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indorsement of a negotiable instrument is a warranty by him who makes it to every subsequent holder in good faith that the instrument itself and all the signatures antecedent to such indorsement are genuine; and when these signatures are forgeries, the indorser is at once liable upon his warranty to such subsequent holder, without any presentment for payment, or notice of nonpayment.®

c. Warranty of validity of instrument.— An indorser of a negotiable instrument warrants the existence and legality of the contract which he undertakes to assign.And where a promissory note was alleged to have been made on Sunday, it was held that this was immaterial in an action against the indorser, because by his indorsement he is estopped to deny that the note is a valid contract, and as against him it must be presumed it was made and delivered at a time when such business could lawfully be done.10 By such an indorsement the validity of the note is warranted, and also the ability of the maker to pay it." Where a note is invalid, suit may be brought immediately against the indorser, without having sued the maker.12 Although the general rule is that an indorsement of a negotiable instrument amounts to a contract that the instrument itself and the antecedent signatures thereon are genuine, yet the obligation of such a contract cannot be enforced


dorser with the subsequent bona fide v. Caverly, 7 Gray (Mass.), 217; holder that the instrument itself and Kenworthy v. Sawyer, 125 Mass. 28; all the signatures prior to the particu- Hannum v. Richardson, 48 Vt. 508; lar indorsement are genuine; and the Henderson v. Lemly, 79 N. C. 169. fact that the name of the maker was In the case of Binney v. Globe Nat. forged will not discharge the indorser. Bank, 150 Mass. 574, 23 N. E. 380, Lennon v. Grauer, 159 N. Y. 433, 54 the court said: “Nor is the liability N. E. 11.

of the petitioner affected by the fact 8. Turnbull v. Bowyer, 40 N. Y. 456, that she is the wife of the assignor 100 Am. Dec. 523; Warren-Scharf of the note who filled the blanks Asphalt Pav. Co. v. Commercial Nat. therein and caused the same to be disBank, 97 Fed. 181, 38 C. C. A. 108. counted, receiving the proceeds thereof.

9. Indorser warrants validity of While a promissory note between a instrument.- Burrill Smith, 7 husband and wife is void between the Pick. (Mass.) 291, 294, where the original parties, an indorser, when court says:

“The indorsee takes it sued upon a contract, between him and on the credit of the indorser. Thus, his indorsee, is not at liberty to deny if a note void between the promisor the validity of the original note, or the and the payee on account of usury capacity of the maker, for the purpose or other illegal consideration is in- of defeating his or her own liability.” dorsed bona fide for valuable consider- 10. Prescott Nat. Bank v. Butler, ation, the indorser must make it 157 Mass. 548, 32 N. E. 909. good; so if the indorsement is of a 11. McNeil v. Knott, 11 Ga. 142; note made by a minor, or of a feme Howell v. Wilson, 2 Blackf. (Ind.) covert, and even if the name of the 418; Tam v. Shaw, 10 Ind. 469; Furpromisor is forged, the indorser is gerson v. Staples, 82 Me. 159, 19 Atl. held upon his contract to pay the in- 158; Bruce v. Burr, 67 N. Y. 237. dorsee.” See also Veasie v. Willis, 12. Tam v. Shaw, 10 Ind. 469; 6 Gray (Mass.), 90; Prescott Bank Johnson v. Blake, 3 Ind. 542.

by a holder who procured an indorsement upon the forged note, with knowledge of the forgery, and upon a representation to the indorser that it was genuine 13

d. Engagement to pay.- Under the common law, as well as under the statute, an indorser guarantees the payment of an instrument according to its tenor, and engages that if it be dishonored, and the necessary proceedings on dishonor be taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it. The liability imposed upon an indorser depends upon the fulfillment of the terms of the contract of indorsement, which is conditioned upon a sufficient demand being made upon the maker, and other necessary proceedings taken upon its dishonor.14 Upon a compliance with the terms of the contract, the indorser is absolutely bound, although the instrument itself is void. 15 An indorsement, although in blank, being a contract in writing, its legal effect cannot be varied by parol proof, in the absence of fraud or mistake.18 This rule must

13. Turner v. Keller, 66 N. Y. 66. Maryland.- Mudd v. Harper, 1 Md.

14. Lockett v. Howze, 18 Ala. 613; 110, 54 Am. Dec. 644. Cassidy v. Kreamer (Pa.), 13 Atl. Massachusetts.- Van Staphorst v. 744.

