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$ 12. Parties to a promissory note.

There are two original parties to a promissory note — the maker and the payee. The person who makes the note is the maker, and the person to whom it is payable is the payee. The note, when made payable to the payee or his order, may, be transferred by indorsement accompanied by delivery to another person, in which case the payee becomes an indorser and the person to whom the note is transferred becomes the indorsee. The holder of a note is the payee or indorsee thereof who is in possession of it, or the bearer thereof when such note is made payable to bearer.73 Where the note is made payable to the order of the maker and by him indorsed and delivered to another, it is, in legal effect, the same as an ordinary promissory note, in which the indorser is the maker and the indorsee is the payee. And where a note signed by two trary to that of the whole of West- is obvious from the preamble of the minster Hall, and there can be no statute, which merely recites that it doubt that promissory notes had ex. had been held that such notes were not actly the same claim to legal recogni- within the custom of merchants,' that tion as bills of exchange, namely, the these decisions were not acceptable to general custom of merchants through- the profession or the country. Nor out England.”

can there be much doubt that, by the Opinion of Chief Justice Cockburn usage prevalent among merchants, in the case of Goodwin v. Robarts, these notes had been treated as securiL. R., 10 Exch. (Eng.) 337 (1878), ties negotiable by the customary in commenting upon the case of Wil- method of assignment, as much as bills liams v. Williams, Carth. 269 (1692), of exchange properly so called. The continues as follows: “ Thus far the statute of Anne may, indeed, practipractice of merchants, traders, and cally speaking, be looked upon as a others, of treating promissory notes, declaratory statute, confirming the dewhether payable to order or to bearer, cisions prior to the time of Lord on the same footing as bills of ex- Holt.” change, had received the sanction of 73. English Bills of Exchange Act, the courts; but Holt having become 1882, § 2. See also Neg. Inst. Law chief justice, a somewhat unseemly (N. Y.), $ 2. conflict arose between him and the What constitutes a holder.-A permerchants as to the negotiability of son must be in actual or constructive promissory notes, whether payable to possession of a note to become the legal order or bearer, the chief justice tak holder thereof, and it must be shown ing what must now be admitted to that he was in legal possession. Lyhave been a narrow-minded view of the saght v. Bryant, 9 °C. B. (Eng.) matter, setting his face strongly 46; Jenkins v. Tongue, 29 L. J. against the negotiability of these in Exch. (Eng.) 147; Ancona v. Marks, struments, contrary, as we are told by 7 H. & N. (Eng.) 686. It is not authority, to the opinion of Westminster Hall, and in a series of sue in the personal possession of the note;

necessary that the indorsee should be cessive cases, persisted in holding them not to be negotiable by indorsement or

possession by his agent is sufficient. delivery. The inconvenience of trade

Richardson v. Lincoln, 5 Metc. (Mass.) arising therefrom led to the passing 201. The holder, even if not the owner, of the statute of 3 & 4 Anne, chap. 9, may maintain, in his own name, an acwhereby promissory notes were made tion on the note, with the owner's concapable of being assigned by indorse. sent. Wheeler v. Johnson, 97 Mass. 39. ment or made payable to bearer, and 74. Scull v. Edwards, 13 Ark. 24, such assignment was thus rendered 56 Am. Dec. 294. In this case it was valid beyond dispute or difficulty. It held that the indorsee acquires a prim

or more persons is made payable to one of them, who in turn indorses it, he is liable thereon as maker.75 In many of the States the rule has been declared, by statute or by the courts, that a promissory note made payable to the order of the maker, if issued for a valuable consideration without indorsement, has the same effect against the maker as if payable to bearer. 76

D. OTHER FORMS OF COMMERCIAL PAPER. $ 13. Bank notes; definition and use.

A bank note may be defined as a promissory note, made by a bank or a banker, payable to bearer on demand." Bank notes are

itive title and not derivative, and the vent the indorsee from maintaining indorsement to him is not technically suit thereon. Ormsbee v. Kidder, 48 such, but is a part of the instrument Vt. 361. itself. See also Towne v. Smith, Fed. Where the instrument is given by Cas. No. 14,115; Winona Bank v. Wof- one firm to another, both having a ford, 71 Miss. 711, 14 South. 262. common member, it is not a promis.

75. Schmidt v. Archer, 113 Ind. 365, sory note until it is assigned by the 14 N. E. 543. An instrument signed latter firm; the assignee in such case by two persons is not invalid as a is to be regarded, as between himself promissory note because it is payable and the makers, as the real payee, and to the order of “myself.” Jenkins v. may maintain an action against the Bass, 88 Ky. 397, 11 S. W. 293, 21 makers. Murdock v. Caruthers, 21 Am. St. Rep. 344.

