Due to

(75.)

Coupon Note.

CHICAGO, ILLINOIS, May 8th, 1900.

or order, Sixty Dollars on the 8th day of November, A. D.

1900, without grace, at the office of Boston, Massachusetts, with interest at the rate of six per cent. per annum after maturity, being for an instalment of interest due on that day upon my principal promissory note of even date herewith, payable to or order, three (3) years after its date, for the sum of Two Thousand (2,000) Dollars secured by trust deed.

(Five other similar coupon notes for interest are added.)

Notes of this kind are often accompanied by a power of attorney to confess judgment, in the form shown in Section IX of this Chapter.

It is quite important to have a clear idea of the difference between the parties to a note, and the parties to a bill of exchange. If A makes a note to B, then A promises to pay, and is the promisor, and B is the promisee, or payee. But if it be payable to B or order, B may write his name across the back, that is, may indorse it, and is an indorser. And if he directs, over his signature on the back, that the note be paid to any person in particular, such payee is now an indorsee. But when a bill is drawn, nobody promises, in words, to pay it. A orders B to pay to C. If B, when requested, says he will not do as ordered, the law supposes A, the drawer, to have promised that he would pay if B did not. If B "accepts," the law now supposes that B promises C to pay the bill to him. Now B, being the acceptor, is held by the law just as a maker of a note is, because he is supposed to have promised in the same way. A, the drawer, is held just as the first indorser of a note is held, because he is supposed to have promised to pay if B did not. If the bill was negotiable, that is, payable to C, or his order, then C may indorse the bill, and although his name is the only one on the back of the bill, he is treated in law only as second indorser, because the drawer is bound in the same way as a first indorser. And if D then puts his name below C's he is treated as third indorser, and so on. For the rights, obligations, and duties of all these parties, see the subsequent sections.

We repeat, that a negotiable promissory note is a written promise to pay to a certain person or his order, or to bearer, at

a certain time, a certain sum of money; and he who signs this is called the Maker or the Promisor; the other party is the Promisee or Payee. The payee of such a note has the same power of indorsement as the payee of a bill of exchange. If the note be not payable "to order," nor to "bearer," it is then not negotiable; these words "or order" or "to bearer" being the words which make it negotiable. The maker of a negotiable note holds, as has been said, the same position as the acceptor of a bill, the drawer the same as the first indorser of a note; that is, a party holding a note and seeking payment of it looks first to the maker, and then to the indorser; one holding a bill looks first to the drawee or acceptor, and, on his failure, to the drawer.

Neither indorsement, nor acceptance, nor making, is complete until delivery and reception of the bill or note, or acceptance; and a defendant may show that there was no legal delivery of the paper.

The law of negotiable paper first defines a bill or note, and determines what instruments come under these names, and then describes and ascertains the duties and obligations of all the parties we have named above. We shall follow this order.

SECTION II.

WHAT IS ESSENTIAL TO A NEGOTIABLE NOTE OR BILL.

A WRITTEN order or promise may be perfectly valid as a written contract or promise, but, although made "to order," will not be negotiable, unless certain requisites of the law-merchant are complied with.

The difference between a note that is negotiable and one that is not, is very important in many respects. One of these is as to the operation of the trustee process, or foreign attachment, or garnishee process, as it is sometimes called. If A owes B a hundred dollars, C, a creditor of B, may trustee A, and A must then pay to C what he owes to B. And this is so, even if A have given his note to B for the hundred dollars, if the note be not negotiable, that is, not to B or order, unless A has actual notice that the note has been assigned for value to a third person. But if the note be negotiable and not overdue, A cannot be trusteed. The reason is, that if he is obliged to pay the money to C, and B

should indorse the note to D for value, and D take it honestly, A must pay the note to D, and so would have to pay it twice. But if the note is not negotiable, B cannot indorse it, and A is safe in paying the money over.

Another very important difference is that defenses, such as want or failure of consideration, which could have been made against the original payee, are not open as against the bona fide indorsee of a negotiable note who has taken it before it is overdue.

1. THE PROMISE MUST BE ABSOLUTE AND DEFINITE.-The promise of the note and the order of the bill must be absolute. Words expressive of intention only do not make a promissory note, and a mere request without an order does not make a bill of exchange. But no one word, and no set of words, are absolutely necessary; for if from all the language the distinct promise or positive order can be inferred, that is sufficient.

