84 Perhaps the most important aspect of the indorsement is that it is a distinct contract. It gives it all the effect of a new instrument as against the indorser, though it does not in fact create a new instrument. Every indorser of a bill is a new drawer, and it is a part of the inherent property of the original instrument that an indorsement operates as against the indorser in the nature of a new drawing of the bill by him. The first legal fact of the theory with which the student should familiarize himself is that, from the form of words which we have already given as common methods of indorsement, the courts have created a peculiar class of rights and liabilities. The main terms of the contract are found on the face of the bill or note. In the illustrations under §§ 12 and 13, for example, the main terms were an order or promise to pay at a given time and place a certain sum of money, either to some specified person or to such person as he might direct. The indorser in his contract adopts and ratifies each of these terms, and makes them the main terms of his own contract. This idea will perhaps be made more clear by saying that if, in the illustration under § 13, John Smith had indorsed the note: "Pay to John Jones. [Signed] John Smith"-John Jones could negotiate it further, despite the indorsement was not in the negotiable form of "Pay to Jones, or order." This is because, by the terms on the face of the instrument, the maker, Thomas Robinson, had promised to pay "to order." This means that he had put into circulation a promise to pay money not only to John Smith, but to any one who might legally hold the instrument. And, except in case of John Smith's making a restrictive indorsement to an agent without intention on his part to transfer his beneficial interest, the indorsement of John Smith would be construed only as an adoption of the promise of Thomas Robinson, See Daniel, Neg. not always clearly recognized by the text-books. Inst. §§ 698, 699; Edw. Bills & N. § 395; Tied. Com. Paper, § 268; Rand. Com. Paper, §§ 724-727. But see 2 Ames, Bills & N. p. 837. 84 Penny v. Innes, 1 Cromp., M. & R. 439; McCamant v. Miners' Trust Co. Bank, 15 Wkly. Notes Cas. (Pa.) 122. which was that the note might pass from hand to hand ad infinitum, until Robinson paid it.85 But there is more embodied in the contract of the indorser than the terms which are found in the face of the instrument. And these are the terms which are implied in and made a part of the contract by the law. As we have seen, a part of the contract of the indorser is that it is a contract of indemnity.86 The right to this indemnity accrues only upon the fulfillment of certain conditions which are conditions precedent to its enforcement.87 The indorser is in law the drawer of a bill.88 With reference to his indorsee he stands precisely in the position of the drawer of a bill. If the instrument be a bill, he may be supposed to have assets in the hands of the drawee and to give the indorsee an order for the payment of them. In the case of a note the considerations existing between the payee and the maker may be supposed to exist between him and his indorsee. But by the mere non-payment of the instrument in the first instance the indorser breaks no contract, because his contract is separate and apart from that of the original parties,89 The contract which the law puts into his mouth 85 Leavitt v. Putnam, 3 N. Y. 494, 53 Am. Dec. 322; Edie v. East India Co., 1 W. Bl. 295, 2 Burrows, 1216. 86 Byles, Bills, p. 154; Edw. Neg. Inst. § 384; Story, Prom. Notes, § 135. 87 Musson v. Lake, 4 How. 262, 11 L. Ed. 967; Cuyler v. Stevens, 4 Wend. (N. Y.) 566; Cayuga County Bank v. Warden, 1 N. Y. 413. 88 Aymar v. Sheldon, 12 Wend. (N. Y.) 439, 27 Am. Dec. 137. In this case the following was held: No principle seems more fully settled or better understood in commercial law, than that the contract of the indorser is a new and independent contract, and that the extent of his obligations is determined by it. The transfer by indorsement is equivalent in effect to the drawing of a bill. 89 In Rothschild v. Currie, it was held that the indorser contracts to pay not primarily or absolutely, but on two conditions: dishonor by drawee or acceptor; and due notification to himself of such dishonor. Being in law a new drawer of the bill, the same state of things is supposed to exist between him and the indorsee, as the law supposes between the drawer and payee. 1 Q. B. 43. In Matthews v. Bloxsome, 33 Law J. 209, the defendant, intending to become surety for A., put his name at the back of a blank bill stamp. The bill was then filled up by plaintiffs as drawers, payable to their own order. As he gave authority to fill out the bill, the defendant was when he writes his name on the back of the instrument is payment on his part according to the terms of the original instrument, with the added conditions of due presentment, dishonor, and notice of dishonor. His contract therefore is that he will pay according to the original terms of the instrument, provided there have been due and proper presentment, dishonor, and notice of dishonor by the holder."0 As a Transfer The last general element of an indorsement is that it is a transfer of the title to the instrument. It is sufficient here to say, in general terms, that by this is meant nothing more than that it is a mere purchase and sale of a piece of property. The indorser or transferrer is viewed in many respects as a vendor, and the indorsee or transferee as a vendee. It is, of course, not tangible property, but a chose in action. REQUISITES OF INDORSEMENT 66. The requisites of an indorsement are as follows: in the same position as an indorser after the bill had been drawn, and might be treated as a new drawer. 