Thus, it is held that where a note is indorsed to another for collection and remittance, the indorsement is restrictive, creating between the indorser and indorsee the relation of principal and agent, and the indorsee, having received the note for a specific purpose, stands as a trustee to the principal.18 But an indorsement of a note by a bank: "Pay to the order of any bank or banker. All previous indorsements guaranteed," was held not a restrictive indorsement, the indorsement being by the peculiar custom used among banks for the purpose of forwarding for collection, and not for the purpose of rediscount or sale. 19 The title to notes and certificates of deposit may pass by a valid gift to the donee, without indorsement.20 And although the title to a note indorsed to another for collection does not, by such act, pass to the indorsee, yet the indorsee may become the owner thereof by remitting, out of his own funds to the indorser, the amount to be collected, with the consent of the maker; but such an indorsee has no power to sell or transfer the note, his power being limited to its collection.21 So, where a note is indorsed: "Pay to the order of [a named bank] for the credit of account of * * *" it is held to be a restrictive indorsement of which a subsequent indorsee is bound to take notice, and is not a holder in due course.22 A restrictive indorsement confers upon the indorsee the right: (1) to receive payment of the instrument; (2) to bring any action thereon that the indorser could bring; (3) to transfer his right as such indorsee, where the form of the indorsement authorizes him to do so. But all subsequent indorsees acquire only the title of the first indorsee under the restrictive indorsement.23 Under subdivision 2 of this section, where an indorsement is made for collec Fed. 497. See also, Citizens Trust Co. v. Ward, 195 Mo. App. 223, 190 S. W. 364. 20 Rothwell v. Taylor, 303 I11. 226, 135 N. E. 419, revg. 221 Ill. App. 658. 21 Peoples &c. Bank v. Craig, 63 Ohio St. 374, 59. N. E. 102, 52 L. R. A. 872, 81 Am. St. 639. 22 Werner Piano Co. v. Henderson, 121 Ark. 165, 180 S. W. 495. 23 Negot. Inst. Act, art. "Negotiation," § 37. tion, the indorsee can sue in his own name, but the defendant can interpose all defenses existing between the maker and the payee or endorser, even defenses which may have arisen subsequent to such indorsement, as no title passes under such an indorsement.24 And the same rule applies where a check is deposited with a bank and the depositor's account is credited therewith, but the bank fails to collect it. In such case the bank can charge the check back to the depositor, notwithstanding the bank permitted him to check against the account.25 But where one deposits a check in a bank by a general indorsement, and it is credited to the depositor's account, and the bank indorses it by general indorsement to its correspondent, which in turn indorses it likewise, and plaintiff had no knowledge of a custom between the banks that if it were protested and returned it should be charged back to the account of the remitting bank; held that the indorsement and credit given passed title in the check to the receiving bank, and rendered it a holder for value in due course.26 So the indorsement, "The undersigned indorsers assume the contract shown by the face of this note. Payable from Pass Aux Heron U. S. Government contract," was held to be a qualified indorsement, the liability of the indorser being limited to such fund.27 It is quite apparent that the second subdivision of this section constitutes an exception to the code provision that actions must be prosecuted by the real party in interest. A qualified indorsement constitutes the indorser a mere assignor of the title to the instrument. It may be made by adding to the indorser's signature the words "without recourse," or any words of similar import. Such an indorsement does not impair the nego 24 Craig v. Palo Alto Stock Farm, 16 Idaho 701, 102 Pac. 393; Freemans Nat. Bank v. National Tube Works, 151 Mass. 413, 24 N. E. 779, 8 L. R. A. 42, 21 Am. St. 461; Regina Flour Mill Co. v. Holmes, 156 Mass. 11, 30 N. E. 176; Schmidt v. Pegg, 172 Mich. 159, 137 N. W. 524; Moore v. Hall, 48 Mich. 143, 11 N. W. 844; Smith v. Bayer, 46 Ore. 143, 79 Pac. 497, 114 Am. St. 858; Ward v. Tyler, 52 Pa. St. 393; Morris-Miller Co. v. VonPressentin, 63 Wash. 74, 114 Pac. 912; Metzger v. Sigall, 83 Wash. 80, 145 Pac. 72; American Sav. Bank &c. Co. v. Dennis, 90 Wash. 547, 156 Pac. 559; Williams, Deacon & Co. v. Shadbolt, 1 Cab. & El. (Eng.) 529. 