them, where the note is not negotiable, it is a mere contract between the original parties, not intended for transfer, and a consideration must be shown.

Non-Negotiable Bills and Notes

Negotiability is not essential to the validity of a bill of exchange, and although it be payable to a designated person, and not to order or to bearer, it imports consideration, and in an action by the payee consideration need not be averred or proved.20 If, however, the instrument lacks any of the essential qualities of a bill of exchange-for example, if it be drawn upon a particular fund, or be payable in another medium than money-no presumption of consideration arises.21 Such instruments are, in general, mere assignments or orders. A number of important distinctions between them and negotiable bills are to be pointed out: A person suing the acceptor must show funds in the acceptor's hands to pay,22 for the agreement is not an acceptance, but a mere promise to pay, and must be based upon a sufficient consideration.23 The acceptor cannot be sued upon the bill, but upon the promise to pay evidenced by the acceptance. The acceptor is under no general liability to pay the bill in the first instance. Non-negotiable ity." Professor Jenks also refers (page 75) to a bill of exchange involved in the case of Spinula v. Camby, decided in 1448 in the town council of Bruges. The bill which was there treated as within the customs of merchants was payable to Bernard Camby and other. Mr. Jenks also gives an instance of a transferable bond prior to 1500. This bond was payable "to F. G., his heirs, or the holder of this letter." It was held by the council of Lübeck (the city which was at the head of the Hanseatic League) that the maker of the obligation could not require the holder of this bond to prove his authority from F. G. before making payment to him." See 2 Pollock & Maitland, Hist. of Eng. Law, 227.

20 Josselyn v. Lacier, 10 Mod. 294; Averett's Adm'r v. Booker, 15 Grat. (Va.) 163, 76 Am. Dec. 203; Louisville, E. & St. L. R. Co. v. Caldwell, 98 Ind. 245; Arnold v. Sprague, 34 Vt. 402; Daniel, Neg. Inst. § 161; 4 Am. & Eng. Enc. Law, 187. See note 16, supra.

21 Raubitschek v. Blank, 80 N. Y. 479; Averett's Adm'r v. Booker, 15 Grat. (Va.) 163, 76 Am. Dec. 203; Wells v. Brigham, 6 Cush. (Mass.) 6, 52 Am. Dec. 750; Atkinson v. Manks, 1 Cow. (N. Y.) 691.

22 Munger v. Shannon, 61 N. Y. 251.

23 Atkinson v. Manks, 1 Cow. (N. Y.) 691.

24

bills are assignments in the sense that they are directions to appropriate and hold the property specified in them to the use of a third person. The third person thus has rights assigned to him, and this whether the bills call for the whole or part of the fund, and whether or not the orders are assented to by the drawee, so long as the drawee has notice of them.20 25

There are some features which non-negotiable bills and non-negotiable notes also have in common. When transferred, it is by operation of the theory of assignment, and not of indorsement,26 and the fact of possession of either the bill or note is not evidence of such title that its mere production upon a trial is prima facie evidence of a right to recover. And, lastly, title to either a non-negotiable bill or note is subject to every equity.27 Under the strict common-law rule the indorsee of a bill or note, in its terms not negotiable, may sue his immediate indorser in his own. name, but he can only sue the maker or remote indorser in the name of the original payee, except where special statute otherwise provides. The indorser of paper not negotiable is only responsible to parties not immediate where he especially contracts to be so, being treated as guarantor or maker. And, lastly, an indorser of either cannot insist on demand and notice as a condition precedent.28

24 Morton v. Naylor, 1 Hill (N. Y.) 583; Mandeville v. Welch, 5 Wheat. 277, 5 L. Ed. 87; Row v. Dawson, 1 Ves. Sr. 331; Lett v. Morris, 4 Sim. 607; Brill v. Tuttle, 81 N. Y. 457, 37 Am. Rep. 515; Ehrichs v. De Mill, 75 N. Y. 370; Robbins v. Bacon, 3 Greenl. (Me.) 346; Bank of Commerce v. Bogy, 44 Mo. 18, 100 Am. Dec. 247. 25 Lowery v. Steward, 25 N. Y. 239, 243, 82 Am. Dec. 346.

26 An assignment, as applied to bills and notes, is the transfer, by writing, of an interest therein. Franklin v. Twogood, 18 Iowa, 515. 27 GILLEY v. HARRELL, 118 Tenn. 115, 101 S. W. 424, Moore Cases Bills and Notes, 7.

28 Richards v. Warring, 4 Abb. Dec. (N. Y.) 50; McMullen v. Rafferty, 89 N. Y. 456; Cromwell v. Hewitt, 40 N. Y. 491, 100 Am. Dec. 527; Story v. Lamb, 52 Mich. 525, 18 N. W. 248; Shinn v. Fredericks, 56 Ill. 439; Rabberman v. Muehlhausen, 3 Ill. App. 326; Herrick v. Edwards, 106 Mo. App. 633, 81 S. W. 466; Johnson v. Lassiter, 155 N. C. 47, 71 S. E. 23. But where the indorsement is in such form that it is the drawing of a negotiable bill, the liability of the

DISTINCTION BETWEEN ASSIGNABILITY AND

NEGOTIABILITY

2. Assignability pertains to contracts in general.

3. An assignment is the legal method of giving to another the power to enforce one's own choses in action.

4. It is an impracticable method, as regards a circulating medium, because:

(a) Title created by assignment, as against the debtor, is not complete without notice to the debtor.

