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dorser,-it was held competent to fying the indorsement of the defendshow by parol the actual contract and ant on the note, this fact furnishes no intent of the parties to have been that ground for enlarging or changing the the word, “cashier," and the words, indorsers' liability on the contract into "for collection for account of,” were which they in fact entered. not intended to have been inserted in It has been held in case of the inthe indorsement.
White dorsement of a note payable to a wife, (1895) – Tex. Civ. App. -, 31 S. W.
by the wife and also by her husband, 553.
that it may be shown that the words, In First Nat. Bank v. McCann (1879) “without recourse on us," following 4 Ill. App. 250, an indorsee of a note the husband's signature, and before which the payee had indorsed for col- the next indorser's signature, may be lection for his (the payee's) account, shown to qualify both the husband's and on which the indorsee had brought and wife's indorsement. Corbett v. suit against the maker, was permitted Fetzer (1896) 47 Neb. 269, 66 N. W. to show that the qualified indorsement 417. The action in this case was bewas a bona fide assignment for a valu
tween the parties, and in Nebraska it able consideration, but no question is competent to vary an unqualified inseems to have been raised.
dorsement by parol evidence as beParol evidence is not competent to tween the parties. vary or explain an indorsement in the is the theory that the words, words: "I bind myself and my repre- "without recourse," have the same efsentatives not to take advantage of fect, whether they precede or follow the statute by which indorsers are the signature. Leahmer v. McCulreleased from liability, after the first lough (Kan.) Fitchburg Bank v. court ensuing the maturity of this Greenwood (Mass.) and Corbett v. note.” Foster v. Stafford (1848) 14 Fetzer (Neb.) supra.
“There is no Ala. 714.
rule of law," says the court in Fitch
burg Bank v. Greenwood (Mass.) sud. "Without recourse" between indors. erg' signatures.
pra, "which requires the party to limit
or qualify his indorsement by any Where the words, "without re
writing preceding his signature. Such course," appear after the signature of
qualification may and often does folthe first indorser and before that of
low the name of the party." In Leahthe second indorser, parol evidence is
mer v. McCullough (Kan.) supra, the competent to show that the restric
fact is noticed and stated to be very tive words were intended to apply to
persuasive that the handwriting in the first indorser. Leahmer v. McCul
which the name of the payee and the lough (1917) 99 Kan. 451, 162 Pac.
words, "without recourse," appeared, 297 (payee's indorsement involved;
was the same. Similar facts were noplaintiff was a subsequent indorsee,
ticed in Corbett v. Fetzer (Neb.) not the payee's immediate indorsee,
supra. but whether he had notice is not stated); Goolrick v. Wallace (1913) 154
The Negotiable Instruments Act
provides that a qualified indorsement Ky. 596, 49 L.R.A.(N.S.) 789, 157 S.
may be made by "adding to the indorsW.920.
er's signature" the words, "without That evidence is admissible for such purpose has been held true as against
recourse," or words of similar import a bona fide holder. Fitchburg Bank
In Goolrick v. Wallace (1913) 154 Ky. v. Greenwood (1861) 2 Allen (Mass.)
596, 49 L.R.A. (N.S.) 789, 157 S. W. 434. The court states that the object
920, it is stated that under this stator effect of this evidence is not to vary
ute, "strictly speaking, these words or modify the contract of the indors
[that is, 'without recourse'] could not ers, but is to show the exact contract appear above the signature whose ininto which the indorser had entered;
dorsement they were intended to that, if the bona fide holder mistook qualify, but we do not feel that the the application of the words which statutes should be given so narrow a were written for the purpose of quali- construction, and hold that the quali. fying words should limit the liability Evidence that an indorsement was for of that indorsement to which they collection, or to transfer the instruwere intended to be applied when ment to the true owner, etc., shows an placed upon the instrument.” It was absence of an intention to contract,accordingly held in this case that, un- at least, an absence of an intention to der the statute, parol evidence was ad- assume any of the obligations implied missible to show that the words, from an indorsement. In the case of "without recourse," appearing after an indorsement for collection, it is not the signature of the first indorser of intended to pass the property to the in. a promissory note and before the sig- dorsee, but is intended simply to ennature of the second indorser, were in- able the indorsee to collect for the intended to apply to and limit the con- dorser. In the case of an indorsement tract of the first indorser. This de- simply to transfer to the true owner, cision is based in part, at least, on the the indorser has no interest in the ambiguity arising from the location of
transaction and intends to assume no the restricting words, the court stat- obligations. So, in the other situaing that “it is impossible to tell, from
tions presented in this subdivision, the location of the qualifying words
there is a lack of intention of contract, with reference to the indorsement on
—at least, a lack of intention to asthe paper, to which indorsement they apply;" and therefore the ends of jus
sume any of the obligations implied tice require that all evidence should be
from an indorsement, even the most
limited thereof. introduced to establish this fact. In Leahmer v. McCullough (1917) 99
It may be shown that an indorseKan. 451, 162 Pac. 297, decided under
ment was never intended as a transfer this provision of the Negotiable In
of title. Ragsdale v. Ragsdale (1900) struments Act, it is stated that under
105 La. 405, 29 So. 906; Runyon v. this act, as well as prior thereto, parol
Clark (1856) 49 N. C. (4 Jones, L.) 52. evidence is admissible in such a case.
