show its worthlessness, is the warranty of a vendor, and not of an indorser, and does not run with the paper, but is personal to the purchaser.22 Where the warranty of an indorser is supplemented by an agreement that the payee should not be liable until the collateral securing the note has been exhausted, it is in effect a guaranty of collection of the debt.23 The indorser's guaranty of payment of the debt renders him primarily and absolutely liable for the debt if not paid at maturity.24 And where the maker of a note indorses it, it is in effect a mere warranty of his own obligation, and adds nothing thereto.25 The warranty of an indorser, under the Negotiable Instruments Act, is of the instrument as it appears on its face, free from the burden of any condition which either of the parties may have consented to prior to the indorsement, and not expressed thereon in writing.26 So, where one negotiates a check, his warranty of its genuineness is not discharged by acceptance and certification or payment of the check.27 And where above the name of the indorser are the words "previous indorsement guaranteed," it is held to have the effect of guaranteeing merely the genuineness of the previous indorsements, but does not render the indorser liable on the note.28 An indorsement of a check in blank does not have the effect of warranting the genuineness of the signature of the maker to the drawee, and the same rule applies where, above the indorsement, is written an express guaranty. When the holder of a check presents it to the drawee for payment, his indorsement of it does not create a warranty of the genuineness of the signature of the drawer, either under the law merchant or the Negotiable Instruments Law; and the same rule applies where the check is presented through a clearing house, the stamp of which is indorsed on the check,29 but he does warrant the genuineness of previous in

22 McAdam v. Grand Forks Mercantile Co., 24 N. Dak. 645, 140 N. W. 725, 47 L. R. A. (N. S.) 246.

23 Sykes v. Everett, 167 N. Car. 600, 83 S. E. 585, 4 A. L. R. 751.

24 Sykes v. Everett, 167 N. Car. 600, 83 S. E. 585, 4 A. L. R. 751.

25 Sabine v. Paine, 166 App. Div. 9, 151 N. Y. S. 735.

26 Fidelity Nat. Bank v. Hosea, 93 Wash. 344, 160 Pac. 960.

27 First Nat. Bank v. Brule Nat. Bank, 38 S. Dak. 396, 161 N. W. 616, 12 A. L. R. 1079.

28 Johnston v. Schnabaum, 86 Ark. 82, 109 S. W. 1163, 17 L. R. A. (N. S.) 838, 126 Am. St. 1082, 15 Ann. Cas. 876.

29 In such case the court said: "Thus far we have determined that the clearing-house stamp indorsed by the defendant on the back of the checks

dorsements.30 And, "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.”31 Such act also provides that: "Where a person places his indorsement on an instrument negotiable by delivery he incurs all the liabilities of an indorser."32 And that: "Where the holder of a set indorses two or more parts to different persons he is liable on every such part, and every indorser subsequent to him is liable on the part he has himself indorsed, as if such parts were separate bills."33

If an indorsement of a note is an act subsequent to the execution of the note, and it is independent thereof, it requires a consideration to support it, independent of the note itself.34 And a negotiable note payable to the maker and another jointly, not partners, indorsed in blank by the maker, does not imply a promise by him to pay such joint payee.35 So, where one holds a note as trustee for another he is not rendered personally liable on his indorsement of the note merely for transfer, if the indorsee knew of the trust relation.30 And where persons write their names on the back of a promissory note they become jointly and severally liable as indorsers in the absence of an agreement that they should not be so bound, and such

did not create a warranty that the signature of the drawer was genuine, and that the result was the same whether the indorsement is viewed in the light of the Negotiable Instrument Law or in the light of the rules of the law merchant. However, payment by the drawee does not, in all circumstances, free a holder from liability. The drawee does not warrant the genuineness of the signatures of the indorsers, for he is not in a position to know their signatures. The holder is bound to know that the previous indorsements, including that of the payee, are genuine; and therefore the holder of the check who accepts payment undertakes that all indorsements prior to his own are genuine. The consequence of this rule is that, if a holder Possesses a check having on it

the genuine signature of the drawer and the forged indorsement of the payee or other indorser, and such holder as receives payment from the drawee, he must refund to the drawee." First Nat. Bank v. United States Nat. Bank, 100 Ore. 264, 197 Pac. 547.

30 State v. Merchants Nat. Bank, 145 Minn. 322, 177 N. W. 135.

31 Negot. Inst. Act, art. "Negotiation," § 40.

32 Negot. Inst. Act, art. "Liabilities of Parties," § 67.

33 Negot. Inst. Act, art. "Bills in Set," § 180.

34 State Sav. Bank v. Osborn, 188 Iowa 168, 175 N. W. 964.

35 Dotson v. Skaggs, 77 W. Va. 372, 87 S. E. 460, L. R. A. 1916D, 761. 36 Newark Trust Co. v. Kriebel, 49 Cal. App. 614, 193 Pac. 962.

liability is not changed by an agreement between them that they will also indorse any renewal thereof.37 Again, a waiver of presentment, demand for payment, of protest, notice of dishonor and nonpayment, and guaranty of payment, written or printed on the back of a negotiable note and signed by persons described in such waiver as indorsers, and containing a guaranty clause, makes them liable both as indorsers and guarantors.38

Liability of indorsers of nonnegotiable instruments.

