[*125]

*A transferer, by delivery, though he does not in general warrant the solvency of the maker of a promissory note or bill of exchange, does warrant that the bill or note is not forged or fictitious.(8)(1)

A transferer, by delivery, cannot be liable in any case to a subsequent transferee, either on the instrument or the consideration. And therefore it has been held, that such subsequent transferee cannot prove for the value in the event of the first transferer's bankruptcy.(t)

But, in all cases, if notes or bills are transferred as valid, when the transferer knows they are good for nothing, the suppression of the truth is a fraud, and he is liable. "If," continues Mr. Justice Bayley, in the case before referred to, "A. could show fraud or knowledge of the maker's insolvency, in the payer, then it would be wholly immaterial whether the notes were taken at the time of sale or afterwards."(u)

Sixthly, as to the rights of transferee by delivery. Bills or notes payable to bearer circulate as money, and are considered as such. And it is absolutely essential to the currency of money, that the property and possession should be inseparable. We have already seen that the indorsee of a bill payable to order, and not made payable to bearer by a blank indorsement, has no right to the bill, either so as to retain it against the real owner, or to sue any party upon it, unless the indorser had a right to indorse.(v) Whereas, if a check,

(s) Jones v. Ryde, 5 Taunt. 489, E. C. L. R. vol. 1; 1 Marsh. 157, E. C. L. R. vol. 4, S. C.; Bruce v. Bruce, 1 Marsh. 165, E. C. L. R. vol. 4; 5 Taunt. 495, E. C. L. R. vol. 1; Fuller v. Smith, Ryan & M. 49. So it has been repeatedly held in America. Ellis v. Wild, 6 Mass. Rep. 321; Young v. Adams, Ibid. 182; Markle v. Hatfield, 2 John. R. 455; Eagle Bank of Newhaven v. Smith, 5 Conn. R. 71. Mr. Justice Story lays it down that there is also a warranty of the title of the transferer. Treatise on Promissory Notes, p. 123. But it is conceived that that is not so. Indeed, an honest transferee by delivery needs no such warranty.

(t) In re Burrington, 2 Sch. & Lef. 112.

(u) Camidge v. Allenby, 6 B. & C. 373, E. C. L. R. vol. 13; 9 D. & R. 391, S. C.; Fenn v. Harrison, 3 T. R. 759.

(v) Mead v. Young, 4 T. R. 28.

(1) The doctrine of implied warranty in sales, applies to the sale of a note: so that one who sells an indorsed note gives an implied warranty that the indorsement is a genuine one. Strange v. Ellison, 2 Bailey, 385; McNeil v. Knott, 11 Georgia,

bill, or note, be made or have become payable to bearer, the title of the holder, both as against a former owner on the one hand, and the maker, acceptor, or indorser on the other, is not affected by any infirmity in the title of the transferer, provided the holder took it bona fide.(1)

It was formerly considered that the transferee's title would be affected by want of due caution on his part, and that he *would [*126] be liable in trover to the real owner, and unable to enforce payment against the parties to the instrument, if he were guilty of negligence in taking it. Thus, where a banker, in a small market town, changed a 5007. Bank of England note for a stranger, without any further inquiry than merely asking his name, he was held liable, in trover, to a party from whom the note had been unlawfully obtained; Best, C. J., observing, "The party's caution should increase with the amount of the note which he is called upon to change.(w) A man may change a 207. note without asking a single question, but would that be right as to one of several thousands? More caution is required in the case of a discounter than of a payer."(x)

But it is now definitively settled, that if a man takes honestly an instrument made or become payable to bearer, he has a good title to it, with whatever degree of negligence he may have acted, unless his gross negligence induce the jury to find fraud. "I believe," says Lord Denman, "we are all of opinion that gross negligence only would not be a sufficient answer by the defendant where the plaintiff has given consideration for the bill. Gross negligence may be evidence of mala fides, but it is not the same thing. We have shaken off the last remnant of the contrary doctrine."(y)

(w) Snow v. Peacock, 2 C. & P. 221, E. C. L. R. vol. 12; and see Gill v. Cubitt, 3 B. & C. 466, E. C. L. R. vol. 10; 5 D. & R. 324, S. C.; Egan v. Thretfall, 5 D. & R. 326, E. C. L. R. vol. 16.

