omission of the words "or order or bearer," in a bill of exchange or promissory note, only affects the negotiability of the instrument; such words are not essential to the validity of such instrument if it possesses all the other requisites.23 b. What are words of negotiability. The words "or order," "or bearer," are so commonly used in commercial instruments that they are sometimes supposed to be essential to negotiability. But it has been said, "in order to make a promissory note or other obligation for the absolute payment of a sum certain, on a certain day, negotiable, it is not essential that it should in terms be payable to bearer or order. Any other equivalent expressions demonstrating the intention to make it negotiable will be of equal force and validity." Words in a bill from which it can be inferred that the person making it, or any other party to it, intended it to be negotiable, will give it a transferable quality against that per 99 24 Barb. 374; Mechanics' Bank v. Strai- the presumption of the consideration, ton, 3 Keyes, 365, 35 Abb. Pr. (N. S.) 11; Maule v. Crawford, 14 Hun, 193. Ohio.- Smurr v. Forman, 1 Ohio, 272. Pennsylvania.— Gerard v. La Coste, 1 Dall. 194. South Carolina.- Pepoon v. Stagg, 1 Nott & McC. 102. South Dakota.- Searles v. Seipp, 6 S. D. 472, 61 N. W. 804. 23. Louisville, etc., R. R. Co. v. Caldwell, 98 Ind. 245. Negotiability as an essential element. A promissory note without words of negotiability may be declared upon as a note within the statute. Downing v. Backenstoes, 3 Cai. (N. Y.) 137; Payne v. Moelke, 53 How. Pr. (N. Y.) 273. from the possession and production of such note by the payees, is sufficient to sustain a recovery on it by them, where the transaction which resulted in giving the note is not disclosed by the evidence. Among other cases holding that words of negotiability are not essential to the validity of a promissory note or bill of exchange, are: Bates v. Butler, 46 Me. 387; Sibley v. Phelps, 6 Cush. (Mass.) 172; Brady v. Chandler, 31 Mo. 28; Cummings v. Freeman, 2 Humph. (Tenn.) 143; Arnold v. Sprague, 34 Vt. 402. 24. Wilson County v. Third Nat. Bank, 103 U. S. 770, 26 L. Ed. 488. In this case the bonds in question were payable to the railroad company, or In the case of Carnwright v. Gray, holder, if the bond were transferred 127 N. Y. 92, 27 N. E. 835, 24 Am. St. by the signature of the president of Rep. 424, 12 L. R. A. 845, it was held the company, and the court said that that a promissory note containing no this was equivalent to making the words of negotiability is within the bonds payable to the company or order statute, providing that the promise to when they bore the indorsement of the pay to a person or order, or to the president. bearer, is due and payable as expressed In United States v. White, 2 Hill in such note, and that the payees or (N. Y.), 59, 37 Am. Dec. 374, a indorsees may maintain actions for promissory note was made payable the sums of money mentioned therein to the order of the indorser named," against the makers and indorsers of and that was held to be negotiable. the same, respectively, in like manner In Dutchess County Ins. Co. v. as in cases of inland bills of exchange, Hatchfield, 1 Hun (N. Y.), 675, a and not otherwise. Therefore, the bond payable to a payee in blank, his note, without such words of negotia- executor, administrator, or assigns, bility, imports a consideration; and was held negotiable. son. 25 As a rule for the construction of instruments the Negotiable Instruments Law has provided that "the instrument need "not follow the language of this act, but any terms are sufficient "which clearly indicate an intention to conform to the require"ments hereof." 28 In view of this statutory rule it is clear that the words "or order," "or bearer," are not essential to negotiability if the intent of the parties to provide for such negotiability be clearly indicated. c. When payable to order; (1) statutory provision.- The Negotiable Instruments Law contains the following: "The instrument is payable to order where it is drawn payable "to the order of a specified person or to him or his order. It may be drawn payable to the order of: 66 "1. A payee who is not maker, drawer or drawee; or 2. The drawer or maker; or "3. The drawee; or "4. Two or more payees jointly; or 66 5. One or some of several payees; or "6. The holder of an office for the time being. "Where the instrument is payable to order the payee must be "named or otherwise indicated therein with reasonable cer"tainty." 27 This section of the act has preserved the old rule that an instrument is payable to order when it is drawn payable to the order of a specified person or to him or his order. The English Bills of Exchange Act 28 provides in accordance with Scotch law that a bill is payable to order which is expressed to be so payable or which is expressed to be payable to a particular person, and does not contain words prohibiting transfer or indicating an intention that it should not be transferable." It would seem that this change might, with propriety, have been adopted. The interests of the commercial public require that instruments should be, as far as possible, negotiable, and the reason for putting the word "order" in the instrument, to make it negotiable, seems to be founded upon technicality. While it may have been doubted at one time whether a note payable to the order of A. B. was equivalent to one payable to A. B. 25. United States V. White, 2 Hill (N. Y.), 59, 37 Am. Dec. 374; Putnam V. Crymes, 1 MeMul. (S. C.) 9; Raymond v. Middleton, 29 Pa. St. 529, 36 Am. Dec. 250. 