CHAPTER XII. By converting blank into special indorsement. What an indorsement admits. Indorsement Indeed, the contract between indorser and indorsee does not consist exclusively of the writing popularly called an indorsement, though that indorsement be a necessary part of it. The contract consists partly of the written indorsement, partly of the delivery of the bill to the indorsee, and may also consist partly of the mutual understanding and intention with which the delivery was made by the indorser and received by the indorsee. That intention may be collected from the words of the parties to the contract, either spoken or written, from the usage of the place, or of the trade, from the course of dealing between the parties, or from their relative situation (†). But though a special contract qualifying the ordinary liability of an indorser may affect the rights of the immediate indorsee, and those who stand merely on his title, it is plain that it cannot restrain the rights of subsequent transferees for value without notice (u). A party transferring a bill may also (as we have just seen) decline personal responsibility, by converting an existing blank indorsement into a special one in favour of his transferee. An indorsement admits the signature and capacity of the drawer and every prior indorser (r). And in an action against an indorser the defendant will not be allowed to plead denying the indorsement to himself (y). Where a person signs a bill or note otherwise than as by a stranger. drawer, or acceptor, or maker, he thereby incurs the liabilities of an indorser to a holder in due course (z). (t) Castrique v. Buttigieg, 10 Moo. P. C. 94; Kidson v. Dilworth, 5 Price, 564; 19 R. R. 656. See Byles on Bills, 6th American edition, p. 243. (u) Abrey v. Crux, L. R., 5 C. P. 37; Code, s. 21 (2) b. (r) Sect. 55 (2) b. Lambert v. Oakes, 1 Lord Raym. 443; 12 Mod. 244; Lambert v. Pack, 1 Salk. 127; Williams v. Seagrove, 2 Barnard. 82; Critchlow v. Parry, 2 Camp. 182; Free v. Hawkins, Holt, N. P. R. 550; Macgregor v. Rhodes, 25 L. J., Q. B. 318; but see East India Company, v. Tritton, 3 B. & C. 280; 5 D. & R. 214; 27 R. R. 353. (y) Macgregor v. Rhodes, 25 L. J., Q. B. 318; 6 E. & B. 266. (2) Code, s. 56. Matthews v. Bloram, 33 L. J., Q. B. 209; Ex parte Yutes, 27 L. J., Bkey. 9. See ante, p. 174, note (ƒ). It will be noticed that this section, while saddling him with the liabilities of an indorser, is silent as to the rights, and does not even style him an indorser so as to come in under s. 57, but apparently leaves him, if compelled to pay, to his rights to be indemnified at common law. The drawer cannot sue him on that alone (which would be inverting the order of parties), unless there be other written evidence of a guarantee sufficient to satisfy the Statute of Frauds. Singer v. Elliott, 4 T. L. R. 524. In Steele x CHAPTER XII. A drawer, indorser, or any party liable on a bill or note, may be discharged by the intentional cancellation of his 'signature by the holder or his agent; this discharges also the subsequent indorsers who would have had a right indorsements. against the party so discharged (a). Under the old rules of pleadings all indorsements must either be proved or struck out; hence, it was usual, in an action on a bill or note where there were several indorsements, to insert two counts-one setting out the indorsements to avoid the necessity of striking them out-the other omitting them so as to prevent a non-suit in case they could not be proved; it was doubtful whether the holder could avail himself of the title of an indorser whose name he had struck out (b). Where a bill or note is paid by an indorser, or where a bill payable to the drawer's order is paid by the drawer, the party paying is remitted to his former rights as regards the acceptor or maker or other antecedent parties, and he may again negotiate the bill or note after first striking out his own and subsequent indorsements (c). Striking out Fourthly, as to the rights of an indorsee. A transfer by RIGHTS OF indorsement vests in the indorsee a right of action against INDORSEE. all the parties whose names are on the bill, in case of v. McKinley (a case before the Code), both Lord Blackburn and Lord Watson consider that the liability is only incurred to a subsequent party, L. R., 5 Ap. Ca., at pp. 769 and 782. In Jenkins v. Comber, [1898] 2 Q. B. 168; 67 L. J. 780; the bill being payable to drawer's order and not indorsed, was held not to be complete and regular on the face of it as a negotiable instrument; but if the plaintiff had indorsed in blank, he might have posed as holder within s. 55 (2) a, and so raised the precise point. (a) Fairclough v. Paria, 9 Ex. 690; Code, s. 63 (2). The striking out by mistake does not discharge. Wilkinson v. Johnson, 3 B. & C. 428 27 R. R. 393; Roper v. Birkbeck, 15 East, 17: Novelli v. Rossi, 2 B. & Ad. 757; 36 R. R. 736; Code, s. 63 (3). (b) Waynam v. Bend, 1 Camp. 175; Bosanquet v. Anderson, 6 Esp. 43; Sidford v. Chambers, 1 Stark. 