2. Parties.

SUMMARY - Cashier may indorse, § 305.— President of railroad, § 306.- Real parties to a note may transfer it, § 307.

§ 305. The cashier of a bank possesses, prima facie, authority to transfer and indorse negotiable securities held by the bank for its use and in its behalf. No special authority for this purpose need be proved, and, if any restriction of the cashier's authority is relied upon by the bank, it must be shown, together with notice thereof, to those doing business with the bank. Wild v. Bank of Passamaquoddy, $$ 308, 309. See § 322.

§ 306. A railway president may indorse and assign the notes and mortgages of the company given to aid in its construction. His indorsee before maturity will take the paper free of equities between the maker and the company. Irwin v. Bailey, §§ 310-312. See § 318.

§ 307. A promissory note payable to the order of several persons, one of whom inceptively refused to be a payee of it, and who was treated by the drawer and other payees, both in the delivery of the note and in its negotiation, as no party and having no interest in it, can be transferred by the indorsement of the real payees so as to give the ownership of it to the indorsee, and a right of action upon it by him against the maker, without any indorsement by the nominal payee. Pease v. Dwight, §§ 313, 314.

[NOTES.-See §§ 315-330.]

WILD v. BANK OF PASSAMAQUODDY.

(Circuit Court for Maine: 3 Mason, 505-507. 1825.)

STATEMENT OF FACTS.-This was an action on a bill of exchange by an indorsee against the bank as indorser. The bill became the property of the bank by successive indorsements, and was indorsed by the cashier of the bank, and came to plaintiff's hands by a subsequent indorsement. The bill was protested and notice given to the bank. It was urged in defense, (1) that the cashier had no authority to indorse the bill; and (2) that plaintiff delayed more than a year after protest and notice in returning the bill to defendant and demanding payment, and that the drawers had failed in the meantime.

§ 308. Authority of bank cashier to indorse and transfer negotiable paper. Opin on by STORY, J.

My opinion is, that neither of the objections is well founded in law. The cashier of a bank is, virtute officii, generally intrusted with the notes, securities and other funds of the bank, and is held out to the world by the bank as its general agent in the negotiation, management and disposal of them. Prima facie, therefore, he must be deemed to have authority to transfer and indorse negotiable securities, held by the bank, for its use-and in its behalf. No special authority for this purpose is necessary to be proved. If any bank chooses to depart from this general course of business, it is certainly at liberty so to do; but in such case it is incumbent on the bank to show that it has interposed a restriction, and that such restriction is known to those with whom it is in the habit of doing business. In the present case, the cashier has, as cashier, indorsed the bill in behalf of the bank, and this is prima facie evidence of authority, it being within the ordinary duties performed by such an officer. If he was restricted in his authority, it is for the defendants to show it. The proof is in their possession, and the plaint.ff, who is a stranger to their regulations, cannot be presumed to be conversant of it.

$309. Delay to return bill to indorser.

As to the other point, the defendants were, in point of law, fixed by due notice of the non-acceptance of the bill. The rights of the plaintiff were then complete. He was not bound to present the bill to them for payment within

any particular time, nor is he bound to prove how, or when, and by what circuitous routes, the bill was in fact returned to him. If the defendants had any interest in a speedy return, it was their duty to make inquiries and take up the bill as soon as possible. But as to the plaintiff, I do not know that an omission to demand payment and produce the bill for any period short of that of the statute of limitations would operate as a bar to a recovery. If the bill were suppressed from fraud (of which there is no pretense in this case), it might give rise to another sort of inquiry, the effect of which it is unnecessary to consider. There is no principle within my knowledge that requires the holder of a bill to demand payment of a prior indorser within any particular period, after the latter has been once fixed by due notice of the non-acceptance.

IRWIN v. BAILEY.

Verdict for plaintiff.

(Circuit Court for Illinois: 8 Bissell, 523–527. 1879.)

Opinion by DRUMMOND, J.