33 Law J. Q. B. 209. 90 N. I. L. § 66 (last par.); Mt. Mansfield Hotel Co. v. Bailey, 64 Vt. 151, 24 Atl. 136, 16 L. R. A. 295, Johns. Cas. Bills & N. 109; May v. Coffin, 4 Mass. 341; Warder v. Tucker, 7 Mass. 449, 5 Am. Dec. 62; Bryant v. Faries, 15 Ill. App. 414. 91 Cock v. Fellows, 1 Johns. (N. Y.) 143; Prevot v. Abbott, 5 Taunt. 786. In this case the plaintiff averred delivery to him by the defendant, and also the facts of acceptance, presentment for payment, and dishonor. Judgment for plaintiff was arrested after verdict for the reason that indorsement by the defendant had not been averred. Pease v. Hirst, 10 Barn. & C. 122; Freeman v. Perry, 22 Conn. 617; Newman v. Ravenscroft, 67 Ill. 496; Woodbury v. Woodbury, 47 N. H. 11, 90 Am. Dec. 555; Lewis v. Hathman, 7 Ind. 585; Titcomb v. Thomas, 5 Greenl. (Me.) 282; Pease v. Dwight, 6 How. 190, 12 L. Ed. 399. See N. I. L. § 30; R. J. & B. F. Camp Lumber Co. v. State Sav. Bank, 59 Fla. 455, 51 South. 543. Following Tenor of Instrument 93 The tenor of a bill or note has already been explained, under § 43. The same reasons require that the indorsement follow the tenor of the original instrument that require that the acceptance follow it. The indorser, as well as the acceptor, may not alter the amount of money 2 obligated in the instrument to be paid, nor the time, place, or manner of payment. If, for instance, the indorser ordered payment of part of the sum called for in the original instrument to one person, and part to another, it would amount to an apportionment of the contract, and the acceptor or maker would thus, by the indorser's act, be liable to two actions where, by the terms of the original contract, he was liable to but one." 94 Were the rule otherwise, the indorser would be empowered to make a contract for the maker or acceptor without his assent,—a reductio ad absurdum. But this does not mean that, when an instrument has been paid in part, a receipt for the amount paid may not be written on its back, and the indorser may not transfer the balance," nor that a note may not be transferred to two or more persons, who hold it in co-ownership as a joint right, nor that an instrument may not be indorsed to a third person as collateral security for a claim equaling but part of the amount 96 95 92 N. I. L. § 32; Hawkins v. Cardy, 1 Ld. Raym. 360. In this case it was shown that Cardy drew a bill for £46. 19s., payable to B. or order, and that B. indorsed £43. 4s. of it payable to plaintiff. It was held by the court that the note was such a personal contract as not to be capable of apportionment. Planters' Bank of Tennessee v. Evans, 36 Tex. 592. 93 In Smallwood v. Vernon, 1 Strange, 478, it was held that an indorser might charge himself to pay at a different time from that specified in the note, though he could not lay a charge upon the maker of a note, differing from the terms of such note. If a note were payable May 1st and it was indorsed payable April 1st, this would make it a promissory note payable, as to the indorser, April 1st. 94 Douglass v. Wilkeson, 6 Wend. (N. Y.) 637; Hughes v. Kiddell, 2 Bay (S. C.) 324. 95 N. I. L. § 32 (last sentence); Douglass v. Wilkeson, 6 Wend. (N. Y.) 637. 96 Flint v. Flint, 6 Allen (Mass.) 36, 83 Am. Dec. 615; Conover v. Earl, 26 Iowa, 167. See N. I. L. § 41. 97 called for in the instrument itself. All these are perfectly proper courses, because they transfer but one right of action. The test is, does the transfer cut up the right of action, or vary it, or invest different persons with different rights of action against different parties to the instrument? If it does, the indorsement is void as such. It is sometimes argued that a writing on the back of the instrument, in the form of words of a guaranty, corresponds to and follows the tenor and purpose of the instrument, and that for this reason it is a form of indorsement. But the better opinion is that its legal effect is what it purports to be—a form of a special contract. A guaranty in general terms, such as "I warrant the collection of the within note, for value received," is not an indorsement.98 Whether a guaranty on a negotiable bill or note is itself negotiable is a question concerning which there is much confusion.99 On the one hand it is held by some cases that the guaranty does not fall within the rule of negotiability, and can inure only to the benefit of the person to whom it was given.1 On the other hand it is held in some jurisdictions that the guaranty passes with the instrument, and inures to the benefit of the holder.2 In this view, in states where choses in action are assignable, suit may be brought by the holder upon the guaranty in his own name. But, even where the latter rule prevails, it cannot be said that the guaranty is strictly "negotiable," inasmuch as only the rights of the party to whom the guaranty was given can pass to subse 97 Reid v. Furnival, 5 Car. & P. 499. See N. I. L. § 27. 98 Ante, p. 153, note 15. 99 Daniel, Neg. Inst. §§ 1774-1778; Rand. Com. Paper, §§ 860, 861. 1 True v. Fuller, 21 Pick. (Mass.) 140; Tinker v. McCauley, 3 Mich. 188; McDoal v. Yeomans, 8 Watts (Pa.) 361; Irish v. Cutter, 31 Me. 536; Hayden v. Weldon, 43 N. J. Law, 128, 39 Am. Rep. 551. See Pars. Notes & B. 133, 134. 2 Webster v. Cobb, 17 Ill. 466; Phelps v. Church, 65 Mich. 232, 32 N. W. 30; Story, Bills, § 458. 3 Cooper v. Dedrick, 22 Barb. (N. Y.) 516; Cole v. Merchants' Bank of Watertown, N. Y., 60 Ind. 350; Harbord v. Cooper, 43 Minn. 466, 45 N. W. 860; Phelps v. Sargent, 69 Minn. 118, 71 N. W. 927. NORT.B.& N. (4TH ED.)—12 |