There is much confusion and conflict of authorities as to the liability incurred by indorsers of nonnegotiable notes. Some authorities hold that such indorsers incur no liability as indorsers;39 while others hold that such an indorsement does not give rise to a guaranty of payment, unless the assignor makes the assignment in a form from which an intent to guarantee the payment of the instrument may be inferred, or the assignee is induced to take the instrument by an agreement, express or implied, to that effect.40 And there is another line of authority which holds that such indorsers, in view of statutory provisions, become liable to the indorsee, after due diligence on the part of the indorsee to collect the instruments, to the same extent as indorsers of negotiable instruments.41 In an Iowa case it is said: "Prior to the passage of the Negotiable Instruments Act, this court held that the indorsee of a nonnegotiable instrument became liable to his indorsee, or a subsequent holder, as a maker of the instrument indorsed, no demand or notice being necessary to fix his liability, which was treated as absolute, and not conditional. * But, whatever may be the status under the present statutory provisions of a blank indorser of a nonnegotiable note, there is no authority for holding him liable, excepting in accordance with the terms of the instrument as to the amount to be paid and the condition on which it is to become pay

*

37 Bavarian Brewing Co. v. Sobocienski (Del. Super.), 109 Atl. 55.

38 Toler v. Sanders, 77 W. Va. 398, 87 S. E. 462.

39 Hilborn v. Pennsylvania Cement Co., 145 App. Div. 442, 129 N. Y. S. 957; Mackintosh v. Gibbs, 79 N. J. L.

40, 74 Atl. 708, 80 Atl. 554; McEwen v. Black, 44 Okla. 644, 146 Pac. 37.

40 Exchange Nat. Bank v. Chapline, 109 Ark. 242, 158 S. W. 151.

41 Bank of Luverne v. Sharpe, 152 Ala. 589, 44 So. 871, 126 Am. St. 58.

able. He does not assume any greater liability than that of maker of the very instrument which he indorses."42

§ 44. Liability under qualified or restrictive indorsement.— An indorser of a note "without recourse" warrants its genuineness; that he has a good title; that it is what it purports to be; that the prior party had capacity to contract; and that he does not have any knowledge of facts that would impair the validity of the note.43 But an implied warranty does not arise under the Negotiable Instruments Law on the theory that the note was indorsed without recourse, where the complaint does not show that the note was so indorsed.44 So, where one indorses "without recourse," with knowledge that it was executed without consideration, he is liable to the indorsee for breach of warranty.45 And, where an indorser obtained the note without consideration, or through fraud, the indorsee can recover from him the amount paid by the indorsee, with interest.46 And so a qualified indorser can not, in an action by a subsequent bona fide holder, impeach his implied warranty by objecting to a judgment against the maker and prior indorsers in favor of such holder.47 Where a note was secured by a mortgage, and the mortgage was transferred "together with the notes or obligations therein described without recourse or in any event or for any cause," the indorsement and assignment, being parts of the same transaction, constitute one contract, and the indorsement is a qualified one, the indorser being a mere assignor, and not liable as indorser. 48 Under the Negotiable Instruments Act, an indorsement on a note by the payee: "Credit the account of" a certain creditor of the payee, is a restrictive indorsement.49 But an indorsement: "Pay to the order of any bank or banker-previous indorsements guaranteed," and the indorsement, "Received payment through" a

named clearing house, have been held not to be restrictive indorsements. 50

§ 45. Blank indorsement-Liability under-How changed to special indorsement.-The Negotiable Instruments Act provides that: "The signature of the indorser, without additional words, is a sufficient indorsement."51 And such act further provides: "The holder may convert a blank indorsement into a special indorsement by writing over the signature of an indorser in blank any contract consistent with the character of the indorsement."52 So an indorser of a negotiable note in blank, without qualification, becomes secondarily liable for the amount of the note; and since a note payable to the order of the maker and indorsed by him in blank becomes payable to bearer, it is not necessary to consider other indorsements in blank as regards the passing of the title to the paper.53 And so, where one indorses in blank a certificate of deposit, and because of insolvency of the bank issuing it, it is dishonored, the indorser is liable on his indorsement.54

§ 46. Liability of transferrer without indorsement-Warranty. The Negotiable Instruments Act provides that every person negotiating an instrument by delivery or by a qualified indorsement, warrants that the instrument is genuine, and in all respects what it purports to be; that he has a good title to it; that all prior parties had capacity to contract; that he has no knowledge of any fact which would impair the validity of the instrument or render it valueless. But when the negotiation is by delivery only, the warranty extends in favor of no holder other than the immediate transferee; however the provisions of subdivision 3 of the section

50 Interstate Trust Co. v. United States Nat. Bank, 67 Colo. 6, 185 Pac. 260, 10 A. L. R. 705.

51 Negot. Inst. Act, art. "Negotiation," § 31.

52 Negot. Inst. Act, art. “Negotiation," § 35. See Aronson v. Nurenburg, 218 Mass. 376, 105 N. E. 1056.

53 Leavitt v. Wintman, 234 Mass. 248, 125 N. E. 390. A note is negotiable when payable to the maker and

indorsed in blank (Commercial Sav. Bank v. Colthurst (Iowa), 188 N. W. 844), and when delivered to a holder for value the parties then are in the relation of the original contracting parties, the holder standing in place of the promisee. Navin v. McCarthy (Mass.), 134 N. E. 232.

54 Jensen v. Wilslef, 36 Nev. 37, 132 Pac. 16, Ann. Cas. 1914D, 1220.