STATEMENT OF FACTS.- The defendant executed a promissory note on the 7th of March, 1856, payable to the Racine & Mississippi Railroad, or order, for $4,000, in five years from May 10, 1856, with ten per cent. interest, payable annually. This note was secured by a mortgage, and was given to the railroad company to enable it to raise money for the construction of the road. It was agreed on the part of those who represented the railroad company, that a certain indemnity should be given to the defendant by which he should be relieved from apparent liability existing upon the note and mortgage; and certain representations were made by them at the time, or before the note was executed, which constituted the inducement for the plaintiff to execute the note and mortgage; and it may be assumed that upon the faith of these representations the papers were executed and delivered to the railroad company. The railroad company took the note and mortgage and attached them together, with a bond on its own part, and an assignment, as it was claimed, of the note and mortgage contained in the bond, being in a form, as it was supposed, to enable the company to raise money upon it; and accordingly, as the evidence shows, in 1857 money was obtained. The weight of the evidence, I think, is, that the money. was raised upon the note and mortgage and the bond, and that they were transferred to the City of Glasgow Bank for value received. The bank thus became the holder of the note and mortgage. This was before the note became due, and of course, unless it had notice of any equities which might exist between the maker of the note and the railroad company, it would not be bound by them. There is no evidence whatever that the City of Glasgow Bank had such notice, and consequently it cannot be bound or affected in any way by those representations. Then, after the bank became the equitable owner of this note, mortgage and bond of the railroad company, it was transmitted to theplaintiff, and he was instructed to represent the bank. At this time the note was not indorsed; that is to say, it had no memorandum written upon it, which, so far as the indorsement of the railroad company was concerned, would constitute a legal transfer of the property, unless that transfer was made by virtue of the assignment of the railroad company, attached with the note to the mortgage.

$310. Power of president of railroad company to indorse a note.

It is not necessary to decide what was the effect of the assignment contained in the bond, because when the plaintiff received the note it was transmitted.

with the bond and mortgage to Messrs. Strong & Fuller, of Racine, in 1858 or 1859, before the note was due. The note not containing the formal indorsement of the railroad company, Mr. Fuller took it to the president, and he indorsed the note in blank, as president of the railroad company. Now, the question is, whether he had the right to make this indorsement transferring the legal ownership of the property to any third person, or to make the note transferable by delivery. It seems to me, under the evidence, that he had that right. He was the financial agent, or one of them, of the company, to make negotiations of the assets of the company, to raise money upon them, and accordingly, under this authority, this particular note, bond and mortgage were transferred to the City of Glasgow Bank, and full consideration received. There is no evidence indicating that the power which was thus given to Durand, as president of the company, was revoked, and in view of the fact that the bank had become the equitable owner of the note, bond and mortgage, whatever view we may take of the effect of the assignment of the bond, undoubtedly Mr. Durand had the right to carry out, in good faith, the contract that had been made with the bank, and to indorse the note. This conferred upon the bank the ownership of the note, making it thus the legal indorsee of the note, as it previously had been the equitable owner.

§ 311. Right of indorsee to sue in his own name though he may have no actual personal interest in the note.

It is to be observed that at this time the plaintiff was the agent of the bank. The legal effect of the indorsement was, that it transferred the note to the bank, and thus, if the plaintiff had any interest in it, he was simply the indorsee, holder, or bearer, as the agent of the bank. This was before the note had matured, and I can have no doubt, under the evidence in this case, that the plaintiff was clothed with all the equities of the City of Glasgow Bank, and that he can sustain his right to sue and to recover upon the equities and legal rights of the bank. The plaintiff, under what I consider the well-settled principles of law, had the right as the agent of the bank, after the maturity of the note, to bring a suit upon it, and the fact that he has no interest whatever in the note, and paid nothing for it, cannot deprive him of the right, provided it was transmitted to him for that purpose, and the suit was brought as the agent and by the consent of the bank. These being the principles of law, it is immaterial what statements may have been made by the agents of the railroad company at the time this note was executed. It was a negotiable note, transferred to the railroad company, and payable to its order. The defendant trusted to the representations of the railroad company. If they were untrue, or a fraud was practiced upon him, it was he who trusted the company. He transferred the note and mortgage, and the rule is well settled, that, when one of two innocent persons must suffer, he must suffer who has enabled a third person to negotiate a security and to obtain money upon it. So as between the bank and the defendant, the latter must suffer, and not the bank which has paid value for this note, and without any knowledge of any circumstances calculated to throw doubt upon it.

§ 312. An indorsee for value without notice is not affected by fraud between the original parties.

The evidence has been allowed to go in with very great latitude; scarcely any restriction has been placed upon it by the court, the case having been tried without the intervention of a jury. Counsel were informed that whatever evidence there was that might have any bearing on the issue would be admitted,

subject to the legal rights of the parties. Consequently all the evidence relating to what is alleged to have been a fraud practiced by the agents of the railroad company upon the defendant has been admitted, subject, of course, to be controlled and limited by the legal discretion of the court when the testimony was all before it. And the testimony being thus before the court, and as the facts in relation to the execution, transfer and delivery of the note to the City of Glasgow Bank prove that value was paid for it, and that the bank had no knowledge whatever of any of the alleged frauds or misrepresentations, I think all of the evidence relating thereto is immaterial, and really inadmissible as against the bank, or as against the plaintiff as its agent. The release referred to in the pleadings was given long after this suit was instituted, and can have no legal effect as against the plaintiff. The plaintiff is therefore entitled to recover in this case, and the issue and judgment of the court will be accordingly.

PEASE v. DWIGHT.

(6 Howard, 190-200. 1847.)

