"In Coffin v. Spencer, (C. C.) 39 Fed. 262, a promissory note containing a clause which authorized the extension of the time of payment from time to time as often as required was before the court, and it was there said that every successive taker of the paper is, of course, bound to take notice of the stipulation, and, instead of looking only to the face of the instrument for the time of its maturity, as in the case of commercial paper he must, is put upon inquiry whether or not any agreement for a renewal or extension of time has been made by his proposed assignor or by any previous holder.' The conclusion of the court was that a stipulation which required a party to inquire into extrinsic facts in order to ascertain when the paper was payable destroyed its negotiability.

"The Supreme Court of Michigan, in Second National Bank v. Wheeler, 75 Mich. 546, 42 N. W. 963, determined that a stipulation in a note to the effect that the payee or holder might extend the time of payment without notice, and without prejudice to his rights against makers, sureties and indorsers, took from the instrument its negotiable character. See, also, Lamb v. Story, 45 Mich. 488, 8 N. W. 87; Bank v. Carson, 60 Mich. 432, 27 N. W. 589; Oyler v. McMurray, 7 Ind. App. 645, 34 N. E. 1004; Rosenthal v. Rambo, (Ind. App.) 62 N. E. 637; Bank v. Piollet, 126 Pa. 194, 17 Atl. 603, 4 L. R. A. 190, 12 Am. St. Rep. 860.

66

The authorities are not uniform as to the proper test of the negotiability of a note, but we think that the correct rule has been stated in those that have been cited. The time of payment in the instrument in question was contingent and uncertain, and depended on the future action of the parties, which no one could anticipate. Clark v. Skeen, 61 Kan. 526, 60 Pac. 327, 49 L. R. A. 190, 78 Am. St. Rep. 337, is cited as an authority to sustain the negotiable quality of the note in controversy. There payment of the note was to be made at a fixed date, but there was a provision in it to the effect that default in the payment of interest would make it mature at an earlier time. That case is plainly distinguishable from the one under consideration. There the time of payment was ultimately certain, although by certain agreed conditions it might be matured before that time. Here the time of payment depends on the future agreement of the parties. No one can tell from an inspection of the instrument itself when it may mature, as it cannot be known what extension may have been or may hereafter be agreed upon. We therefore conclude that the uncertainty of the time of payment is fatal to the negotiability of the instrument.

"The same defenses were therefore open to the purchasers of the cattle that would have been if the actions had been brought by the commission company, and as that company received the proceeds of the sale of the cattle, and in effect sanctioned the sales, the lien thereon was extinguished, and they are precluded from reclaiming the cattle so sold. It is unnecessary, therefore, to consider the matter of the description of the cattle in the mortgage, or the other questions which have been discussed by counsel.

72 Pac. 844.

Payment: Forged Indorsement.

C. S. Hoffman was the executor of an estate from which Peter W. Brubaker was entitled to receive $264.15. Hoffman was unable to locate Brubaker, and wrote several letters of inquiry to various places. An imposter, learning of this, assumed the name of Brubaker, and in a letter signed Peter W. Brubaker" notified Hoffman that his address was Lincoln, Neb. Thereupon Hoffman procured from his local bank its check on a New York bank to the order of C. S. Hoffman, which Hoffman indorsed payable to the order of Peter W. Brubaker, and mailed it addressed to that person at Lincoln.

The imposter received it, and writing " Peter W. Brubaker" on the back of it, received the money on it and it was paid by the bank on which it was drawn.

Hoffman was obliged to make payment to the true Peter W. Brubaker, and he sued the New York bank, claiming that it was liable as is one who pays an order on a forged indorsement. It was held, under all of the circumstances, that the payment as made would protect the bank. The court said in part:

"The liability of defendant is asserted on the grounds set forth in section 42 of the negotiable instruments act of New York, which has been enacted in effect in 14 other States, and is claimed to be declaratory of the common law. Said section 42 reads as follows: 'Where a signature is forged or made without authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.' It is claimed that this signature is a forgery, and the defendant therefore liable. As above stated, there seems to be no doubt that the real Peter W. Brubaker who was among the heirs of this estate never indorsed this draft. But it also seems clear that the plaintiff is not entitled to set up this claim. A recent case in Rhode Island (Tollman v. American National Bank, 48 Atl. 480, 52 L. R. A. 877) seems to sustain plaintiff's contention. Its syllabus has the following: 'A check drawn payable to the order of A. was procured by representations that the person to whom it was given was A., and the indorsement of the latter was forged thereto, and it was paid by the bank. Held, that the bank was liable to the drawer for such sum, both at the common law and under the statute.' Rhode Island has adopted the statute above cited. The weight of authority, however, seems to be decidedly in favor of the doctrine that where a check or draft is drawn or indorsed and delivered to a party, to be cashed by him under the name in which it is made out or indorsed, that his signature by way of indorsement in that name is valid as between an innocent holder and the party delivering it to him. This is commonly put on the ground that the payer of the draft or the purchaser of it is simply carrying out innocently the intention of the maker or indorser. Emporia Nat. Bank v. Shotwell, 35 Kan. 360, 11 Pac. 141, 57 Am. Rep.