The time of payment is usually written in a bill or note; if not, it is payable on demand. The time of payment must notdepend on a contingency. In fact, any contingency apparent on the face of the instrument prevents it from being a negotiable note; and the happening of the contingency does not cure it. And the payment promised or ordered must be of a definite sum of money.

A negotiable bill of exchange or promissory note must be payable in money only, and not in goods or merchandise, or property of any kind, or by the performance of any act. If payable in "current funds," or good "bank-notes," or "current banknotes," this should not be sufficient on general principles; some courts, however, construe this as meaning notes convertible on demand into money, and therefore as the same thing as money, and call the note negotiable.

A bill or note may be written upon any paper or proper substitute for it, in any language, in ink or pencil. A name may be signed or indorsed by a mark; and, though usually written at the bottom, it may be sufficient if written in the body of the note; as, "I, A B, promise," &c.; unless it can be shown that the note was incomplete, and was intended to be finished by signature. If not dated, it will be considered as dated when it was made; but a written date is prima facie evidence (this means evidence which may be overcome by opposite and better evidence, but until

so overcome is sufficient) of the time of making. The amount is usually written in figures at the corner or bottom. If the sum is written at length in the body, and also in figures at the corner, the written words control the figures, and evidence is not admissible to show that the figures were right and the words inaccurate. But in an American case, a promissory note, expressed to be for "thee hundred dollars," and figures in the margin, $300, was held to be a good note for three hundred dollars, if the maker when he signed it intended "three" when he wrote "thee"; and whether such was his intention was a question for the jury. And the omission of such a word as "dollars," or "pounds," or "sterling," may be supplied, if the meaning of the instrument is quite clear.

It has been just said that any contingency apparent on the face of the instrument prevents it from being a negotiable note. Hence it is not safe to write in the body of the note, or in connection with the promise, any condition or contingency. But, if what is so written in no way affects the promise itself, the note may still be negotiable.

Thus, in some parts of this country, persons who sell a machine, or other thing, on a credit, sometimes take a promissory note payable to the seller or order, and containing an additional clause, providing that, until the note is paid, the property in the thing sold (or the ownership of it) shall be and remain in the seller. Such notes are often made in the following form:

(76.)

Form of a Note given for a Chattel sold, with a Condition preserving the Ownership of the Seller.

cent. per annum until paid. And it is further agreed that the title to the (reaper) for which this note is given shall remain in said seller) until this note is fully paid.

(the

(Witness.)

Value received

(Signature.)

On the back of this note is sometimes the following statement:

I own County of

Statement made for the Purpose of obtaining Credit.

acres of land in my own name in the Town of
and State of
which is worth at a fair valuation,

It is not incumbered by mortgage or otherwise, except the amount of and the title is perfect in me in all respects. I have stock and personal property to the amount of $. over and above my debts and

liabilities.

The above property being worth over and above my debts, liabilities, and exemptions at least FIVE TIMES the amount of the within note.

The question has arisen whether such a note is negotiable. Suppose the seller of the chattel, who is payee of the note, sells the note and indorses it for value to an innocent indorsee; then the buyer finds that he was cheated, and puts in this defence of fraud when he is sued on the note by the indorser. He can make this defence if this note be not negotiable; but he cannot make it if it be negotiable. I should say it was negotiable; and that the only effect of the condition or provision annexed to the promise, was, that it operated much as a mortgage of the thing, by the buyer, back to the seller, to secure the payment. In some States such a note must be recorded like a chattel mortgage.

2. THE PAYEE MUST BE DESIGNATED.-The payee should be distinctly named, unless the bill or note be made payable to bearer. If it can be gathered from the instrument, by a reasonable or necessary construction, who is the payee, that is enough. The note may be made payable to the promisor or his order; that is, a man may say, I promise to pay to my own order; and such note is nothing until the promisor not only signs it, but indorses it.

A note indorsed in blank is always transferable by delivery, just as if it were made payable to bearer; because any holder may write over the indorsement an order to pay to himself. Indorsements are either indorsements in blank, by which is meant the name of the indorser and nothing more, or indorsement in full, which are so called when over the name of the indorser is written, "pay to A B." (By A B we mean the name of the person to whom the note or bill is indorsed.) These two kinds of indorsements are fully explained subsequently in section VI of this chapter. A note to the order of the promisor himself, and indorsed by him in blank, is therefore much the same thing as a