CHAPTER XVII.

NEGOTIABLE INSTRUMENTS.

SECTION I.

Introductory.-It is a rule of property that one may assign whatever interest he has in a given thing to another and the transferee under such an assignment takes the interest formerly possessed by the transferor. This rule now applies to choses in action, which are transferable by assignment, but such assignment does not necessarily make the chose in action negotiable in the sense in which that term is usually used and understood when speaking of negotiable paper. The distinguishing feature of negotiable instruments and the element that brings them into universal circulation in the business world, is the fact that a transfer by delivery or indorsement and delivery, depending on the tenor of the instrument, to one who in the usual course of business takes the paper, complete and regular on its face, for value, before maturity and without notice of any infirmity, makes such person a "holder in due course" or a "bona fide holder" of such instrument and as such he takes title to the same free from all infirmities. This is a quality accorded no other evidence of indebtedness known to the law, and the result is that the purchaser of a negotiable instrument may take a better title than was possessed by the original holder. This difference between a negotiable instrument and one which may be transferred by assignment may be made clear by an illustration. A holds a negotiable note against B and also a claim for wages. A transfers both of them to C, who sues upon the same. On the wage claim, B may urge any defense against C that he might have had against A, but if the note was transferred to C as a bona fide holder, he takes it free from the defenses and infirmities which might have been pleaded against A. It is this characteristic of negotia

ble paper which allows it to circulate in the business world, taking the place of money in many instances, and obviating the transfer, from hand to hand, of money. When an instrument is payable to a person "or order" "or bearer", or it contains other words having an equivalent meaning, the other requisites being present, it is usually a negotiable instrument, in the sense in which that term is usually used.

The law in reference to negotiable instruments had its origin in the customs of merchants and such customs were finally recognized by the courts of law and became a part of the common law. In this country, each state making its own laws and interpreting the common law, there soon arose different rules in reference to negotiable instruments. While these differences were, in the main, not very great, they caused some confusion in inter-state business. This resulted in a movement to pass a uniform "Negotiable Instrument Law" in all the states. The Negotiable Instrument Law has now been adopted by the following states, and is being considered by many others: Colorado, Connecticut, District of Columbia, Florida Massachusetts, North Carolina, North Dakota, New York, Oregon, Rhode Island, Tennessee, Utah, Virginia, Washington and Wisconsin.

In Wisconsin, the Negotiable Instrument Law was passed in 1899 and has since that time been several times amended. The following is a copy of the law, as amended, with explanatory notes, which covers the law as it now exists in this state.

SECTION II.

GENERAL PROVISIONS.

Definitions. In this chapter unless the context otherwise requires,

"Acceptance" means an acceptance completed by delivery or notification.

"Action" includes counter-claim and set-off.

"Bank" includes any person or association of persons carrying on the business of banking, whether incorporated or not.

"Bearer" means the person in possession of a bill or note which is payable to bearer.

"Bill" means bill of exchange, and "note" means negotiable promissory note.

"Delivery" means transfer of possession, actual or constructive, from one person to another.

"Holder" means the payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof.

"Indorsement" means an indorsement completed by

delivery.

"Instrument" means negotiable instrument.

"Issue" means the first delivery of the instrument, complete in form, to a person who takes it as a holder.

"Person" includes a body of persons, whether incorporated or not.

"Value" means valuable consideration.

"Written" includes printed, and "writing" includes

print.

The person "primarily" liable on an instrument is the person who by the terms of the instrument is absolutely required to pay same. All other parties are "secondarily" liable.

In determining what is a "reasonable time" or an "unreasonable time", regard is to be had to the nature of the instrument, the usage of trade or business (if any) with respect to such instruments, and the facts of the particular case. Where the day, or the last day, for doing any act herein required or permitted to be done, falls on Sunday or on a holiday, the act may be done on the next succeeding secular or business day. The provisions of this chapter do not apply to negotiable instruments made and delivered prior to the passage hereof.

In any case not provided for in this chapter the rules of the law merchant shall govern.

SECTION III.

NEGOTIABLE INSTRUMents in general.