Pearce, 4 Mass. 258. The obligation of an indorser is New Hampshire.- Dow v. Rowell, widely different from that of a surety, 12 N. H. 49. whatever may be the analogy between New York. — Fassin v. Hubbard, 55 them in some respects. The latter is N. Y. 465; Hodges v. Schuler, 22 N. bound absolutely to pay in case the Y. 114; Morford v. Davis, 28 N. Y. debtor does not, while the obligation of 481; Bank of Albion v. Smith, 27 the former is one dependent upon cer- Barb. 489. tain suspensive conditions. Breedlove Ohio.- Farr v. Ricker, 46 Ohio St. v. Fletcher, 7 Mart. (La.) 524; Rush- 265, 21 N. E. 354; Parker v. Riddle, worth v. Moore, 36 N. H. 188.

11 Ohio, 102. 15. Indorser is absolutely bound South Carolina. — Eccles v. Ballard, upon a compliance by the holder with 2 McCord, 388. the terms of the contract, see:

Teras.- Davidson v. Peticoals, 34 Connecticut.- Miller Riley, 2 Tex. 27. Root, 522.

Wisconsin.- Cowles v. McVickar, 3 Illinois.— Bowes v. Industrial Bank, Wis. 725. 88 Ill. App. 498.

16. Legal effect of contract of inIndiana.— Holton v. McCormick, 45 dorsement cannot be varied by parol Ind. 411; Grimes v. Piersol, 25 Ind. testimony, Farr_v. Rickar, 46 Ohio 246.

St. 265, 21 N. E. 354. In the case Iowa.- National Bank v. Green, 33 of Martin v. Cole, 104 U. S. 37, MatIowa, 140.

thews, J., said: “ The contract creKentucky.— Owings v. Grimes, 5 ated by the indorsement and delivLitt. 331.

ery of a negotiable note even between Louisiana.— Crane v. Trudeau, 19 the immediate parties to it is a comLa. Ann. 307; Dupre v. Richard, il mercial contract, and is not in any Rob. 497, 43 Am. Dec. 214.

proper sense a contract implied by Maine.— Furgerson v. Staples, 82 the law, much less an inchoate or imMe. 159, 19 Atl. 158; Cushman v. perfect contract. It is an express Marshall, 21 Me. 122.

contract, and is in writing, some of

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be deemed subject to the exception that as between the indorser and the indorsee parol testimony is admissible to show their true relation to each other, according to their own intention and agreement. But this exception is not universally admitted, and in some States it is held that even as between the immediate parties a collateral agreement, modifying the obligation which the law presumes in the case of a blank indorsement, is not admissible. An apparent conflict in the authorities as to the admissibility of evidence to vary the terms of a blank indorsement is presumably eradicated by the provisions of the above section of the statute, which makes an indorser absolutely liable to all subsequent holders in due course, unless the indorsement is expressly qualified.

e. Liability of indorser on instrument negotiable by delivery; statutory provision.— The Negotiable Instruments Law provides that: “Where a person places his indorsement on an instrument “negotiable by delivery, he incurs all the liabilities of an in

