in its inception.95 The Negotiable Instruments Law "* has in part at least adopted the rule as laid down in the New York case; for, while it declares that the general indorser warrants that the instrument is valid and subsisting, it excludes this warranty in the case of transfer by delivery as well as of indorsement without recourse, substituting in its place a warranty on the part of such transferror that he has no knowledge of any fact which would impair the validity of the instrument or render it valueless. Where a bill or note is transferred by delivery or indorsed without recourse, the transferee takes the risk of the insolvency of the maker or other principal party unless the transferror be guilty of fraud in passing it off with knowledge of the fact. A broker or other agent who negotiates a bill or note without indorsement is liable upon the implied warranties applicable to a transferror by delivery, unless he discloses his agency and the name of his principal.98

DAMAGES AGAINST THE ACCEPTOR, MAKER, DRAWER, AND INDORSERS UPON THE BILL OR NOTE AND UPON THE WARRANTIES

80. The acceptor of a bill of exchange and the maker of a promissory note is liable, upon its dishonor, for the amount of the bill or note and legal interest, and also notarial expenses where they are allowed by law.

95 "The opinion in this case [Littauer v. Goldman, 72 N. Y. 506, 28 Am. Rep. 171] admits the common law rule and then denies its essential result by eliminating conditions of nonexistence which are necessarily embraced in it. * * Either the principle

of warranty of identity must be accepted or rejected; it cannot be accepted and its legitimate and inevitable results denied." Meyer v. Richards, supra, per White, J.

96 Section 115. See note 81, supra.

97 Bicknall v. Waterman, 5 R. I. 43. There is, however, much conflict of authority on this point. See Daniel, Neg. Inst. § 737.

98 President, etc., of Cabot Bank v. Morton, 4 Gray (Mass.) 156; Worthington v. Cowles, 112 Mass. 30. N. I. L. § 69, so declares the law.

Where the drawee of a bill of exchange has agreed for a valuable consideration to accept it, he is liable, upon its dishonor, for his breach of promise to accept, in all damages which are the immediate consequences of such breach.

The measure of damages to be recovered against a drawer or indorser upon his indorsement is— (a) On an inland bill: the amount of the bill and interest, and also protest fees where they are al

lowed.

(b) On a foreign bill: the amount of the bill, interest, protest fees, re-exchange, or damages in lieu thereof.

The measure of damages to be recovered against the drawer or indorsers in case of a breach of warranty is the original consideration.

It is our purpose to point out in this section the practical application of the rules we have laid down, by showing what damages the courts administer against the parties upon the breach of their contracts. For the present we shall leave the matter of consideration as a basis for damage, both as between parties immediate and not immediate, out of the question. The rules pertaining to this point will be discussed further on. The only point to be considered is the damages which, assuming the contract between the parties to be for value, and enforceable, the courts find were in contemplation of the parties when it was made.

In some of these contracts, important items are exchange and re-exchange. Exchange, as we have seen, is the market value in one country of money to be delivered in another. The drawer of a foreign bill contracts for its payment at the place where it is drawn payable. When the bill is dishonored, the doctrine of re-exchange applies. Reexchange is a doctrine founded upon equitable principles. It means, for instance, when the payee, for example, gives premium for a bill drawn in this country payable in Paris, France, which is dishonored in Paris, the amount which would restore the payee to the situation he was in when he

bought the bill. This is either the payment of the money in Paris that the payee expected to and would get there, or the payment in this country of those sums, together with the difference in value between the whole sum at Paris and the same amount in this country. This difference in value is ascertained by the premium on a bill drawn in Paris and payable in this country which should sell at Paris for the sum claimed."9 In many states statutes provide for a fixed amount payable by way of damages in lieu of re-exchange.1 Notarial fees are those incurred for a notary where protest is required or permitted by law.

The other principal item of damage is the amount nominated in the principal terms of the paper, and this discussion principally pertains to this, and how far the warranties relate to it. The general rule is that the acceptor and drawer of a bill, the maker of a note, and all indorsers are liable for the amount nominated in the bill, and interest.2

99 Bank of United States v. United States, 2 How. 737, 11 L. Ed. 39. In Suse v. Pompe, 30 Law J. C. P. 75, 8 C. B. (N. S.) 538, where a bill was drawn and indorsed in Liverpool, payable in English money, directed to V. at Vienna, by whom it was dishonored, in an action by the indorsees against the indorsers it was held that the plaintiffs were entitled to recover as much English money as would have enabled them in Vienna on the day of maturity to purchase as many Austrian florins as they ought to have received from the drawee, with the expenses necessary to obtain them. Byles, J., said: "The most obvious and direct mode of obtaining that English money is to draw on Vienna on the indorser in England a bill at sight for so much English money as will purchase the required number of Austrian florins at the actual rate of exchange on the day of dishonor, and to include in the amount of that bill the interest and necessary expenses of the transaction. The whole amount is called * * * re-exchange. This bill for re-exchange being negotiated at Vienna puts into the pocket of the holder at the proper time and place the exact sum which he ought to have received from the drawee. Although in English practice the re-exchange bill is seldom drawn, yet the theory of the transaction is as we have above described it, and settles the principle on which the damages are to be computed, although no re-exchange bill be in fact drawn."

* * *

1 Rand. Com. Paper, § 1720.

2 Daniel, Neg. Inst. § 749; Rand. Com. Paper, § 1726. instrument provides for interest, it runs from the date.

Where the

Dorman v.