Ala. 785. Where the name of a firm The statutes of Kentucky provide is signed by one of two partners to a (Gen. Stats., chap. 22, § 13), that note payable to the other, it is, in where a note is made payable to the effect, merely the note of the former to maker's order, and is indorsed by him, the latter. Morrison v. Stockwell, 39 and then delivered, such signature and Ky. 172. delivery operates as a promise to pay 76. California.- Code, $ 3102. And the face of the note at maturity to the see Main v. Hilton, 54 Cal. 110. person to whom the same shall be de- Mississippi.-Columbus Ins. & Bank. livered. Under this statute it has Co. v. First Nat. Bank, 73 Miss. 96, been held that where a note, signed by 15 South. 138. the defendant and M., was made pay- Missouri.–Lowrie v. Zankel, 49 Mo. able to the order of M, and the latter App. 153. signed his name on the back of the New York. The statute of New note, and delivered it to the plaintiff, York formerly provided that a note that the defendant became liable to the made payable to the order of the plaintiff. Jenkins v. Bass, 88 Ky. 397, maker" shall, if negotiated by the 11 S. W. 293, 21 Am. St. Rep. 344, maker, have the same effect and be of See, generally, Pitcher v. Barrows, 34 the same validity as against the maker Mass. 361, 28 Am. Dec. 306; Heywood and all persons having knowledge of v. Wingate, 14 N. H. 73; Rombo v. the funds, as if payable to the bearer.” Metz, 5 Strobh. (S. C.) 108, 53 Am. (Rev. Stat., pt. 2, chap. 4, tit. 2, § 5.) Dec. 694; Woods v. Ridley, 30 Tenn. This statute was repealed in 1897 by 194; Norton v. Downer, 15 Vt. 569. the Negotiable Instruments Law, and

Notes signed by firm payable to under section 27 of that law it is now member. Where a note signed by all provided that a note made payable to the members of a firm is made payable the maker is payable to order. See the to the order of one of them, the legal following cases which arose under the disability of the payee to maintain an former act: Irving Nat. Bank v. action thereon, because he would be Alley, 79 N. Y. 536; Turnbull v. Bowboth plaintiff and defendant, does not yer, 40 N. Y. 456; Shipman v. Bank of disqualify him from indorsing the note New York, 126 N. Y. 318, 27 N. E. 371. to a third party for value, nor pre- 77. Byles on Bills (16th ed.), p. 10,



generally issued for circulation as money.

The laws of many States authorize the issue of circulating notes by banks and bankers and provide for their redemption by the deposit with the State of ample security.79 The National Banking Act expressly provides for the issue of circulating notes by national banks organized under that act, to be secured by the deposit of United States bonds. The United States statutes do not prohibit the issue of circulating notes by State banks, under the sanction of State authority, but they impliedly discourage it by imposing a tax on all notes “ of any person, or of any State bank or State banking association, used for circulation ” and paid out by any national or State bank.81 It follows, therefore, that the bank notes in use in this country are those issued by national banks, under the direct control of Federal authority. These notes are a most important part of our circulating medium. Their payment being secured by the deposit of government bonds, and the banks issuing them being so closely supervised by the governmental departments having them in charge, they circulate without regard to the banks which

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contains the following definition of a ing association, State bank, or State bank note: “A bank note is a prom- banking association shall pay a tax of issory note, made by a banker, payable ten per centum on the amount of notes to bearer on demand, and intended to of any person, or of any State bank or circulate as money."

State banking association, used for cirEdwards defines a bank note as a culation and paid out by them.” species of promissory note drawn pay. Object of tax; power to impose.able to bearer on demand, and for This section does not lay a direct tax. many purposes treated and considered Congress having undertaken, in the exas cash.” Edwards on Bills, etc., & 20. ercise of undisputed constitutional Parsons defines a bank note as a

power, to provide a currency for the “promissory note of a bank payable on whole country, may secure the benefit demand to bearer and therefore nego- of it to the people by appropriate leg. tiable by delivery.” 2 Parsons on islation, and to that end may restrain, Notes and Bills, 2, 88.

by suitable enactments, the circulation 78. Byles on Bills ( 16th ed.), p. 10. of any notes not issued under its au79. States authorizing circulating

thority. Veazie Bank v. Fenno, 8 notes are Kentucky, Louisiana, Maine, Wall. (U. S.) 533. Maryland, Massachusetts, Minnesota,