(x) Perhaps this last proposition may now be reversed.

(y) Goodman v. Harvey, 4 Ad. & El. 870, E. C. L. R. vol. 31; 6 N. & M. 372, S. C.; Uther v. Rich, 10 Ad. & E. 784, E. C. L. R. vol. 37; 2 P. & D. 579, S. C. In the case of Goodman v. Harvey, the bill bore on it when discounted, the notarial mark of non-acceptance. To use the words of the Lord Chief Justice, "the plain

(1) A note payable to A. or bearer, may be negotiated by delivery only, even if indorsed by A. Wilbour v. Turner, 5 Pick. 526; Dole v. Weeks, 4 Mass. 451. A note or bill with a seal to it is not a negotiable instrument; but in Georgia it has been held that a bond payable to bearer is. Porter v. McCollum, 15 Georgia,

If the party presenting a bill or note payable to bearer, be the mere agent of another, the agent's title is infected with the infirmity. of his principal's title, although the principal is in the agent's debt; and the agent consequently cannot enforce payment of the maker.(z)

It makes no difference that the bill or note is only pledged, and not absolutely transferred; the pawnee acquires a property in it, and is not liable in trover, to the real owner, as in the case of goods improperly pledged. (a)

*Exchequer bills, which are payable to bearer before the [*127] blank is filled up,(b) bonds of foreign princes and states payable to bearer, (c) and East India bonds,(d) resemble money and bills of exchange payable to bearer, in the necessary union of possession and property. Honest acquisition confers title.(e)

A metallic token like an I. O. U., should seem at common law to be only evidence of a debt. Though intended for circulation, it can therefore at common law give no right of action to a transferee.

But the issuer of tokens made of mixed metals, compounded partly of gold or silver, is liable to the holder.(ƒ)

The issuer of a token made wholly or in part of copper, is liable only to the original taker.(g)

tiff received the bill with a death-wound apparent on it." See Backhouse v. Harrison, 5 B. & Ad. 1098, E. C. L. R. vol. 27; 3 N. & M. 188; Crook v. Jadis, 5 B. & Ad. 909, E. C. L. R. vol. 27; 3 N. & M. 257, S. C.; Foster v. Pearson, 1 C. M. & R. 855 ;* 5 Tyr. 255, S. C.; Willis v. Bank of England, 4 Ad. & E. 21, E. C. L. R.

vol. 31.

(z) Solomons v. Bank of England, 13 East, 135; 1 Rose, 99, S. C.

(a) Collins v. Martin, 1 Bos. & Pul. 648; 2 Esp. 520, S. C. See as to lien of banker, post.

(b) Wookey v. Poole, 4 B. & Ald. 1, E. C. L. R. vol. 6; see as to divided warrants, Partridge v. Bank of England, 13 L. J. 281, Q. B., and 9 Q. B. 424, E. C. L. R. vol. 58, in error; and see further as to Exchequer bills, Barnett v. Brandao, 6 M. & G. 630, E. C. L. R. vol. 46; Brandao v. Barnett, 3 C. B. Rep. 519, E. C. L. R. vol. 54.

(c) Gorgier v. Meiville, 3 B. & C. 45, E. C. L. R. vol. 10; 5 D. & R. 641, S. C. (d) 51 Geo. 3, c. 64.

(e) The embezzling of bills by agents, or pledging them beyond their lien, is a transportable misdemeanor; 7 & 8 Geo. 4, c. 29, ss. 49 and 50.

see the chapter on that subject.

(ƒ) 53 Geo. 3, c. 114, s. 3.

As to Lost Bills,

(g) 57 Geo. 3, c. 46.

The issuing of tokens made partly of gold or silver is restrained by the 53 Geo. 3, c. 114, and the issuing of tokens made wholly or partly of copper by the 57 Geo. 3, c. 46.

Tokens into the composition of which neither the precious metals or copper enter, seem left to the common law.

Wages, however, cannot in certain trades be paid in tokens.(h)

Seventhly, as to transfer under peculiar circumstances.

