 334; Burnham v. Webster, 19 Maine, 232; Ranger v. Cary, 1 Met. 369; Cain v. Spann, 1 McMullan, 258; Washburn v. Ramsdell, 17 Vt 299; Smith v. Clopton, 4 Texas, 109; McMahan v. Bremond, 16 Texas, 331 ; Dickerson v. Burke, 25 Gx. 225.

(v) Walker v. Davis, 33 Maine, 516. See also cases supra.

(w) Cook v. Helms, 5 Wisc. 107. In Snyder o. Riley, 6 Barr, 161, Gibson, J., after stating that the law presumed a note was indorsed before maturity, added : “ But the contra 't of indorsement, being without date and without witnesses, is so peculiarly susceptible of a fraudulent practice upon the drawer, by precluding perhaps a just defence on criginal grounds, that the presumption of fairness primarily applicable to it is not

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than the payee, the possession of the note in court at the trial by the plaintiff is not prima facie evidence, as in the case of negotiable paper, that the note was transferred to the plaintiff before the commencement of the action, and before maturity.(2)

If the defendant rest upon some want of consideration which attaches to the holder, the questions of consideration, which we have already considered, come in. And to what has been already said, it may be added, that the cases sometimes seem to adopt, as a test of the rights of the holder, the question whether he “ took the paper in the usual course of business.” This phrase was used for this purpose in a case before Lord Mansfield,(y) and many judges have repeated it; but it seems to be open to some objection. As a compendious and convenient phrase, it may continue to be used; but it defines nothing; and it would be better if the law said more distinctly what are the employments of negotiable paper which leave to it all its privileges, and what are those which take them away. This phrase leaves all the real question be hind; for this is in each case, substantially, what is the mercantile character of the transaction. The use of this phrase las helped to keep open the question, Is the giving of accommodation paper, or the paying an old debt, or securing an old debt by

only of the slightest kind, but open to be blown away hy the slightest breath of suspi. cion.” In this case evidence was offered that the defendant had publicly repudiated the note, which was not put in suit until after the lapse of three years from maturity; that payment was not demanded at the place where the note was made payable ; that the plaintiff refused to permit the defendant to inspect his books; and that it did not appear that the note was protested, as is usual in such cases, or notice of dishonor given to charge the indorser. It was held that all or any of these circumstances, proved or conceded, would be sufficient to cast the burden of proving the time and the consideration of the transfer upon the plaintiff. In Hill v. Kroft, 29 Penn. State, 186, the facts that no de mand of payment was made upon the makers at maturity of the note, that it was not protested for non-payment, and that suit was not brought for more than six months after it was due, were sufficient to shift the burden of proof. In Ranger v. Cary, 1 Met. 369, it was held that the burden was not discharged by proof that the note was transferred and delivered to the plaintiff before dishonor, but was not indorsed until afterwards. But in McCready v. Cann, 5 Harring. Del. 175, it was held that no inference of irreg. ulurity could arise from the omission to present the note or to protest it, that not being necessary to charge the drawer.

(3) Barrick v. Austin, 21 Barb. 241. See also Bircleback v. Wilkins, 22 Penn. State, 26

(y) Miller v. Race, 1 Burr. 457. See also Littell v. Marshall, 1 Rob. La. 51; Evang v. Smith, 4 Binn. 366. In Billings v. Collins, 44 Maine, 271, it was held that the assign. ment of negotiable paper by operation of a bankrupt or insolvent law was not in the regu. lar course of trade, and that the assignee could acquire only the rights of the insolvent

the assignment of negotiable paper, a transaction which the law views as according to the usage of merchants? There is certainly no unity of opinion on this point. Thus, the courts of New York hold that giving paper to secure an old debt — and at one time they held, or were thought to hold, that paying an old debt by assignment of negotiable paper - is not mercantile ; (2) while

the Supreme Court of the United States, Story, J. giving the opinion, held, on better grounds we think, that these transactions were mercantile.(a) That they are constantly occurring among merchants, and that a considerable portion of the negotiable paper made in business is used in this way, is certain. Nor do we see that there is anything objectionable, or anything which courts should seek to restrain or suppress, in this employment of negotiable paper ; while, on the other hand, it conforms to the fundamental principle of the law of negotiable paper, that it is the representative of money, and may be used everywhere as its substitute. And therefore we are disposed to believe that the law of this country is tending towards the rule, that whether negotiable paper is sold, or discounted, or indorsed over to pay a new debt, or for a new purchase, or to secure a new debt, or an old debt, or to pay an old debt, it becomes in each case the property of the holder, and carries with it all the privileges of negotiable paper, unless there be something in the particular transac

, tion which is equivalent to fraud, actual or constructive.(6)

A person cannot acquire the rights of a bona fide holder of a note by paying the amount thereof for the person from whom it is due, without his request, express or implied. (c)

If there be fraud of any kind on the part of the holder, or on the part of the transferrer with any privity or knowledge on the part of the holder, he can, of course, found no right upon his fraud.

(z) See supra, p. 222.
(a) Swift v. Tyson, 16 Pet. 1.
(b) See supra, pp. 218 - 228.

(c) Willis v. Hobson, 37 Maine, 403. An expressman received the money to pay a note which was at a bank in Boston, which money he disposed of in another manner, and on the last day of grace he called on the plaintiffs and requested them to pay the note for him, as he was short of funds, which was assented to ; but from the lateness of the request the payment could not be made that day, and to protect the teller for delay of payment the firm name of the express company and the name of the plaintiffs were indorsed on the note, and the next day it was paid by the plaintiffs. Held, that they could not recover, on the ground stated in the text.


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