25 American Sav. Bank &c. Co. v. Dennis, 90 Wash. 547, 156 Pac. 559. 26 Nat. Bank of Commerce v. Bossemeyer, 101 Nebr. 96, 162 N. W. 503, L. R. A. 1917E, 374. 27 Peoples Bank v. Moore, 201 Ala. 411, 78 So. 789. tiable character of the instrument.28 Under such act, the indorsement of a promissory note "without recourse," is a qualified indorsement constituting the indorsee a mere assignee of the title to the instrument.29 And where the words "without recourse" are not used by the indorser in order to constitute other words used "words of similar import," they must be such as to show an intention on the part of the indorser to disclaim liability under the indorsement.30 If, however, no qualifying words are used by the indorser, parol evidence is not admissible to show that the indorsement was intended by the parties to be a qualified one. 31 But where the words "without recourse" are written between the names of two indorsers, parol evidence is admissible to show who indorsed "without recourse," where their application is not apparent from the indorsement.32 As expressly stated in the statute, a qualified indorsement does not affect the negotiable character of the instrument, and it does not give the indorsee notice of any existing equities.33 There may be a partially restrictive indorsement, as where the indorsement requires the holder to first exhaust all security for payment of the instrument before proceeding against the indorser.34 And where an indorsement is conditional, a party required to pay the instrument may disregard the condition, and make 28 Negot. Inst. Act, art. "Negotiation," § 38. 29 Cressler v. Brown, 79 Okla. 170, 192 Pac. 417. 30 Cowles v. Harts, 3 Conn. 516; Farnsworth v. Burdick, 94 Kans. 749, 147 Pac. 863; Nelson v. Southworth, 93 Kans. 532, 144 Pac. 835; Schmidt Pegg, 172 Mich. 159, 137 N. W. 524; Markey v. Corey, 108 Mich. 184, 66 N. W. 493, 36 L. R. A. 117, 62 Am. St. 698; Fassin v. Hubbard, 55 N. Y. 465; Copeland v. Burk, 59 Okla. 219, 158 Pac. 1162. L. R. A. 1917A, 1165; Fleming, 46 Pa. St. 140; V. Grant Mindeman, 123 Wis. 149, 101 St. 1003. 31 Fitchburg Bank v. Greenwood, 2 Allen (Mass.) 434; Aronson v. Nurenberg, 218 Mass. 376, 105 N. E. 1056; Lake Harriet State Bank v. Miller, 138 32 Leahmer v. McCullough, 99 Kans. 451, 162 Pac. 297; Goolrick v. Wallace, 154 Ky. 596, 157 S. W. 920, 49 L. R. A. (N. S.) 789; Corbett v. Fetzer, 47 Nebr. 269, 66 N. W. 417. 33 Morehead v. Harris, 121 Ark. 634, 182 S. W. 521; Colvert v. Harrington, 61 Ind. App. 608, 112 N. E. 249; Higby v. Bahrenfuss, 180 Iowa 316, 163 N. W. 247; Elgin City Banking Co. v. Hall, 119 Tenn. 548, 108 S. W. 1068; Dollar Sav. & Trust Co. v. Crawford, 69 W. Va. 109, 70 S. E. 1089, 33 L. R. A. (N. S.) 587. 34 Smith v. Show, 16 N. Dak. 306, 112 N. W. 1062. payment to the indorsee or his transferee, whether the condition. has been fulfilled or not. But any person to whom an instrument so indorsed is negotiated will hold the same, or the proceeds thereof, subject to the rights of the person indorsing conditionally.35 Where an instrument payable to bearer is indorsed specially, it may nevertheless be further negotiated by delivery; but the person indorsing specially is liable as indorser to only such holders as make title through his indorsement.36 -- § 40. Mode of indorsement-Statutory provisions-Liability. The Uniform Negotiable Instruments Act provides that, "An instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof. If payable to bearer it is negotiated by delivery; if payable to order it is negotiated by the indorsement of the holder completed by delivery."37 It was not the