This provision is declaratory of the common law. A note payable to bearer is transferable without indorsement; and if the payee choose to put his name on the back he is as much bound as an indorser as if the note had been made payable to him or to

dorser.” 19

the terms of which, according to the Allen v. Chambers, 13 Wash. 327, 43 custom of merchants and for the con- Pac. 57; Charles v. Denis, 43 Wis. venience of commerce, are usually 66, 24 Am. Rep. 383. omitted, but not the less, on that ac- 17. Admissibility of par 1 testimony count, perfectly understood. All its to show terms of agreement between terms are certain, fixed, and definite, indorser and indorsee, see Lewis v. and when necessary, supplied by the Long, 102 N. C. 206, 11 Am. Rep. common knowledge, based on uni- 725; Cole v. Smith, 29 La. Ann. 551, versal custom, which has made it 29 Am. Rep. 343. both safe and convenient to rest the In the case of Smith v. Morrill, rights and obligations of parties to 54 Me. 48, it was held that a blank insuch instruments upon an abbrevia. dorsement of a negotiable promissory tion, that the mere name of the in- note is, as between the immediate pardorser, signed upon the back of a ties thereto, only prima facie evidence negotiable instrument, conveys and ex• of the contract implied by law; and it presses his meaning and intention as is competent to prove by parol evifully and completely as if he has writ. dence, the agreement which was in fact ten out the customary obligation of made at the time of the indorsements. his contract in full.” And it was held As to third persons without notice of in that case that parol evidence is any other contract, the one implied not competent to contradict or vary by law is conclusive. See also James the legal effect of such an instrument; v. Smith, 30 Iowa, 55; Sturtevant v. and it is also stated that the cases in Randall, 53 Me. 149; Holmes v. First support of the rule “ are too numerous Nat. Bank, 38 Neb. 326, 56 N. W. for citation." See also Holt v. Moore, 1011, 41 Am. St. Rep. 733. 6 Ala. 521; Stephens v. State, 56 Ga. 18. Dale v. Gear, 38 Conn. 15; Beat604; Johnson v. Glover, 121 Ill. 283, tie v. Brown, 64 Ill. 360; Hately v. 12 N. E. 257; Smythe v. Scott, 106 Pike, 162 III. 241, 44 N. E. 441. Ind. 245, 6 N. E. 145; Holton v. Mc- 19. Neg. Inst. L. (N. Y.), § 117. Cormick, 45 Ind. 411; Bowler v. For the same section in the statutes Braun, 63 Minn, 32, 65 N. W. 124; of other States see Appendix.

his order.20 The indorser of a note drawn payable to bearer incurs the same liabilities and obligations as the indorser of a' nego tiable note payable to order.2:


» 22

$ 87. Order in which indorsers are liable.

a. Statutory provision.— The Negotiable Instruments Law provides that: “As respects one another, indorsers are liable prima facie in the order in which they indorse; but evidence is admissible to show that as between or among themselves they have agreed otherwise. Joint payees or joint indorsees who indorse are deemed to indorse jointly and severally.

b. Presumption as to order.— Indorsements upon bills of exchange or promissory notes rest upon the theory that the liability of the indorsers to each other is regulated by the position of their names and that the paper is transferred from one to another by indorsement.23 The date of the indorsement does not necessarily control the obligation of the parties to each other; although there may be, as stated in the statute, a prima facie liability dependent upon the order in which the indorsements are made.24 Where the indorsers are accommodation parties, the same rule is applicable; the indorsers are liable in the order of their indorsement arising from the contract of indorsement itself, and not from any separate agreement which they may have for the joint payment of the instrument. 25

Where an instrument is indorsed for transfer by

20. Brush v. Reeves, 3 Johns. (N. 21. Cover v. Meyers, 75 Md. 406, Y.) 439; Tam v. Shaw, 10 Ind. 469; 23 Atl. 850. Tillman v. Ailles, 13 Miss. 373, 43 Am. 22. Neg. Inst. L. (N. Y.), § 118. Dec. 52.