Form and Interpretation.-An instrument to be negotiable must conform to the following requirements:

1. It must be in writing and signed by the the maker or drawer.

2. Must contain an unconditional promise or order to pay a sum certain in money.

3. Must be payable on demand or at a fixed or determinable future time.

4. Must be payable to order or to bearer.

5. Where the instrument is addressed to a drawee, he he must be named or otherwise indicated therein with reasonable certainty. But no order drawn upon or accepted by the treasurer of any county, town, city, village or school district, whether drawn by any officer thereof or any other person, and no obligation nor instrument made by any such corporation or any officer thereof, unless expressly authorized by law to be made negotiable, shall be, or shall be deemed to be, negotiable according to the custom of merchants in whatever form they may be drawn or made.

Warehouse receipts, bills of lading and railroad receipts upon the face of which the words "not negotiable" shall not be plainly written, printed or stamped, shall be negotiable as provided in section 1676 of the Wisconsin statutes of 1878, and in section 4194 and 4425 of these statutes, as the same have been construed by the supreme court.

NOTE. -The indorsement of an instrument not negotiable for lack of the word order or bearer, supplying such word, makes it negotiable from that time.

ORDER OR BEARER.-Equivalent words may be used, as, holder, assigns, or "this note shall be negotiable."

OR AT A FIXED OR DETERMINABLE TIME.-A bill of exchange or

note need not be made payable on a day certain.

IN MONEY.-The word "currency" in a certificate of deposit means money, including bank notes which, though not an absolute legal tender, are issued for circulation by authority of law, and are in actual and general circulation (at the locus in quo) at par with coin.

A certificate of deposit promising payment to order of a certain number of dollars "in currency" is negotiable.

INDICATED WITH REASONABLE CERTAINTY. A bill payable at a particular house is meant to be addressed to the person there residing.

Sum payable defined.-The sum payable is a sum certain within the meaning of this chapter, although it is to be paid:

1. With interest; or

2. By stated instalments; or

3. By stated instalments, with a provision that upon default in payment of any instalment or of interest, the whole shall become due; or

4. With exchange, whether at a fixed rate or at the current rate; or

5. With costs of collection or an attorney's fee, in case payment shall not be made at maturity.

BY STATED INSTALMENTS. -See note to next section.

THE WHOLE SHALL BE DUE. -This does not change the Wisconsin rule; but other conditions, allowing the payee to sell the chattel for the price of which the note was given, and collect the amount due, with ten per cent. for collection expenses, renders both the sum and time of payment uncertain.

An unqualified order or promise. -An unqualified order or promise to pay is unconditional within the meaning of this chapter, though coupled with:

1. An indication of a particular fund out of which reimbursement is to be made, or a particular account to be debited with the amount; or

2. A statement of the transaction which gives rise to the instrument.

But an order or promise to pay out of a particular fund is not unconditional.

NOTE-PARTICULAR FUND.-A. and B. cultivating on shares the farm of M. and N., partners, gave X. (to whom A. and B. were indebted) an instrument in writing addressed to M. and N. requesting them to pay a certain sum of money to X., "and take the same out of our share of the grain" meaning the grain then harvested or growing on said farm; and M. and N. wrote the words "Order accepted" on the back of the instrument, with their firm name signed thereto. In an action by X. against M. and N.: Held,

1) That the instrument, though without words of negotiability, is a valid bill of exchange.

2) That the order and acceptance are absolute; the words above quoted from the order not limiting its payment to a particular fund, or making it conditional, but merely indicating the means by which the drawees might reimburse themselves.

3) That the drawees cannot defend against the legal effect of the bill and acceptance, on the ground that, before such acceptance, they had already made advances to the drawers, solely on the faith of the share of grain belonging to the latter, more than sufficient to cover its full value, and that the facts were known to X. at the time of such acceptance. An order by a debtor upon a third person to pay a certain sum to his creditor or order, out of a particular fund, when such fund shall be created (as by the future payment of a draft then in the hands of such third person), is not negotiable as a bill of exchange; and no inference can be drawn from the paper itself that it was taken in payment of the drawer's original debt to the payee or that the payee's right to recover such original debt was suspended until his credit on the instrument should expire. A note payable "out of any property I may have" or "out of my separate property and estate" (in case of a married woman) is negotiable.