intention of such act to prescribe any exclusive method by which negotiable instruments might be transferred, but it only prescribes the manner in which their negotiability may be preserved and kept free from equities and defenses in actions by the transferee. In other respects it leaves the law unchanged and in force as it was at the time of the passage of the Negotiable Instruments Act,38 and it does not prescribe any particular mode of indorsement,39 and a seal is not required, even in indorsements by corporations.40 The usual mode of indorsing, however, is the signing of the name of the indorser on the back of the instrument. Under this section commercial paper is negotiated when it is delivered to the payee or to an indorsee. thereof.42 In an action on a negotiable instrument, the complaint 41 35 Negot. Inst. Act, art. "Negotiation," $39; Robertson v. Kensington, 4 Taunt. (Eng.) 30. 36 Negot. Inst. Act, art. "Negotiation," § 40. 37 Negot. Inst. Act, art. "Negotia tion," § 30. 38 Carter v. Butler, 264 Mo. 306, 174 S. W. 399, Ann. Cas. 1917A, 483. 39 LaHatte v. Metropolitan Trust Co., 18 Ga. App. 764, 90 S. E. 725. 40 Sheffield v. Johnson County Sav. Bank, 2 Ga. App. 221, 58 S. E. 386. 41 Hays v. Plummer, 126 Cal. 107, 58 Pac. 447, 77 Am. St. 153; Haug v. Riley, 101 Ga. 372, 29 S. E. 44, 40 L. R. A. 244; Hendrix v. Bauhard Bros., 138 Ga. 473, 75 S. E. 588, 43 L. R. A. (N. S.) 1028, Ann. Cas. 1913D, 688; Kern v. Hazlerigg, 11 Ind. 443, 71 Am. Dec. 360; Herrick v. Edwards, 106 Mo. App. 633, 81 S. W. 466; Gorman v. Ketchum, 33 Wis. 427. 42 Ex parte Goldberg & Lewis, 191 Ala. 356, 67 So. 839, L. R. A. 1915F, 1157; Young v. Hayes, 183 Iowa 134, is demurrable which does not show that it was negotiated in the manner required by statute; it not being sufficient to merely allege the transfer of the instrument to plaintiff.43 But it would seem that if the note is payable to bearer such an allegation would be sufficient, as in such case the instrument can be negotiated by mere delivery, which is the simplest form of transfer, but no doubt such an instrument could be transferred by indorsement. If, however, the instrument is payable to order, plaintiff must allege and prove its negotiation by indorsement.44 And in view of the provision of the Uniform Negotiable Instruments Act15 providing that "‘indorsement' means an indorsement completed by delivery," it would appear that allegation and proof of indorsement would be sufficient without an express allegation of delivery.46 But title does not pass by the mere indorsement of the instrument without delivery, and want of delivery may be set up as a defense.47 And since a note made payable to one or order, when indorsed in blank, is payable to bearer, it is no defense that the note was not indorsed to plaintiff, where it had previously been indorsed in blank, thereby making it transferable by mere delivery.48 Delivery of notes indorsed in blank is sufficient where they were placed in plaintiff's private safety 165 N. W. 391; Liberty Trust Co. v. Tilton, 217 Mass. 462, 105 N. E. 605, L. R. A. 1915B, 144; Nat. Bank of Commerce v. Farmers & Merchants Bank, 87 Nebr. 841, 128 N. W. 522; Aurora State Bank v. Hayes-Eames Elevator Co., 88 Nebr. 187, 129 N. W. 279; Seaman v. Muir, 72 Ore. 583, 144 Pac. 121. Coal Min. Co. v. International Trust Co., 18 Colo. App. 345, 71 Pac. 898; Williams v. Peninsular Gro. Co., 73 Fla. 937, 75 So. 517. In this latter case an allegation "that the note in suit was indorsed to plaintiff, and that by reason of said indorsement the legal title * * * was transferred to and became vested in said indorsee," held not to show a negotiation of the note to plaintiff; but it is hard to reconcile this holding with the provision of the statute that "indorsement' means an indorsement completed by delivery." 47 Spencer v. Carstarphen, 15 Colo. 445, 28 Pac. 882; Clark v. Sigourney, 17 Conn. 511; Dann v. Norris, 24 Conn. 333; Middleton v. Griffith, 57 N. J. L. 442, 31 Atl. 405. 48 Davis v. First Nat. Bank, 192 Ala. 8, 68 So. 261; Dominion Trust Co. v. Hildner, 243 Pa. 253, 90 Atl. 69. |