For the same section in the statutes In the case of Leggett v. Raymond, of other States see Appendix. 6 Hill (N. Y.), 639, L. indorsed the 23. Easterly v. Barber, 66 N. Y. words “I guaranty the payment of 433, 437. this note," on the note payable to 24. See Slack v. Kirk, 67 Pa. St. himself or bearer. It was held in 380. an action brought by R. that L. was 25. McCarthy v. Roots, 21 How. (U. liable as indorser on proof of demand 8.) 432. In this case it was held that and notice, though it did not appear the fact that the indorsers were acthat the guaranty was made to R. commodation parties does not make

Where an instrument which can them cosureties, bound to contribute pags by delivery is indorsed such in- equally to the payment of the bills, dorsement must be deemed to have without a special agreement to that been made for the purpose of guar. effect. See also Easterly v. Barber, anteeing the genuineness of the note 66 N. Y. 433. and its payment, and the presumption In the case of Kelly v. Burroughs, is that the indorsement was made for 102 N. Y. 93, 6 N. E. 109, it was these purposes. Hence the indorser is held that where a second indorser of prima facie liable upon the instru- a promissory note has paid and taken ment. Doom v. Sherwin, 20 Colo. 234, it up, he becomes a holder for value, 38 Pac. 256.

and may maintain an action to re


several indorsers, each indorsee is entitled to recover of his immediate indorser the amount of the consideration for the indorse ment. The amount to be recovered of an immediate indorser may include the costs in the unsuccessful suit instituted for the collection of a note defective because of usury, 27 and such other damages as may be sustained by him for the failure of the maker to pay the note.28 Where several persons in succession indorse a negotiable note, the act of each, respectively, imports a several and successive, and not a joint obligation, whether done for accommodation or for value, unless there be an agreement aliunde different than that evidenced by the indorsements.

c. Agreement between indorsers. The statute expressly provides, and the rule has existed at common law, that an agreement may be made between the indorsers of an instrument varying their liabilities as such indorsers, which will be binding among themselves; and in an action brought by an indorser of a promissory note who has paid such note, against a prior indorser, it is competent for the defendant to prove by parol that all the indorsers were accommodation indorsers, and that by agreement they were,


cover the amount thereof, of the first 16 Me. 163; Hulbert v. Douglas, 94 indorser, although both are accommo N. C. 128. dation indorsers.

27. Recovery of costs.- In the 26. In New York it is the settled case of Delaware Bank v. Jarvis, 20 rule that an indorsee who buys a note N. Y. 226, it appeared that the holder at less than its face value can re- of a note, which had a usurious incover against the indorser no more ception in his hands, transferred it than the sum for which he purchased without indorsement and without nothe note, with interest; though he tice of the facts to the plaintiff. The

latter bro may recover the full amount of the

an action upon the note against the maker. This rule

note to which the defense of usury

applies only as between the parties to was successfully interposed. The dethe transfer of the note, and does not fendant had notice of the plea and affect the liability of third persons duct of the action, but declined to

was called upon to assume the conwho indorse for the accommodation of

It was held that the party the payee, and who are not parties to the transfer. Ingalls v. Lee, 9 Barb. accepting the transfer of negotiable (N. Y.) 647; Judd v. Seaver, 8. Paigę ranty of the validity thereof, and

paper may act upon the implied war(N. Y.), 548; Cram v. Hendricks, 7 bring an action for its collection; and Wend. 569; Munn v. Commission Co., when defeated he is entitled to re15 Johns. (N. Y.) 44; Brannan v.

cover the costs incurred by him, from Hess, 13 Johns. (N. Y.) 52; Brown v. his assignor. See also Gilman v. Mott, 7 Johns. (N. Y.) 361.

Lewis, 15 Me. 452; Whitney v. NaIn other States. See Cook v. Cock- tional Bank, 45 N. Y. 303. rell, 1 Stew. (Ala.) 475, 18 Am. Dec. 67; 28. Orono Bank v. Wood, 49 Me. Coye v. Palmer, 16 Cal. 158; Shaeffer 26. v. Hodges, 54 Ill. 337; Short v. Cof- 29. Wolf v. Hostetter, 182 Pa, St. feen, 76 Ill. 245; Hurst v. Chambers, 292, 37 Atl. 988, citing Daniel on 12 Bush (Ky.), 155; Short v. Trabue, Negotiable Instruments, $ 703; Russ 4 Metc. (Ky.) 299; French v. Grindle, v. Sadler, 197 Pa. St. 51, 46 Atl. 903.

do so.

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