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the negotiability of a note is not destroyed by the fact that one of the makers is also the payee;53 nor by the fact that the treasurer of a corporation executes a corporate note by signing the name of the corporation and his name alone as such treasurer, where such manner of execution was customary to the knowledge of the board of directors;54 nor by the fact that the note is a conditional one, retaining title to the property, the purchase-price of which the note represents, and the holder took it with knowledge of such fact;55 nor by the fact that the holder received the note from the maker notwithstanding the presumption of its payment, as a note or bill can be reissued after payment, and still be negotiable.56 And the negotiability of a note continues, even after maturity, especially as between the original parties to the instrument.57 So it is held that the negotiability of an instrument is not destroyed by failure to place the required revenue stamp upon it, where the statute only provides that such failure shall render them inadmissible in evidence, 58 As the negotiation of a negotiable note payable to order, without indorsement, destroys its negotiability, so its negotiability is preserved by indorsement, made by a transferee, before due though the payee did not indorse until later.59

§ 18. Making negotiable bonds nonnegotiable.-Again, the Negotiable Instruments Law of New York, and perhaps of other states, provides that "The owner or holder of any corporate or municipal bond or obligation (except such as are designated to circulate as money, payable to bearer), heretofore or hereafter issued in and payable in this state, but not registered in pursuance of any state law, may make such bonds or obligation, or the interest coupon accompanying the same, nonnegotiable, by subscribing his name to a statement indorsed thereupon, that such bond, obligation

53 Melton v. Pensacola Bank &c. Co., 190 Fed. 126.

54 Corr v. Evans Colliery Co., 63 Pa. Super. Ct. 56.

55 Peoples Bank v. Porter (Cal. App.), 208 Pac. 200.

56 Beauchamp V. Zellmer (Tex. Com. App.), 237 S. W. 911; (Tex. Civ. App.), 227 S. W. 965.

57 Beall v. Russell, 76 Misc. 244,

134 N. Y. S. 633; Central Trust Co. v. Fargason, 21 Ga. App. 696, 94 S. E. 902.

58 Richardson v. Cheshire, 193 Iowa 930, 188 N. W. 146; Farmers' Sav. Bank v. Neel, 193 Iowa 685, 187 N. W. 555.

59 Fowler v. Griffin (Iowa), 127 N. W. 1082.

or coupon is his property; and thereon the principal sum therein mentioned is payable only to such owner or holder, or his legal representatives or assigns, unless such bond, obligation or coupon be transferred by indorsement in blank, or payable to bearer, or to order, with the addition of the assignor's place of residence." 1960

60 Negot. Inst. Act of N. Y., § 332.

CHAPTER 2

PARTIES TO COMMERCIAL PAPER-THEIR LIABILITY—AND AVAILABILITY OF DEFENSES GENERALLY

Section

25. Primary and secondary liability.

26. Persons primarily liable.

27. Liability of person signing in representative capacity.

28. Rule as to makers and drawers-Defenses.

29.

Rule as to makers and drawers-That transfer from payee was procured by undue influence.

30. Joint and several makers.

31.

32.

In action on corporation note or indorsement.

When maker concluded by acts of agent.

33. Clearing-house rules-When available.

34. On note purchased by or from bank-Discount.

35. Liabilities of sureties-Defenses.

36. Obligors on bond-Rule where note is given in consideration of extension of time.

37. Liability as guarantors-Defense.

37a. Indorsement by payee or subsequent holder, with guaranty

clause.

38. Who are indorsers-Statutory provisions.

39. Kinds of indorsement-Statutory provisions.

40. Mode of indorsement-Statutory provisions-Liability.

41. Striking out indorsement, and transfer without indorsement. 42. Time and place of indorsement.

43. Liability of general indorsers-Statutory provisions-War

ranty.

44. Liability under qualified or restrictive indorsement.

45.

Blank indorsement-Liability under-How changed to special

indorsement.