An indorsement may be made even before the bill or note itself, and so render the indorser liable to subsequent parties to any amount warranted by the stamp. The plaintiffs were bankers, with whom one G. had dealings. They refused to let him have more money, unless he procured them the indorsement of a third person. G. accordingly induced the defendant to sign his name across the back of four blank forms of promissory notes. G. then filled them up, and delivered them to the plaintiffs, who knew the notes were blank at the time of the indorsement. The notes were not paid by G., the maker, and the plaintiffs called on the defendant as indorser. Lord Mansfield: "Nothing is so clear, as that the indorsement on a blank note is a letter of credit for an indefinite sum. *The defendant said, [*128] Trust G. to any amount, and I will be his security.' It does not lie in his mouth to say the indorsements were not regular.”(¿)(1)

An indorsement may be made either before or after acceptance. If a bill be indorsed after refusal to accept, and notice thereof to the indorsee, or after it is due, these are circumstances which may reasonably excite suspicion as to the liability or solvency of the antecedent parties. An indorsee, therefore, of a bill dishonored or after due, with notice thereof, has not all the equity of an indorsee for value in the ordinary course of negotiation. He is held to take the bill on

(h) 1 & 2 Wm. 4, c. 37.

(i) Russell v. Langstaffe, Doug. 496; Usher v. Dauncy, 4 Camp. 97. A bill may be indorsed before the day of its date. Passmore v. North, 13 East, 517; and see Snaith v. Mingay, 1 M. & Sel. 86; Cruchley v. Clarence, 2 M. & Sel. 90; and see 17 Geo. 3, c. 30, s. 1, and Schultz v. Astley, 2 Bing. N. C. 544, E. C. L. R. vol. 29; 2 Scott, 815; 1 Hodges, 525, S. C.

(1) A blank indorsement, upon a blank piece of paper, with intent to give a person credit, is in effect a letter of credit; and if a promissory note is afterwards written on the paper, the indorser cannot object that the note was written after the indorsement. Violett v. Patton, 6 Cranch, 142.

the credit of his indorser, and has no superior title against the other parties.(k)

Drawer requested defendant to indorse two bills, for his, the drawer's, accommodation. He accordingly drew two in favor of the defendant, which defendant indorsed, and gave up to him. These bills the drawee then gave to A., and A. signed an agreement with defendant, that if one of the bills were paid, the defendant should be exonerated from the other. One of them the defendant accordingly did pay. The other was presented for acceptance and dishonored; it was, after this, indorsed by A. to the plaintiffs, with notice of the dishonor. On payment being refused, plaintiffs sued defendant. Held, that the plaintiffs, having taken the bill after notice of dishonor, took the title. of their indorser, and that, as the agreement would have been a defence to an action at the suit of A., it was a defence also against the plaintiffs.(1)

But if the indorsee had no notice of the dishonor, he is not prejudiced by it. Payee presented a bill for acceptance, which was refused. He neglected to advise the drawer, and thereby discharged the drawer as between the drawer and himself. He then indorsed the bill without informing his indorsee of the dishonor. Held, that the discharge to the drawer extended only to an action at the suit of the party guilty of the neglect, and that the indorsee having had no notice of the dishonor, the same defence was not available against him as against his indorser.(m)

* After a bill or note is due,"(n) says Lord Ellenborough, "it comes disgraced to the indorsee, and it is his duty to make [*129] inquiries concerning it. If he takes it, though he gives a full consideration for it, he takes it on the credit of the indorser, and subject

(k) But as to a bill payable to bearer, see Goodman v. Harvey, 4 Ad. & El. 870, E. C. L. R. vol. 31; 6 N. & Man. 372, S. C.

(1) Crossley v. Ham, 13 East, 498.

(m) O'Keefe v. Dunn, 6 Taunt. 305, E. C. L. R. vol. 1; 1 Marsh. 613, E. C. L. R. vol. 4, S. C.; affirmed in the K. B.; 5 M. & S. 282; and see Whitehead v. Walker, 11 L. J. 168, Exch.; 9 Mees. & Wels. 506,* S. C., and Bartlett v. Benson, 14 M. & W. 733;* 3 D. & L. 274; 15 L. J., Ex. 23, S. C.

(n) It is apprehended that wherever a party alleges that a bill was indorsed when overdue, or under any other peculiar circumstances, it lies on the party averring the fact to prove it on the general principle, "Ei incumbit probatio qui dicit." See post, p. 132.