326. The plaintiff had no This (c) Code, s. 59 (2) b. striking out indorsements previous to re-issuing the bill after maturity is now imperative, not optional. A bill to payee or order, if paid by the drawer, cannot be re-issued by him, because if the payee's indorsement be struck out, the bill is no longer negotiable, and if it be not, the payee might be made liable to a subsequent party. See Beck v. Robley, 4 H. Bl. (n.) 89 ; and Code, s. 59 (2) a. Glenie v. Bruce Smith (1907] 2 K.B. 507. CHAPTER XII. Right of transferee to compel indorsement. Where a bill re-indorsed to Walters v. Neary 21 T.L.R. 146. default of acceptance or payment; and we have already seen (d), that against an innocent indorsee for value, no prior party can set up the defence of fraud, duress, illegality, or absence of consideration. But, if the payee of a bill payable to order neglect to indorse, the holder has no remedy in his own name against any person but him from whom he received it, till he have obtained the indorsement, which if he gave value he may compel (e). If a man have delivered a bill without indorsing it, where it was upon good consideration agreed or understood that it should be indorsed by him, and afterwards he refused to indorse, an action may be maintained against him for so refusing (f). He, or his personal representatives, may be ordered by the Court to indorse (g). But the transferee of an unindorsed bill has no right to sign his transferee's name as indorser (h). Nor can he obtain a good title by an indorsement written after notice to him of a fraud (i). If a bill be re-indorsed to a previous indorser, he has, in general, no remedy against the intermediate parties, for they would have their remedy over against him, and the result of the actions would be, to place the parties in precisely the same situation as before any action at all (k). But where a holder has previously indorsed, and the subsequent intermediate indorser has no right of action or remedy on that previous indorsement against the holder, there are cases in which the holder may sue the intermediate indorser (7). And if the plaintiff declared, as lie (d) Chapter on CONSIDERA TION. (e) By judgment or order, and have the indorsement made on failure of compliance by nominee of the Court, 47 & 48 Vict. c. 61, s. 14. Code, s. 31 (4). In Scotland it has been held that he can sue, and in his own name. Hood v. Stewart, 17 C. o. S. Ca. 749; Good v. Walker, 61 L. J., Q. B. 736. (f) Rose v. Sims, 1 B. & Ad. 521. (g) Watkins v. Maule, 2 Jac. & Walker, 242: Smith v. Pickery, Peake, 50; Rolleston v. Hibbert, 3 T. & R. 411; Er parte Rhodes, 3 Mont. & Ayr. 217: Er parte Greening, 13 Ves. 206; Edge v. he Rumford, 31 L. J., Ch. 805; 31 (h) Harrop v. Fisher, 30 L. J., C. P. 283; and see Moxon v. Pulling, 4 Camp. 50 Story on Bills of Exchange, s. 201; Rose v. Sims, 1 B. & Ad. 521. (i) Whistler v. Fowler, 14 C. B., N. S. 248; 32 L. J., C. P. 161. (k) Bishop v. Hayward, 4 T. R. 470 Britten v. Webb, 2 B. & C. 483; 3 D. & R. 650. Code, s. 59 (2) b. (1) Wilders v. Stevens, 15 L. J., Exch. 108; 15 M. & W. 208; Williams v. Clarke, 16 M. & W. 834; Smith v. Marsack, 18 L. J., C. P. 65; 6 C. B. 486; Morris v. Walker, 19 L. J., Q. B. 400; 15 might do, on an indorsement from the first blank indorser to himself, it would, it seems, be intended that he meant to rely on his first title, and it was doubtful whether he could reply any facts arising on the intervening indorsements without a departure (m). But where a bill or note is merely indorsed to another, and deposited with him as a trustee, he can only use it in conformity with the stipulations on which he became the depositary of it (n). If the depositary of the bill indorse it over in breach of trust, the indorsee, with notice of the breach of trust, can acquire no title to the bill as against the rightful owner, and can neither sue him on the bill, nor hold the bill against him (0). Therefore, where the acceptor of a bill, who had received no value, delivered the bill to the