171; Meridian Nat. Bank v. First Nat. Bank, 7 Ind. App. 322, 33 N. E. 247, 34 N. E. 608, 52 Am. St. Rep. 450; Robertson v. Coleman, 141 Mass. 235, 4 N. E. 619, 55 Am. Rep. 471; Levy v. Bank of America, 24 La. Ann. 220, 13 Am. Rep. 124; Land, etc., Čo. v. N. W. Bank, 196 Pa. 230, 46 Atl. 420, 50 L. R. A. 75, 79 Am. St. Rep. 717. It is also placed sometimes, as was done in a measure in this instance, by the trial court, on the ground of negligence on the part of the maker. It is sometimes held that the payee is a fictitious person, and the check or draft therefore payable to bearer.

"It is suggested in defendant's brief that the exemption from liability is more properly placed on the ground of estoppel, or, as it is stated in the negotiable instruments act, that the party is 'precluded from setting up the forgery or want of authority.' It certainly would seem that in this case when Mr. Hoffman was satisfied with the release he got, and mailed the draft to the maker of that release, he asserted as definitely as a man could his desire that this money should be paid where it was paid. After that desire has been acted upon, and the false Brubaker has received the money, it would seem too late for the plaintiff to discover his mistake, and collect the money back from one who had paid it out to the individual he requested, though not the one he thought he was requesting to have it paid to.

"The plaintiff insists that the sole question in this case is whether the indorsement of the draft by the imposter was a forgery. We do not believe a determination of that question will dispose of this case. That the indorsement was a forgery may be conceded; but it does not necessarily follow that the plaintiff is entitled to recover in this action. We think the majority of cases, certainly the best considered cases, hold that, under the circumstances shown in evidence in this case, an innocent purchaser is protected by such indorsement. Meridian Nat. Bank v. First Nat. Bank, (Ind.) 34 N. E. 608, 52 Am. St. Rep. 450; Emporia Nat. Bank v. Shotwell, 35 Kan. 360, 11 Pac. 141, 57 Am. Rep. 171; Kohn v. Watkins, 26 Kan. 691, 40 Am. Rep. 336; Land Title & Trust Co. v. N. W. Nat. Bank, 196 ra. 230, 46 Atl. 420, 50 L. R. A. 75, 79 Am. St. Rep. 717; Robertson v. Coleman, 141 Mass. 235, 4 N. E. 619, 55 Am. Rep. 471; United States v. Nat. Exchange Bank, (C. C.) 45 Fed. 163; Crippen Lawrence & Co. v. Am. Nat. Bank of Kansas City, 51 Mo. App. 508; Forbes v. Espy, 21 Ohio St. 474. It has been suggested that the cases just cited may be classified under four heads, the basis of such classification being the ground upon which the courts place their respective decisions, which are as follows: First, that such indorsement effectuates the intention of the drawer; second, that the drawer has been guilty of negligence; third, that the drawer is to be treated as a fictitious person; fourth, estoppel. But such classification is unscientific, and is based on the language of the opinions, rather than upon any principle underlying them. A careful analysis of the cases will show, we think, that the controlling principle in each is that of estoppel, which, to our minds, is peculiarly applicable to cases of this character.

"The plaintiff had money which belonged to Peter W. Brubaker. An imposter assumed the name of Peter W. Brubaker, and claimed the money. His identity was a question for the plaintiff. Satisfied that he was dealing with the real Peter W. Brubaker, the plaintiff indorsed and delivered the draft to the imposter. Of the contractual

obligation thus created, the delivery of the draft was an essential element, and stamped the imposter as the person to whose order the plaintiff intended payment to be made. In other words, by the delivery of the draft to the imposter the plaintiff held him out to the world as his indorsee, and as the person to whose order he had, by his indorsement, directed payment to be made. He cannot now be heard to complain that the defendant acted on the indicia of identity with which he himself had clothed the imposter."

96 N. W. 112.

Bill of Lading Attached to Discounted Bill of Exchange: Liability of

Purchaser.