Dibdin, Russ. & M. 381; Williams v. Baker, 67 Ill. 238; Campbell

It is, however, held, though not without weighty dissent, that as against his immediate indorser the recovery of an indorsee is limited to the amount of the consideration paid with interest. In addition to this, the rules governing these parties as to re-exchange and fees are as follows: The acceptor at common law is probably not primarily liable to the holder for re-exchange, because his contract is to pay the money named in the bill at the place of payment

Printing Press & Mfg. Co. v. Jones, 79 Ala. 475. See N. I. L. § 36 (subd. 2). Interest on a demand note runs from demand. Barough v. White, 4 B. & C. 325; Breyfogle v. Beckley, 16 Serg. & R. (Pa.) 264; Hunter v. Wood, 54 Ala. 71. Where the rate fixed by law as prevailing in absence of contract is lower than the contract rate, the better opinion is that after maturity the contract rate should still prevail. Seymour v. Continental Life Ins. Co., 44 Conn. 300, 26 Am. Rep. 469; Cecil v. Hicks, 29 Grat. (Va.) 1, 26 Am. Rep. 391; Findlay v. Hall, 12 Ohio St. 610; Pruyn v. City of Milwaukee, 18 Wis. 367. Contra: Macomber v. Dunham, 8 Wend. (N. Y.) 550; Duran v. Ayer, 67 Me. 145; Newton v. Kennerly, 31 Ark. 626, 25 Am. Rep. 592. Cf. Holden v. Freeman's Saving & Trust Co., 100 U. S. 72, 25 L. Ed. 567; Cromwell v. Sac County, 96 U. S. 61, 24 L. Ed. 681. See Daniel, Neg. Inst. § 1458a. Interest after maturity is by way of damages. Where no interest is reserved, interest runs after maturity at the legal rate. Lithgow v. Lyon, Coop. Rep. 29; Laing v. Stone, 2 Man. & R. 562; Swett v. Hooper, 62 Me. 54; Godfrey v. Craycraft, 81 Ind. 476. As to conflict of law governing interest by way of damages, see post, 252.

3 Munn v. Commission Co., 15 Johns. (N. Y.) 44, 8 Am. Dec. 219. In this case it was decided that, where a payee parts, for a discount greater than the legal rate of interest, with a valid note upon which he might maintain an action when mature, such transfer is not usurious, even where the payee indorses the note, and the indorsee may, on nonpayment by the maker, sue the indorser, but that his recovery will be the amount advanced by him and the interest thereon. In Cram v. Hendricks, the above case was cited upon a point similar, and the decision was to the same effect. 7 Wend. (N. Y.) 569; Ingalls v. Lee, 9 Barb. (N. Y.) 647; Judd v. Seaver, 8 Paige (N. Y.) 548; Hutchins v. McCann, 7 Port. (Ala.) 94; Noble v. Walker, 32 Ala. 456; Raplee v. Morgan, 3 Ill. (2 Scam.) 561; Semmes v. Wilson, 5 Cranch, C. C. 285, Fed. Cas. No. 12,658; Bank of U. S. v. Smith, 4 Cranch, C. C. 712, Fed. Cas. No. 936. But see contra, Roark v. Turner, 29 Ga. 455; National Bank of Michigan v. Green, 33 Iowa, 140; Durant v. Banta, 27 N. J. Law, 624. See Daniel, Neg. Inst. §§ 767, 768; 2 Ames Cas. Bills & N. 819 (supporting the latter view).

and not at the place of drawing; nor is he liable for damages; though the better reason seems to be that he is liable to the drawer, where he has dishonored the bill which he had promised to pay and the drawer has been obliged to pay re-exchange. It is probably the common-law rule, also, that the maker of a note is liable neither for re-exchange nor damages, because of the supposed rule that notes are subject to the rules of the law merchant only in those respects covered by the enactment of the statute of Anne; though it must be added that this point is by no means settled. Protest fees are chargeable against the acceptor and maker only when a protest is required or permitted by law. But when it is required, or permitted but not required, they are allowed as an item of damage. The drawer and the indorsers, in their succession, are liable for protest fees, and, in case of foreign bills, for all re-exchanges, or else damages in lieu thereof.10

These rules being understood, it only remains to consider the damages administered by the courts with reference to the drawee, when he refuses to accept, and upon the warranties which have been the subject of discussion in

4 Newman v. Goza, 2 La. Ann. 642; Trammell v. Hudmon, 56 Ala. 237; Watt v. Riddle, 8 Watts (Pa.) 545.

5 Bowen v. Stoddard, 10 Metc. (Mass.) 375; Manning v. Kohn, 44 Ala. 343.

6 Walker v. Hamilton, 1 De Gex, F. & J. 602; Bowen v. Stoddard, 10 Metc. (Mass.) 379, per Hubbard, J.; Re General South American Co., 37 Law T. 599. Some authorities hold that the acceptor is liable for re-exchange to the holder. Daniel, Neg. Inst. § 1449.

7 Martin v. Franklin, 4 Johns. (N. Y.) 124; Scofield v. Day, 20 Johns. (N. Y.) 102; Adams v. Cordis, 8 Pick. (Mass.) 260; Lodge v. Spooner, 8 Gray (Mass.) 166.

s Lee v. Wilcocks, 5 Serg. & R. (Pa.) 48; Grant v. Healey, 3 Sumn. 523, Fed. Cas. No. 5,696.

9 Johnson v. Bank of Fulton, 29 Ga. 260; German v. Ritchie, 9 Kan. 110; Merritt v. Benton, 10 Wend. (N. Y.) 117 (where it was held that the protest fee is an expense to which the holder of a note is subjected by the default of an indorser, whose duty it is to pay at maturity, and that the holder should therefore recover it. "It may fairly be considered as a charge incident upon the indorser's failure to perform his contract"). See note 1, page 195, supra.

10 Mellish v. Simeon, 2 H. Bl. 378; Tied. Com. Paper, § 407.