Parol evidence is competent in an In Lawrence v. Dobyns (1860) 30
action by the transferee after maturity Mo. 196, where a note was indorsed by
of the payee, who was also the first the payee, and following his name
indorser of the note, against a subsewere the words, “Without recourse,
quent indorser, to show that the note S. J. Levi” (Levi being an agent of the
had been regularly transferred to such payee), the court assumes without dis
defendant and by him returned to the cussion that the payee's indorsement
payee upon payment. Adrian v. Mcwas in blank, and denies evidence of
Caskill (1889) 103 N. C. 182, 3 L.R.A. an agreement to show that it was to
759, 14 Am. St. Rep. 788, 9 S. E. 284. be without recourse.
This was held as against a holder
without knowledge of the above-menV. Evidence to show absence of contrac
tioned transfers. The fact, however, tual intention or limited contractual
that the note was taken from the payee, intention.
was held to charge the transferee
with what appeared upon the note a. In general.
itself. The parol evidence rule assumes the An indorser, when sued by his inexistence of a written contract, and dorsee, may prove that his name was denies the admissibility of parol evi- written on the back of the instrument dence to vary or explain the contract long prior to the transfer, and for the as thus evidenced. When the evidence purpose of enabling an agent to collect sought to be introduced is to the effect the same, and that it was agreed that that there was no contract, as, for the transfer to the plaintiff should be example, because of lack of delivery, made without the defendant's indorsethe evidence is not generally regarded ment; but, by neglect, the name was as inadmissible because of the parol not erased. Hudson v. Wolcott (1884) evidence rule. This principle finds its 39 Ohio St. 618. application in the cases discussed in Thus, it may be shown that the this subdivision of the present note. payee who had indorsed the note in
er its maturity, and after it had been misappropriated by the person intrusted with it, in Goggerley v. Cuthbert (1806) 2 Bos. & P. N. R. 170, 127 Eng. Reprint, 589, 9 Revised Rep. 632.
But where a note bears the payee's indorsement, and the payee and her son negotiate the note thus indorsed to a bank as security for a loan to the son, without anything being said as to an interest remaining in the payee, it has been held that evidence that payee retained an interest therein is incompetent. Cropsey v. Averill (1879) 8 Neb. 151.
And see the cases passing upon the admissibility of parol evidence in case of indorsements for purposes of identification, infra, VII.
structed another who negotiated it to erase the indorsement before delivery to the purchaser, but, through mistake, the note was delivered with the signature remaining thereon. Gregg v. Groesbeck (1895) 11 Utah, 310, 32 L.R.A. 266, 40 Pac. 202.
In CLARK V. SALLASKA (reported herewith ante, 746, a payee, to whom à note indorsed by him and used as collateral security has been returned, was held entitled to show an agreement upon a subsequent transfer that the indorsement thus made was not to have legal effect as an indorsement, but should be limited to defects, infirmities, and equities existing between him and the maker of the note.
In Jenkins v. Shinn (1892) 55 Ark. 347, 18 S. W. 240, an action by an indorsee who held the note as collateral security, against the maker, parol evidence was held inadmissible to show that the indorsee was to have no authority to collect the note. In this case, a receipt had been given by the indorsee which embodied the contract between the indorsee and indorser, and seemingly it is the modification of this contract that the court is considering rather than the indorsement.
See Smith v. Barber (1790) 1 Root (Conn.) 207, supra, II. a, 1.
It may also be shown that the indorsement by the payee of a promissory note which was delivered to the makers, and by them negotiated, was not, to the knowledge of the person to whom it was negotiated, to be delivered except upon the compliance with certain conditions. Ricketts v. Pendleton (1859) 14 Md. 320. “There can be no doubt,” says the court, “that it is competent for a defendant to show by parol that a promissory note, on which he is sued as indorser, was delivered as an escrow, or that it was delivered to the plaintiff to be held upon a condition to be performed before the interest of the holder could attach."