46. Liability of transferrer without indorsement-Warranty. 47. Liability of indorser as maker.

48. Secondary contingent or conditional liability of indorser.

Section

49.

50.

51.

52.

Order in which indorsers are liable.

To whom defenses available.

Proof of relationship of parties to commercial paper.

Accommodation paper-Definition.

53. Who are accommodation parties.

54. Right of accommodation maker to withdraw.

55. Liability dependent on who is the accommodated party.

56. Primary liability of accommodation maker.

57. Defense of failure of plaintiff bank to apply deposit of accommodated party in discharge of note.

58.

59.

60.

Defense of limited use of accommodation note.
Accommodation makers as sureties.

Who are accommodation indorsers.

61. Liability of accommodation indorsers generally.

62. Liability of accommodation indorsers-Defenses.

63. Accommodation indorsers not liable to accommodated party. 64. Liability of accommodation indorser as surety.

65. Liability of accommodation indorser on note held as collateral -Order of liability.

66.

Liability of accommodation acceptor.

67. Negotiable instruments for patent right or speculative purposes -Defenses.

§ 25. Primary and secondary liability.-Parties to commercial paper are either primarily or secondarily liable, depending on whether they are makers, accommodation makers, sureties, indorsers, accommodation indorsers, guarantors, drawers, acceptors, or accommodation acceptors, the relation of the parties to the instrument being an important question for determination as to the right of defense in an action on the instrument. The makers of notes or the drawers of bills or checks are, as a general rule, primarily liable for the payment thereof, while all other parties are, as a general rule, secondarily liable on such instruments.1 The Uniform Negotiable Instruments Law provides that: "The person

1 Hudson Trust Co. v. Elliott, 194 Ala. 441, 69 So. 631; Farmers & Merchants Bank v. Davies, 144 La. 532;

80 So. 713; National Bank v. Dickinson, 102 Kans. 564, 171 Pac. 636.

'primarily' liable on an instrument is the person who by the terms. of the instrument, is absolutely required to pay the same. All other parties are 'secondarily' liable." The terms "primarily liable" and "secondarily liable", as used in such section of the statute, have reference to the remedy provided by law for enforcing the obligation of one signing a negotiable instrument, rather than to the character and limits of the obligation itself. In determining whether the parties to an instrument are primarily or secondarily liable thereunder, the laws of the state where the transaction occurred must control; and if the act occurred in two or more states, the law of the state where the last act was done controls.

§ 26. Persons primarily liable.-The Uniform Negotiable Instruments Law provides that: "The maker of a negotiable instrument, by making it engages that he will pay it according to its tenor, and admits the existence of the payee and his then capacity to indorse." It provides further that: "The drawer by drawing the instrument admits the existence of the payee and his then capacity to indorse; and engages that on due presentment the instrument will be accepted or paid, or both, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it. But the drawer may insert in the instrument an express stipulation negativing or limiting his own liability to the holder." The relation of

principal and surety may exist as between the makers of a note, while all may be held primarily liable as makers to the holder of the instrument. Thus, where a note is signed by two or more persons, and no element of suretyship appears, the payees or indorsers can

2 See Negot. Inst. Act, art. "General Provisions," § 192; Hudson Trust Co. v. Elliott, 194 Ala. 441, 69 So. 631; Webb v. Rolla Produce Co. (Mo. App.), 234 S. W. 1068.

3 Northern State Bank v. Bellamy, 19 N. Dak. 509, 125 N. W. 888, 31 L. R. A. (N. S.) 149.

4 Sunflower State Bank v. Bowman (Mo. App.), 243 S. W. 403.

5 Negot. Inst. Act. See art, “Liabilities of Parties," $60. The makers of a note admit the existence of the payee. Webb v. Rolla Produce Co. (Mo. App.), 234 S. W. 1068.

6 Negot. Inst. Act. See art, “Liabilities of Parties," $61.

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