The Court of Civil Appeals of Texas, in the widely published case of Landa v. Lattin, 46 S. W. 48, held, in effect, that where a bank purchased of the drawers a bill of exchange, with bill of lading attached, drawn against a shipment of merchandise, and the drawee accepted and paid the draft, that the bank warranted to the payor of the draft the quality and quantity of the goods mentioned in the bill of lading. The Supreme Court of North Carolina followed this decision, 35 S. E. 251, as has also the Supreme Court of Mississippi. The Supreme Court of Iowa refused to follow it, 84 N. W. 930, and now the Supreme Court of Texas reverse the rule laid down by the lower court of that State, saying, in part:

"The theory of the plaintiff is supported by the decision of the Court of Civil Appeals for the Third District in the case of Landa v. Lattin, 19 Tex. Civ. App. 246, 46 S. W. 48, which was followed by the Supreme Court of North Carolina in the case of Finch v. Gregg, 35 S. E. 251, 49 L. R. A. 679. We understand the courts to hold in those cases that a purchaser of such drafts and bills of lading is substituted, by the mere purchase, in the place of the vendor in the contract of sale, and becomes bound to perform that contract as a condition precedent to his right to the price of the goods represented by the bill of lading; and that, therefore, although the drafts be actually accepted and paid by the drawee, if the consideration which he was to receive from the drawer fails, the price may be recovered from the holder to whom the payment has been made. It is undoubtedly true that the purchaser acquires by his purchase no greater rights than the drawer has against the drawee. The attitude of the latter is, so far, unchanged, and he is no further bound to the purchaser than he would be bound to the drawer to accept or pay; but we do not agree that the purchaser becomes bound to perform the contract of the vendor, nor that, when the bill of exchange is subsequently accepted or paid, he acquires no additional right against the acceptor or payor. Transactions of this kind have often come before the courts, and we understand the rule of the commercial law to be thoroughly established that one who has accepted or paid a bill of exchange drawn upon him cannot defeat his acceptance or recover the money paid because there

was no consideration, or the consideration has failed, as between him and the drawer, when the payee bought from the latter for value without notice of the defense. The leading cases on the subject have arisen where bills of lading for goods were forged and attached to drafts drawn for the prices of the goods, negotiated with banks, and forwarded to and accepted or paid by the drawees, without knowledge on the part of either holder or drawee of the forgery. Efforts of the acceptors to avoid liability on acceptances, and of payors to recover the money so paid, have been defeated both in courts of law and of equity. Hoffman & Co. v. Bank of Milwaukee, 12 Wall. 181, 20 L. Ed. 366; Goetz v. Bank of Kansas City, 119 U. S. 551, 7 Sup. Ct. 318, 30 L. Ed. 515; Robinson v. Reynolds, 2 Adolph & Ellis, 196; Thiedemann v. Goldschmidt, 1 De G. F. & J. 4; I Daniel on Negotiable Instruments, §§ 174, 175, and notes; Marsh v. Low, 55 Ind. 271. Other authorities are cited in those referred to.

"The latest decision called to our attention is that of the Supreme Court of Iowa in the case of Tolerton & Stetson v. Anglo-California Bank, 84 N. W. 930, 50 L. R. A. 777, in which the court, after discussing Landa v. Lattin and Finch v. Gregg, enunciates what we regard as the correct rule.

"The decisions referred to are wholly inconsistent with the theory that in such a transaction the purchaser of the draft and bill of lading becomes substituted for the vendor to such extent that he assumes the obligations of his contract with the vendee. This is not true of assignees generally. While an assignee may not by his assignment. acquire any right against the party against whom the claim is asserted, he does not, by taking the assignment merely, assume the obligations of the assignor. The true question in such cases is whether or not money so paid upon bills of exchange can be recovered as having been paid by mistake, which is negatived by the rules of the law merchant; and not whether or not there has been a breach of contract by the holder, who never has a contract with the drawee of the bill of exchange until the latter honors it."

75 N. W. 292.

Decisions Nos. 180, 383, 463, 608, refer to this subject.

Indorser of Non-negotiable Note Held as Maker.

The Lowell Trust Company discounted for James J. Coffey the note practically described below. On its non-payment the company sued the estate of John H. Coffey as indorser of the note. The court held that the note was non-negotiable by reason of the provision allowing payment to be made in whole or in part at any time before maturity, and being non-negotiable no one would be liable as indorser of it; but it was held that the alleged indorsers could be held as makers. The negotiable instruments law, now in force in Massachusetts, seems to provide that if this note had been issued after the adoption of such law that it would be negotiable.