The payee of a bill who indorsed it and delivered it to another to raise money for him (the payee) was held entitled to recover the bill in an action in trover, from one into whose hands it had come without consideration, aft
b. Indorsement for collection, As between the parties or those having notice, parol evidence is admissible to show that an unqualified indorsement was for collection. Thus, an indorser may show in defense of an action on his indorsement that no sale of the bill or note was intended, but that the indorsement was made for purposes of collection only. Johnston v. Schnabaum (1908) 86 Ark. 82, 17 L.R.A.(N.S.) 838, 126 Am. St. Rep. 1082, 109 S. W. 1163, 15 Ann. Cas. 876; Rhodes v. Risley (1791) 1 D. Chip. (Vt.) 52, 1 Am. Dec. 696.
In Herrick v. Carman (1813) 10 Johns. (N. Y.) 224, it was held competent in an action by the second indorsee of a promissory note against his immediate indorser, to show that the plaintiff gave no consideration for the note, but held it merely as the agent of the payee or first indorser, to collect the amount for them; therefore, had no right to bring the suit.
See Dale v. Gear (1871) 38 Conn. 15, 9 Am. Rep. 353, supra, II. a, 4.
Where the payee of a note indorsed the same to his agent for collection, and several years thereafter sold the note and transferred it to the purchaser, the indorsement as between the indorser and indorsee must be deemed to have been made at the time of the sale, so that the purpose of the payee in previously making the indorsement is immaterial. Goodwin y.
Davenport (1860) 47 Me. 112, 74 Am. may show by parol evidence that the Dec. 478.
bill was indorsed to the plaintiff for The payee who has indorsed a note collection only, and that the payee in blank and delivered it to an agent had notified the drawer not to pay to may show, as against an attaching plaintiff. Barker v. Prentiss (1810) 6 creditor of the agent, that the indorse- Mass. 430. ment and delivery were for the pur- It may be shown that a note was inpose of collection or discount for the dorsed by an officer of the maker, and use of the payee. Avery & Son v. Mil- intrusted to the plaintiff for discount. ler (1888) 86 Ala. 495, 6 So. 38; How- Hamburger v. Miller (1877) 48 Md. ell v. McCarthy (1916) 77 W. Va. 695, 325. 88 S. E. 181.
That the indorsement of a bill by In an action to recover the proceeds the cashier of a bank to the cashier of a bill or note collected by the in- of another bank is not conclusive evi. dorsee, it may be shown that the in- dence of the transfer of the property dorsement was for collection. Mc- in the bill, but that it may be for colWhirt v. McKee (1870) 6 Kan. 412; lection, and it is competent to show Armstrong v. National Bank (1890) by evidence, where the fact becomes 90 Ky. 431, 9 L.R.A. 553, 14 S. W. 411. material, as to the way in which the
The admissibility of parol evidence indorsement operated, is held also in does not arise in Blairne v. Bourne Church V. Barlow (1830) 9 Pick. (1875) 11 R. I. 119, 23 Am. Rep. 429; (Mass.) 547. but the court there states that, even Under the provision of the Negoti. where there is a general indorsement able Instruments Act that delivery of of paper which is sent only for collec- an indorsed instrument which has not tion, it will remain the property of the come into the hands of a holder in due sender as to all persons having notice. course may be shown to have been The supreme court of Kansas in the
conditional, for a special purpose only, case of McWhirt v. McKee (Kan.) and not made to transfer property in supra, states that such testimony does
the instrument, an unrestricted innot contradict the assignment, nor
dorsement on a check sent by one bank does it vary it, nor even explain it;
to another may be shown to have been that the contract is “outside of the as
for collection, where the rights of signment, and . parol in its
bona fide holders are not involved. character, and therefore could be
Morris-Miller Co. v. Von Pressentin proved by oral testimony. The con
(1911) 63 Wash. 74, 114 Pac. 912. tract was that [the indorsee] was to
The right to show by parol that an take the note, collect it, and, when col
indorsement was for purposes of collected, to pay it over, and all this was
lection arises in actions by the inin parol. The 'assignment forms no
dorser against the maker, where the part of the contract, and was made only
indorser's right to maintain the action to assist [the indorsee] in the perform
is raised. It is generally held in such ance of the obligation he took upon
cases that parol evidence is admissihimself by reason of the contract."