26. Neg. Inst. Law (N. Y.), § 29. See Appendix. 27. Neg. Inst. Law (N. Y.), § 27. See Appendix. 28. English Bills of Exchange Act, 8. See Appendix. or order, it has long been settled that a note payable to a man and his order, or to his order only, is one and the same thing.29 (2) Instrument payable to drawer or maker. An instrument payable to the drawer or maker has no legal inception until it is indorsed by the payee.30 It then becomes negotiable by delivery, in the same manner as an instrument payable to bearer.31 The practice of issuing such paper has now become very common, and its validity, when indorsed by the maker or drawer, is not questioned. Statutes have been in existence for many years in many of the States to the effect that notes made payable to the order of the maker or of a fictitious person shall, if negotiated by the maker, have the same effect and be of the same validity, as against the maker and all persons having knowledge of the facts, as if made payable to the bearer.32 In those States in which the Negotiable Instruments Law has been adopted such statutes have been superseded by the section of that law above quoted. to bearer." See also Dubois v. Mason, 127 Mass. 37, 34 Am. Rep. 335; Norfolk Nat. Bank v. Griffin, 107 N. C. 173, 11 S. E. 1049, 22 Am. St. Rep. 868. 29. Howard v. Palmer, 64 Me. 86, 92; Durgin v. Bartol, 64 Me. 473; Huling v. Hogg, 1 Watts & S. (Pa.) 418; Sherman v. Goble, 4 Conn. 246. 30. Instrument payable to order of maker or drawer.-Lea v. Branch 31. Scull v. Edwards, 13 Ark. 24, Bank, 8 Port. (Ala.) 119; Hey- 56 Am. Dec. 294; Smalley v. Wright, wood V. Wingate, 14 N. H. 73; 44 Me. 442, 69 Am. Dec. 112; Pitcher Moses V. Lawrence County Bank, v. Barrows, 17 Pick. (Mass.) 361, 28 Am. Dec. 306; Parks v. Ingram, 22 N. H. 283, 55 Am. Dec. 153; Winona Bank v. Wofford, 7 Miss. 711, 14 South. 262. 149 U. S. 298, 13 Sup. Ct. 900; Blatchford v. Millikin, 35 Ill. 434; Kayser v. Hall, 85 Ill. 511, 28 Am. Rep. 624; Pickering v. Cording, 92 Ind. 306, 47 Am. Rep. 145, in which 32. Payable to order of fictitious the court said: "When an instru- person.-In New York (1 R. S. 768, § 5, ment in the form of a promissory note, repealed by Neg. Inst. Law [1897, negotiable by the law rerchant, is chap. 612]), it was provided that made payable to the order of the promissory notes made payable to the maker himself, it is incomplete; in- order of the maker, or of a fictitious deed, it is a nullity, until it has been person, if negotiated by him, shall indorsed by the maker. A promissory have the same validity, as against him note must have a maker, and it must and "all persons having knowledge have a payee who is another person of the facts, as if payable to the than the maker. Until a promissory bearer." It was held, under this statnote made payable to the order of the ute, that the facts of which a person maker has been indorsed and deliv- must have knowledge, in order to give ered by the maker, there is no payee the note efficacy against him, are simor promisee, and the instrument is ply that the note is payable to the in the nature of a written promise to order of the maker, or of a fictitious pay to the person to whom the maker person. Irving Nat. Bank v. Alley, shall, by indorsement, order payment 79 N. Y. 536. It was also held in to be made. By special indorsement this case that a note payable to the a particular person may be made order of the maker, as against an acpayee as if his name were originally commodation indorser having knowlinserted as such in the note. The edge of this fact, is to be considered maker's indorsement in blank will as if payable to the bearer, and is make the equivalent to a note payable valid, although negotiated without the A bill of exchange, drawn by one upon himself, may be regarded as an accepted bill.33 And it has also been held that a commercial paper in the form of a bill of exchange, but showing on its face that the drawer and drawee are the same person, may be treated by the holder as a promissory note; and that although he may elect to treat it as a bill of exchange, the drawer cannot probably compel him to so treat it.34 But it has been held in a leading New York case that such an instrument could not be treated as a bill of exchange, but must be declared on as a promissory note.35 The Negotiable Instruments Law has provided that " where in a bill the drawer and drawee are the same person the holder may treat the instrument, at his option, either as a bill of exchange or a promissory note." 36 A similar provision is also contained in the English Bills of Exchange Act.37 (3) Instruments drawn by agent, officer, or partner.— For the same reason as in the case of a bill drawn by a person upon himself, a bill drawn by an agent upon his principal is in legal effect a promissory note, and open in the hands of a transferee to all defenses which the principal had against the payee. And where a draft is drawn by a resident agent of a corporation upon a non indorsement of the payee. See also 520. California Civ. Code, § 3102, is to a similar effect. See Main v. Hilton, 54 Cal. 110. 