The tax is on the notes paid out, New Hampshire, New Jersey, New York,

that is, made use of as a circulating Ohio, Pennsylvania, Rhode Island, Tennessee, Vermont, West Vir. medium. Such a use is against the

Thereginia. In the States of Arkansas, Cali- policy of the United States. fornia, Mississippi, Nevada, Oregon,

fore the banker who helps to keep up Texas, and Washington the issue of the use by paying them out, that is, circulating notes is prohibited by the employing them as the equivalent of Constitution; and in the States of Ala- money in discharging his obligations, bama, Colorado, Florida, Idaho, Illi- is taxed for what he does. The taxanois, and Michigan such notes are pro- tion is no doubt intended to destroy prohibited by statute.

the use; but that, as has just been 80. U. S. Rev. Stat., 88 5157-5189. seen, Congress has the power to do.

81. U. S. Rev. Stat., & 3412, which Merchants' Nat. Bank v. U. S., 102 provides that: “ Every national bank. U. S. l.

gave them life. The rules relating to negotiable instruments are not often applied to these notes.



§ 14. Due bills and I 0 U's.

It has been generally held in this country that a due bill,- a paper whereby the maker acknowledges his indebtedness to the payee in form substantially as follows: “ Due B. one hundred and fifty dollars, payable to his order. (Signed) A.,"—is a promissory note.82 This is upon the theory that the acknowledgment of indebtedness on its face implies a promise to pay. As

82. Forms of due bills.“Due A. Kentucky.–Kalfus v. Watts, 16 Ky. B. $325, payable on demand " held a 197. promissory note. Kimball v. Hunting- Louisiana.— Spearing v. Zacharie, ton, 10 Wend. (N. Y.) 675, 25 Am. 26 La. Ann. 496. Dec. 590. See also Carver v. Hayes, Maine.- Carver v. Hayes, 47 Me. 47 Me. 257.

257. A paper as follows:

“ $525. Con- Massachusetts.— Lincoln v. Butler, ger, Aug. 23, 1865. Due G. S. W., on 14 Gray (Mass.), 129. corn, five hundred and twenty-five dol- Missouri.— Finney v. Shirley, 7 Mo. lars. (Signed) A. B.” is a promis- 42; McGowen v. West, 7 Mo. 569, 38 sory note. Jacquin v. Warner, 40 Ill. Am. Dec. 468; Brady v. Chandler, 31 459. But a writing as follows: “I Mo. 28. owe the estate of Zenas Warden, New York.- Luqueer v. Prosser, 1 $190.15. May 13, 1863” was held to Hill (N. Y.), 256; Sackett v. Spencer, import a mere statement of balance, 29 Barb. (N. Y.) 180; Russell and not to be a promissory note. Whipple, 2 Cow. (N. Y.) 536; ShelBowles v. Lambert, 54 Ill. 237. See don v. Heaton, 88 Hun (N. Y.), 535, Lincoln v. Butler, 18 Gray Mass.), 34 N. Y. Supp. 856. 129; McGowen v. West, 7 Mo. 569. Pennsylvania.- Potts v. Coal Co., 6

An instrument in these words: Phila. (Pa.) 249. “Good to Robert Cochran, or order, South Carolina.- Pepoon v. Stagg, for $30, borrowed money " is a valid 1 Nott & McC. (S. C.) 102. promissory note. Franklin v. March, South Dakota.- Schmitz v. Hawk6 N. H. 364, 25 Am. Dec. 462. But a eye Gold Min. Co., 8 S. D. 544, 67 N. similar instrument, in which the payee W. 618. was not named, was held not to be a Tennessee.- Read Wheeler, 10 promissory note. Brown v. Gilman, Tenn. 50; Cummings v. Freeman, 21 13 Mass. 157.

Tenn. 143; Marrigan v. Page, 23 Tenn. See also in general on this proposi- 247. tion:

Texas.- Hopson v. Brunwankel, 24 Alabama.- Johnson Johnson, Tex. 607, 76 Am. Dec. 124. Minor (Ala.), 263; Bowie v. Foster, See 7 Century Digest, “ Bills and Minor (Ala.), 264; Fleming v. Burge, Notes," $ 61. 6 Ala. 373.

83. Kimball Huntington, 10 Arkansas.- Huyck v. Meador, 24 Wend. (N. Y.) 675, 25 Am. Dec. 590. Ark. 191.

See also Elder v. Rouse, 15 Wend. Connecticut.- Smith v. Allen, 5 Day (N. Y.) 220; Sackett v. Spencer, 29 (Conn.), 337; Currier v. Lockwood, 40 Barb. (N. Y.) 184; Woodward v. Conn. 349, 16 Am. Rep. 40.