ble to show that the indorsement was The drawer of a bill of exchange
made for purposes of collection only. payable to his own order, who has in
Dickinson v. Burr (1854) 15 Ark. 372, dorsed the same in blank and deposit- overruling Purdy v. Brown (1842) 4 ed it for collection in a bank by which Ark. 535; Smith v. Childress (1871) 27 it is indorsed in blank and sent Ark. 328; Carhart v. Wynn (1857) 22 through a second bank to a third bank, Ga. 24, approved in Goette v. Sutton which collected the bill, may show, as (1907) 128 Ga. 179, 57 S. E. 308, a against the bank making the collec- case not within the scope of this antion, that his indorsement was for pur- notation. But it has been stated genposes of collection only. Lawrence v. erally that the holder's own blank Stonington Bank (1827) 6 Conn. 521. indorsement, left uncanceled on a note
The drawer of a bill of exchange, on which action is brought, will not, when sued thereon by an indorsee, in general, prevent his recovery. Mid
dleton v. Griffith (1894) 57 N. J. L. 442. This principle is applied in other cases (Zimmer v. Chew (1898) 34 App. Div. 504, 54 N. Y. Supp. 685), and is not exhaustively considered herein.
In one of these cases the indorsement was by a bank, and was in the usual form to pay to any bank or banker, and it is stated that such an indorsement shows on its face that it passed title for collection only. Johnston v. Schnabaum (1908) 86 Ark. 82, 17 L.R.A.(N.S.) 838, 126 Am. St. Rep. 1082, 109 S. W. 1163, 15 Ann. Cas. 876.
But parol evidence is not admissible as against a holder for value without notice, either in a suit by such holder upon the indorsement (Parker v. Stallings (1868) 61 N. C. 590, 98 Am. Dec. 84), or in a suit by the indorser to recover the proceeds from such holder (Bradford v. Williams (1884) 91 N. C. 7).
As to the right to introduce parol evidence when a note is indorsed "for collection," see IV. c, supra. c. Indorsement for collateral security.
A payee who has indorsed notes and delivered them as collateral security may show this fact by parol evidence in an action to recover of the person to whom the notes have been delivered, and who has collected them. Hazzard v. Duke (1878) 64 Ind. 220; Wood v. Matthews (1881) 73 Mo. 477.
In a very brief opinion the supreme court of Washington, in Keeler v. Commercial Printing Co. (1897) 16 Wash. 526, 48 Pac. 239, holds parol evidence admissible as against a party who took with knowledge that a note was indorsed in blank for security merely. d. Indorsement to transfer to true owner.
As between the indorser and his immediate indorsee it may be shown that the indorser was merely a nomi. nal holder of the note, which in fact belonged to the indorsee, and that the indorsement was made for the purpose merely of vesting title in the true owner. First Nat. Bank v. Reinman (1910) 93 Ark. 376, 28 L.R.A. (N.S.) 530, 125 S. W. 443; Allin v. Williams (1893) 97 Cal. 403, 32 Pac. 441; Scammon v. Adams (1850) 11
Ill. 575 (obiter); Lovejoy v. Citizens' Bank (1880) 23 Kan. 331. It may be shown that an indorsement was made for the express purpose of transferring a note which had been drawn payable to the indorser's order without his knowledge or consent, to the owner, even though there is in the note a waiver of presentment for payment, notice of nonpayment protest, and notice of protest and diligence in bringing suit thereon. Farmers Sav. Bank v. Hansmann (1901) 114 Iowa, 49, 86 N. W. 31. An agent, who, in remitting funds to his principal, purchased a draft to his own order and indorsed the same, may, as against his principal, show the intention as to personal liability on the indorsement. Lewis v. Brehme (1870) 33 Md. 412, 3 Am. Rep. 190; Castrique v. Buttigieg (1855) 10 Moore, P. C. C. 94, 14 Eng. Reprint, 427, 4 Week. Rep. 427. А court of equity will restrain an action on an indorsement by an agent, of a draft purchased by him to remit funds to his principal, and accidentally made payable to the agent, either by the principal or an indorsee with notice. Kidson v. Dilworth (1818) 5 Price, 564, 146 Eng. Reprint, 695, 19 Revised Rep. 656. It may be shown that a note belonging to a bank, but payable to its president according to custom, was indorsed by the president for the purpose of transferring legal title to the bank, in an action by the bank on the indorsement. Lovejoy V. Citizens' Bank (Kan.) supra.
In M'Donough v. Goule (1835) 8 La. 472, an agent who had indorsed a note payable to himself, and delivered the same to his principal with the intent merely of transferring the legal title to the principal, was allowed to show this fact as against another agent of the principal in a suit upon the note; but it seems no question was raised as to the competency of the evidence.
An indorser may, when sued upon his indorsement, show by parol that the note was made payable to him by mistake, but in fact belonged to his principal, and that it was transferred to the indorsee to pay a debt of the principal. The parol evidence in such a case does not vary the terms of the