33. Bill payable to drawer deemed accepted. In the case of Cunningham v. Wardwell, 12 Me. 466, a bill of exchange was drawn by the drawer upon himself, and the court said: "The drawer undertakes that the bill shall be accepted. As it was here drawn upon himself, he also sustained the relation of drawee. And if in both capacities, which he assumed upon signing the bill, he undertook that the bill should be accepted and paid, of which the bill itself is evidence, it is accepted. A promise to accept an existing bill, if made upon an executed consideration, or if it influence any person to take or retain the bill, it is as to the person to whom the promise is made in one case, and as to him whom it influenced on the other, a 38 complete acceptance." See also Randolph v. Parish, 9 Port. (Ala.) 76; Wildes v. Savage, Fed. Cas. 17,653; Bank of British North America v. Barling, 46 Fed. 357; Kaskaskia Bridge Co. v. Shannon, 6 Ill. 15; Rice v. Hogan, 8 Dana (Ky.), 133. 34. Brazelton v. McMurray, 44 Ala. 323; Patillo v. Mayor, 70 Ga. 715; De Vaugh v. Hangabrook, 73 Ga. 809; Bradley v. Mason, 6 Bush (Ky.), 603; Indiana & Illinois Central R. R. Co. v. Davis, 20 Ind. 6, 83 Am. Dec. 303; Maux Ferry Gravel Road Co. v. Barnegan, 40 Ind. 361; Dougall v. Cowles, 5 Day (Conn.), 511; Commonwealth v. Butterick, 100 Mass. 12, 97 Am. Dec. 65. 35. Fairchild v. Ogdensburgh, etc., R. Co., 15 N. Y. 337, 69 Am. Dec. 606. 36. Neg. Inst. Law (N. Y.), § 214. See Appendix. 37. English Bills of Exchange Act, 1882, § 5 (2). 38. Stafford v. Bratcher, 4 Ky. Law Rep. 996; McCormick v. Hickey, 24 Mo. App. 362; Raymond v. Mann, 45 Tex. 301; Bailey v. Southwestern R, Bank, 11 Fla. 266. 39 But resident agent of the same corporation it may be treated as a bill of exchange as sued on in the same manner. And where a duly authorized officer of a corporation makes an order upon the proper financial officer thereof, such order may, in the option of the holder, be treated as the promissory note of the corporation. if such an order be deemed a bill of exchange no formal acceptance by the corporation is required, because the act of drawing is itself an acceptance. It has been held that an order drawn by a corporation upon its treasurer in favor of a third person is a clear acknowledgment of indebtedness in favor of the drawee, and is in effect a note, and may be sued on as such.42 41 (4) Instrument payable to order of drawee.- An instrument requesting the drawee to pay a sum to his own order is generally held to be a valid bill of exchange. Such validity is not to be destroyed because of the fact that the drawee and payee are one and the same person. As has been said by Judge Story in the case of Wildes v. Savage:** "An instrument is not the less a bill 43 39. Hazard v. Cole, 1 Idaho, 276. himself, payable to his own order and 40. Wetumpka & C. R. Co. v. accepted and indorsed with his own Bingham, 5 Ala. 657; Kaskaskia name above the name of S. In passing Bridge Co. v. Shannon, 6 Ill. 15; upon the sufficiency of the indictment, Marion & M. R. Co. v. Hodge, 9 Ind. Foster, J. (p. 16), says: "Upon prin163; Indiana & Ill. Cent. R. Co. v. ciple, as well as by the authorities Davis, 20 Ind. 6, 83 Am. Dec. 303; Rio cited by the attorney-general, we Grande Extension Co. v. Coby, 7 Colo. entertain no doubt that an order for 299, 3 Pac. 481. In the case of Dennis the payment of money drawn by one v. Table Mt. Water Co., 10 Cal. 369, in his own favor on himself, and by it was held that where a draft is himself accepted and indorsed, may drawn by the president and secretary be treated as a bill of exchange, and of a corporation upon its treasurer, so described in an indictment. Such no notice of presentation and non- instruments are well known in compayment is necessary to hold the corporation. The draft in such a case is only an order of the corporation upon itself. See also Mobley v. Clark, 28 Barb. (N. Y.) 390. 41. Hasey v. White Pigeon BeetSugar Co., 1 Doug. (Mich.) 193. 42. Marion & M. R. Co. v. Hodge, 9 Ind. 163. 43. Holsworth v. Hunter, 10 B. & C. (Eng.) 449, 21 E. C. L. (Eng.) 110; Witte v. Williams, 8 S. C. 290, 28 Am. Rep. 294. 44. 1 Story (U. S.), 22. Instrument drawn upon one's self as bill of exchange.- In Commonwealth v. Butterick, 100 Mass. 12, Butterick was indicted for forging the name of S., as an indorser on a bill of exchange drawn by defendant on merce; especially in the case of mercantile firms which have branches in different cities, all composed of the same partners. Perhaps such a bill may also be declared upon as a promissory note. But we agree with the Court of Queen's Bench in the latest English case on the question, decided in 1852, that it is not unjust to presume that it was drawn in this form for the purpose of suing upon it either as a promissory note or a bill of exchange.' Lloyd v. Oliver, 18 Q. B. (Eng.) 471. It is sufficient that the instrument was in the form of, and purported to be, a bill of exchange; and the defendant might be convicted of forging this indorsement, if all the other names were also forged or were those of fictitious personages." |