drawer, desiring him to hold it for his use, but the drawer indorsed it for value to the defendant, who knew that the drawer had no authority to part with it, the defendant, the indorsee, was held liable to the acceptor in trover. "The drawer," says Lord Tenterden, "having put the bill into the defendant's hands, when the defendant knew that the drawer had no authority so to do, the defendant's title is no better than the drawer's. But then, it is said, allowing that the plaintiff had a property in the bill, the defendant had a right to hold it, because he may sue the drawer. I think the defendant had no right to hold it as against the acceptor, the plaintiff, because the defendant took the bill with the knowledge that the person from whom he took it had no title to it as against the plaintiff" (p). So where the drawer of a bill of exchange deposited it with a creditor, and gave him authority to receive the proceeds and apply them in a specified way, and the drawer afterwards committed an act of bankruptcy, on which a commission issued, the creditor having, after the act of bankruptcy, delivered the original bill to the acceptor, and taken in lieu of it another bill, it was held by Tindal, C. J., that the Q. B. 589; Wilkinson v. Unwin, (m) Bartlett v. Benson, 15 L. J., Exch. 23; 14 M. & W. 733. (n) As to the consideration where the bill is deposited as security for the balance of a running account, see ante, CONSIDERATION. (0) Goggerly v. Cuthbert, 2 N. R. 170. If the acceptor be compelled to pay, he may sue the depositary. Bleaden v. Charles, 7 Bing. 246; and see Oshorn v. Donald, 12 W. R. 839. (p) Evans v. Kymer, 1 B. & Ad. 528; 35 R. R. 368. CHAPTER Where the indorsee is a trustee. CHAPTER Restrictive creditor had been guilty of a conversion, and the assignees of the bankrupt might recover against him in trover (q). But it would have been otherwise if the creditor had merely received the money, for that would not have amounted to a conversion (r). Where a bill has been indorsed in blank, and the transferee of the depositary takes it without knowledge of the particular and limited purpose for which the bill was deposited with the trustee, the transferee acquires a title (s); and the transferee's title will not now be affected by proving him guilty of negligence, however gross, if there were no fraud. Gross negligence may, however, be evidence of fraud (). And it is conceived, that if the bill had not become payable to bearer, but was transferable only by indorsement of the trustee, an indorsement by him in breach of trust to an indorsee for value, and without notice, would in general confer a title. The trust may be expressed on the bill itself by a restricindorsements. tive indorsement, or a restrictive direction appended to the payee's name, so that, into whose hands soever the bill may travel, it may carry a trust on the face of it (u). An indorsement is restrictive which prohibits the further negotiation of the bill or note, as "pay D. only," or which expresses that it is a mere authority to deal with the bill as thereby directed, and not a transfer of the ownership thereof, as "pay D. for the account of X.," or "pay D. or order for collection" (x). A restrictive indorsement gives the indorsee the right to receive payment of the bill, and to sue any party that his indorser could have sued, but not to transfer his rights as indorsee unless expressly authorized (g) Robson v. Rolls, 1 M. & Rob. 239. (r) Jones v. Fort, 9 B. & C. 764; 4 M. & Ry. 547. (8) Bolton v. Puller, 1 B. & P. 539; 4 R. R. 723; Ramsbottom v. Cator, 1 Stark. 228; Collins v. Martin, 1 B. & P. 648 ; 4 R. R. 752; Gorgier v. Mieville, 3 B. & C. 45: 4 D. & R. 641; 27 R. R. 290; Wookey v. Pole, 4 B. & Ald. 1; 22 R. R. 594; and see Roberts v. Eden, 1 B. & P. 398. (t) Goodman v. Harrey, 4 Ad. & E. 870; 6 N. & M. 372; Uther v. Rich, 10 Ad. & E. 784; 2 Per. & D. 579. (u) Code, s. 32 (6). Such restrictive indorsements are not of very late invention, but they appear to have been well known before the middle of the last century. Snee v. Prescot, 1 Atk. 247; Edie v. East India Company, 2 Burr. 1227; 1 W. Bl. 295; and ante, p. 42. (x) Code, s. 35. The Code gives no form of words for a restrictive drawing, though it clearly contemplates such by sect. 8. The following have been held to be restrictive indorsements: "The within must be credited to D.," Ancher v. Bank of England, 2 Doug. 637; "pay D. or order for my use," " pay D. for my account," Edie v. East India Co., 2 Burr. 1227; Evans v. |