ERROR to U. S. Circuit Court, District of Michigan.

STATEMENT OF FACTS.- This was a suit on a note made payable originally to Walter Chester, and Pease, Chester & Co. It was averred in the declaration that Walter Chester was made a payee solely for the purpose of procuring his indorsement, and that he had no interest in the matter; that the note was delivered to Pease, Chester & Co., and indorsed by them alone. There was a demurrer because it was not averred that the note was indorsed and delivered by Walter Chester. Judgment for plaintiff.

Opinion by MR. JUSTICE WAYNE.

We think that the only point presented by the record in this case for the decision of the court was rightly ruled by the circuit court.

§ 313. Nominal payee need not indorse a note to transfer title to it, and indorsee of real payee may sue upon it.

That point is, whether a promissory note, payable to the order of several persons, one of whom inceptively refused to be a payee of it, and who was treated by the drawer and other payees, both in the delivery of the note and in its negotiation, as no party and having no interest in it, can be transferred by the indorsement of the real payees, so as to give the ownership of it to the indorsee, and a right of action upon it ex directo, under the statute of 3 and 4 Anne, c. 9. The statute is that "any person, to whom a promissory note that is payable to any person or his order is indorsed or assigned, or the money therein mentioned ordered to be paid by indorsement thereon, shall and may maintain an action for such sum of money, either against the person signing such note, or against any of the persons who indorsed the same, in like manner as in cases of inland bills of exchange." The statute requires a transfer to be made by the indorsement of the person to whom the note is payable, and the interpretation of it is that, where a note is payable to the order of several persons not in partnership, all must separately sign their names as indorsers; the object being that, before an indorsee shall recover the contents of the note in his own name, he shall show he has acquired a property in it by a transfer from those who were the original payees, or from others who were their indorsers. The statute is not merely a form, requiring all the payees to indorse, but a substantial requisition, upon the presumption that all the payees upon the face of the paper have an interest in it, and that they have indorsed it. We

have, then, the rule, and the reason of the rule. And it seems to us that to permit it to comprehend a case of an undertaking between the real parties, because a name had been mistakenly inserted, or had been inadvertently left upon the face of the paper, when the note was delivered to the real payees by the drawee, would be to wrest the statute out of its meaning, and to sacrifice the substantial intention of it merely to form. The statute meant to deal with real parties. The omission to erase the name in such a case does not lessen the drawer's obligation to pay his note to the real payees, or their right of action upon it against the drawer as a note of hand. If, then, the real payees shall indorse the note to a third person, they are within the words of the statute as indorsers; and the indorsee, in an action against them or the drawer, may be permitted to prove the real character of the undertaking, by showing that the name of a person had been inadvertently left upon the paper as a payee, who had refused to be such, and who had been waived as a party to the note, both by the drawer and the real payees, when the contract had been completed between them by the delivery of the note. In the case before us, the declaration recites the particular circumstances under which the note was made and indorsed. The demurrer admits them. That is, that the paper had been indorsed by the real payees of it, but not by the nominal payee, who never was an actual payee nor ever had any interest in the note by being in any way a party to it. It would really be going very far to say that the statute giving the indorsee a right of action for such sum of money, either against the person signing such note, or against any of the persons who indorsed the same, did not mean it to be exercised because a person's name was upon the face of the paper who never had been a party to it. No such decision has been made. It may be because no case of this kind has ever occurred before. We can find none like it. In the absence of all authority against our conclusion, we must take upon ourselves the responsibility of announcing it as an original application of the statute to this case, and for any case of a like kind which may occur, without intending it to go further.

314. Who may transfer a note by indorsement.

We think, however, that the interpretation is sustained by what has been the practice under the statute in some other particulars,- that it is within the spirit of the principle upon which the statute has been administered. For instance, the statute requires the indorsement of a note to be made by the person to whom it is payable, and one of several partners may indorse in the partnership name; but though a note be made payable to a partnership a transfer in the name of one partner alone will pass the partnership interest, if it be proved that it has been the practice of the firm to indorse for them in the name of one only. South Carolina Bank v. Case, 8 Barn. & Cress., 436. So if one partner transfer in the name formerly used by the partnership. Williamson v. Johnson, 1 Barn. & Cress., 146; 2 D. & R. 281. Also, where, a bill is drawn upon a firm, and one partner writes "Accepted," adding only his own name, it will bind the firm, if they were in partnership at the time of the acceptance. An indorsement by the cashier of a bank of a note payable directly to the bank is good, upon the ground that he represents the interest of the bank in it, though he is not officially or otherwise a payee upon the face of the note. In Goddard v. Lyman, 14 Pick., 268, it is said a negotiable note payable to three persons may be legally transferred by indorsement by two of them to the third payee and a stranger; and, if this were doubtful, the indorsement of the third payee to the stranger will clearly pass the property to