Genet, 37 Barb. 527. Georgia.- Mitchell v. Rome R. Co., But in Connecticut it has been held 17 Ga. 574; Brewer v. Brewer, 7 Ga. that while the law implies a promise 584; Lowe v. Murphy, 9 Ga. 338; Hart to pay from a mere due bill or acv. Conner, 21 Ga. 384.

knowledgment of debt, if the promise Illinois. - Bilderback v. Burlingame, is simply implied and not expressed, 27 Ill. 337; Sears v. Wesleyan Univer- the instrument cannot be classed with sity, 28 Ill. 183.

promissory notes. Currier v. Lock




suggested by the foot-note, there is some conflict of authority as to effect of the promise to pay implied in a due bill; many nice distinctions have been drawn, none of which are entirely satisfactory. A mere acknowledgment of debt evidenced by an IO U is held not to be a promissory note in England, 54 and many authorities in this country are to the same effect.85 It seems well settled, however, that if the due bill or I O U contains words which would import a promise to pay and render the instrument negotiable it should be treated as a promissory note.86 If an IO U contains an agreement that it is to be paid on a given day, or on demand, it will be a promissory note 87 Some of the States have, by statute, extended the law of bills and promissory notes to all instruments in writing whereby any person acknowledges any sum of money to be due to any other person.


wood, 40 Conn. 349, 16 Am. Rep. 40. W. 216; Fesenmayer v. Adcock, 16 And in Louisiana a due bill is a mere Mees. & W. 449. acknowledgment of debt, and, the 85. In Massachusetts it has been promise to pay money being only im- held that a mere promise implied by plied, it does not fall within the defini- law, founded on an acknowledgment of tion of a promissory note. Garland v. indebtedness, is not sufficient to constiScott, 15 La. Ann. 143. But this case tute a promissory note; as where the seems overruled by Spearing v. Zach- instrument was in the following form: arie, 26 La. Ann. 496. And in Missouri it has been held

“ Marlboro', Sept. 23, 1881.

I OU, E. A. Gay, the sum of that a memorandum stating that a certain sum is due, with interest, but seventeen dolls. 5/100, for value re


JOHN R. ROOKE." containing no express promise or time of payment, and naming no payee, is Gay v. Rooke, 151 Mass. 115, 23 not a promissory note. Biskup v. N. E. 835, 21 Am. St. Rep. 434, 7 L. Oberle, Mo. App. 583.

R. A. 392. In this case the court said: Story says (Promissory Notes, $ 14) " While in a few States it has been that “ to constitute a good promissory held otherwise, the law as generally note, there must be an express promise understood in this country is, that in on the face of the instrument to pay the absence of any statute, a mere acmoney; for a mere promise implied by knowledgment of a debt is not a promlaw, founded upon an acknowledged in- issory note, and such is, we think, the debtedness will not be sufficient.” But law of this Commonwealth." The folthis declaration of the rule is not up- lowing cases are cited: Gray v. Bow. held by the weight of authority either den, 23 Pick. (Mass.) 282; Commonof the decisions as above cited, or of wealth Ins. Co. v. Whitney, 1 Metc. the text-writers. See Byles on Bills, (Mass.) 21; Daggett v. Daggett, 124 p. 8; Parsons on Notes and Bills, Mass. 149; Almy v. Winslow, 126 § 24: Chitty on Bills, p. 428.

Mass. 342; Carson v. Lucas, 13 B. 84. Most of the English cases arose Mon. (Ky.) 213. under the Stamp Act and they held 86. Russell v. Whipple, 2 Cow. (N. that such paper did not require a Y.) 5.36; Wardwell v. Sterne, 22 La. stamp as it was only an evidence of Ann. 28. indebtedness. Israel Israel, 1 87. Byles on Bills (16th ed.), p. 35. Campb. 499; Gould v. Coombs, 1 C. B. See Brooks v. Elkins, 2 Mees. & W. 74; 543; Childers v. Boulnois, Dowl. & R. Waithman v. Elsee, 1 C. & K. 35; 8; Smith v. Smith, 1 Fost. & F. 539; Brown v. Gilman, 13 Mass. 158. Beeching v. Westbrook. 8 Mees. & W. 88. Gay v. Rooke, 151 Mass. 115, 411; Melanotte v. Teasdale, 13 Mees. & 23 N. E. 835, 21 Am. St. Rep. 434, 7


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