(b) No subsequent purchaser of the property or right can acquire better title than that of his immediate assignor.

5. Negotiability pertains to a special class of contracts. 6-7. Negotiability facilitates their transfer as a circulating medium, because the transfer of legal rights is effected by indorsement or change of possession.

We purpose here to state briefly the fundamental reasons why negotiable bills and notes could not readily be transferred as a circulating medium under the rules governing the transfer of ordinary choses in action. The rights evidenced or created by ordinary contractual obligations are almost always a kind of property, having in themselves a value measured in law by the damages assessable upon their breach. This property may at this stage of the law pass from person to person just as any other property does. But there are well-settled rules governing such transfer, which are the outgrowth and mingling of early doctrines of the courts of common law and of equity, and at which the student must glance to understand the rules themselves. To this must also be added the statement that statutes, from time to time, have been largely instrumental in moulding these doctrines of common law and of equity into the form which the theory of assignment of choses in action presents at the present time.

indorser is the liability of the drawer of such a bill. Bay v. Freazer, 1 Bay (S. C.) 66.

Assignment

It was probably the common-law rule in the first instance that no assignee of the benefits of a contract could sue for and recover them. The primitive view was, in the first place, that the contract created a strictly personal obligation between the creditor and the debtor, and also that the assignment of choses in action would increase litigationa reason which led the courts to set their faces resolutely against it.29 And whether from reasons of business expediency, or because they were influenced by equitable doctrines, is not clear, but the courts of common law at an early day modified this rule into one that for a long time prevailed, namely, that an assignment of a contract might be made, but the assignee must sue for its benefit in the name of the assignor or his representatives. The theory was that the courts of common law would so far take cognizance of equitable rights created by the assignment that the name of the assignor might be used as a trustee of the benefits of the contract for the benefit of the assignee." This doctrine has been generally modified by statutes, the commonest ones, in the United States, being the provisions of the various Codes-that "every action must be prosecuted by the real party in interest," and that the "transfer of every claim or demand passes an interest which the transferee may enforce by an action in his own name, as the transferrer might have done.” 31 With courts of equity, it is true, the rule was different. For in equity, from immemorial times, the assignment of a chose in action or of the benefits under a contract has been permitted, and the assignee could maintain a suit in equity in his own name.3 But, however salutary the operation of this equitable rule

32

29 Pol. Cont. 207; Beecher v. Buckingham, 18 Conn. 110, 44 Am. Dec. 580.

30 Caister v. Eccles, 1 Ld. Raym. 683; McWilliams v. Webb, 32 Iowa, 577; Halloran v. Whitcomb, 43 Vt. 306; Fay v. Guynon, 131 Mass. 31.

31 But see BARROW v. BISPHAM, 11 N. J. Law, 110, Moore Cases Bills and Notes, 2.

32 Smith v. Brittain, 3 Ired. Eq. (38 N. C.) 347, 42 Am. Dec. 175; Tibbetts v. Gerrish, 25 N. H. 41, 57 Am. Dec. 307.

might have been in some phases of the enforcement of contract rights, it could have had little influence with bills and notes. Cases arising upon them came within the cognizance of the courts of common law. And there are cases to show that even when the assigned non-negotiable promise was to pay a sum of money to the promisee, or to bearer, or to order, or where, by any other form of words, the instrument purported to be made assignable, even then the holder could not sue in his own name, but only in that of his assignor. This objection, inasmuch as it related only to the form of action, was not of vital importance. Yet were it the rule that the transferees of negotiable instruments must sue in the name of their transferrers, it would certainly clog their circulation, since it would complicate and render less certain the recovery of judgments upon them.

33

There were other rules relating to the transfer of ordinary contracts, governing alike courts of common law and equity, which were of greater practical importance. The first is the doctrine of notice. The rule governing assignment, as stated in the principal text, is that title by assignment, as against the debtor, is not complete without notice to him. As the result of this rule, follows the one that a debtor who performs his contract to the original creditor, without notice of any assignment by the creditor to another person, is released from his obligation under it. An illustration of this principle is a well-known case where a bond and mortgage had been given, and assigned by various intermediate assignments, not recorded until some nine years afterwards. At that time the mortgage was attempted to be foreclosed by the true owner. In the meantime the mortgagor had made various payments upon the mortgage, and finally had paid it up in full to the original mortgagee,

34

33 Coolidge v. Ruggles, 15 Mass. 387; Clark v. King, 2 Mass. 524; Weidler v. Kauffman, 14 Ohio, 455; Jones v. Carter, 8 Q. B. 134.

34 Judson v. Corcoran, 17 How. 612, 15 L. Ed. 231; Van Buskirk v. Hartford Fire Ins. Co., 14 Conn. 141, 36 Am. Dec. 473; Smith v. Ewer, 22 Pa. 116, 60 Am. Dec. 73; Merchants' & Mechanics' Bank of Chicago v. Hewett, 3 Iowa, 93, 66 Am. Dec. 49; Winberry v. Koonce, 83 N. C. 351; Hobson v. Stevenson, 1 Tenn. Ch. 203; Richards v. Griggs, 16 Mo. 416, 57 Am. Dec. 240.

NORT.B.& N.(4TH ED.)-2