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because the statute directed words of negotiability. But the true reason is that laid down by Lord Holt,55 given in a case where the words "or his order" were omitted from a bill. "And the chief justice did agree that the indorsement of this bill did not make him that drew the bill chargeable to the indorsee, for the words 'or his order' did give authority to assign it by indorsement, and it is an agreement by the first drawer that he would answer it to the assignee." What words will then be deemed by the courts to confer negotiability? "Whether the parties to an instrument can give it a negotiable character, with all the incidents pertaining to negotiable paper, when it is not in terms within the class of instruments known to the law as 'negotiable,' may be questioned," says Allen, J., in Evertson v. National Bank. But, however this may be with instruments intended to be other than orders or promises for the payment of money alone, still it is probably the rule that, in the instruments governed by the rules of the law merchant, any words in a bill or note whence it can be inferred that the person making it intended it to be negotiable, will give it a transferable quality against that person.

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NEGOTIABLE BONDS

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10. By mercantile custom bonds which conform to certain requirements have become negotiable, although they are common-law specialties.

Bonds

We have already pointed out 58 that by the custom of merchants bonds under seal (whether corporate or indi

55 Hill v. Lewis, 1 Salk. 132.

56 66 N. Y. 18, 23 Am. Rep. 9. See, also, Crouch v. Credit Foncier of England, L. R. 8 Q. B. 374; Hasey v. White Pigeon Beet Sugar Co., 1 Doug. (Mich.) 193; Robinson v. Wilkinson, 38 Mich. 299; ALMY v. WINSLOW, 126 Mass. 342, Moore Cases Bills and Notes, 72; Grinnell v. Baxter, 17 Pick. (Mass.) 386; Daggett v. Daggett, 124 Mass. 149; Judson v. Gookwin, 37 Ill. 286.

57 PUTNAM v. CRYMES, 1 McMul. (S. C.) 9, 36 Am. Dec. 250, Moore Cases Bills and Notes, 7.

58 Note 2, supra.

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vidual), which contain words of negotiability and otherwise comply with the same formal requisites as a bill or note, are negotiable mercantile specialties. The law merchant with respect to such bonds is almost entirely the same as that relating to bills and notes. Thus, at least in the absence of a special custom to the contrary, uncertainty of the time of payment makes the bond non-negotiable." The implied terms of the indorser's contract are the same as in the case of a bill or note. In the absence of special custom, however, the obligor of such a bond is not entitled to days of grace.62 Many interesting questions have arisen as to interest coupons detachable from such bonds. Thus it is held, where the coupon is complete in form as a promissory note and is detached from the sealed bond, that it is still a sealed instrument within the meaning of the statute of limitations. So it has been held that assumpsit will not lie on such a coupon unless, in the jurisdiction in question, assumpsit lies on a sealed instrument. On the other hand, days of grace are allowed on such coupons, and they have been held to be within the scope of statutes relating in terms only to promissory notes and bills of exchange. Finally, it has been held that such coupons are negotiable, although they do not contain a promise to pay expressed upon or implied in the language on the face of

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59 See note 2, supra.

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60 Chotteau v. Allen, 70 Mo. 290; Jackson v. Vicksburg, S. & T. R. Co., 2 Woods, 141, Fed. Cas. No. 7,150. So the promise to pay must be unconditional. McClelland v. Norfolk S. Ry. Co., 110 N. Y. 469, 18 N. E. 237, 1 L. R. A. 299, 6 Am. St. Rep. 397. And the promise must be to pay a sum certain. Parsons v. Jackson, 99 U. S. 434, 25 L. Ed. 457. See note 2, supra, as to the modification of these requirements by new customs and the effect of the N. I. L.

61 Bonner v. City of New Orleans, 3 Fed. Cas. No. 1,631; Taylor v. Branch, 1 Stew. & P. (Ala.) 249, 23 Am. Dec. 293; Hicks v. Vann, 4 Ark. 526.

627 Cyc. 537, 867-872; Lamkin v. Nye, 43 Miss. 241; Skidmore v. Little, 4 Tex. 301; Arents v. Com., 18 Grat. (Va.) 750, semble. But see Jones, Corp. Bonds & Mort. (3d Ed.) § 245.

63 City of Kenosha v. Lamson, 9 Wall. 477, 19 L. Ed. 725.

64 Clarke v. Janesville, 1 Biss. 98, Fed. Cas. No. 2,854.

65 2 Daniel, Neg. Inst. (5th Ed.) 445, 446; 7 Cyc. 538, 869.

66 Cooper v. Thompson, 13 Blatchf. 434, 438, 6 Fed. Cas. No. 3,202.

the coupon; 7 and it is submitted that independently of statute these coupons may be negotiable, although not containing the so-called words of negotiability.88

PAYMENT BY NEGOTIABLE INSTRUMENT

11. The common rules regarding a negotiable instrument as a medium of payment are as follows:

(a) Where a negotiable instrument to which the debtor is a party as drawer, acceptor, maker, or indorser is received for a debt, whether precedent or contemporaneous, in the absence of agreement to the contrary a presumption arises in most jurisdictions that the instrument is received in conditional, and not in absolute, payment.

(b) Where a negotiable instrument to which the debtor is not a party is received for a debt, in the absence of agreement to the contrary a presumption arises. in most jurisdictions that the instrument is received in conditional payment if the debt was precedent; but that it is received in absolute payment if the debt be contemporaneous.

Whether a payment by bill or note is absolute (that is, in extinguishment of the debt) or conditional (that is, in extinguishment of the debt only on condition that the bill or note be paid at maturity) is to be determined by the intention of the parties; and if their intention has been expressed, or can be gathered from the circumstances, it will always govern. But, in the absence of agreement, express or implied, certain presumptions as to the intention of the parties have become established. It is said on high authority that in refusing to hold that acceptance of a bill or note, as in case of acceptance of an instrument under seal, works an extinguishment and merger of the debt in the new security, the courts have failed to give full effect to the cus

67 Arentz v. Com., 18 Grat. (Va.) 750.

68 Smith v. Clark County, 54 Mo. 58. See note 2, supra.

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tom of merchants. Certain it is that for lack of a guiding principle the courts have been led into hopeless confusion in their efforts to arrive at the presumed intention of debtors and creditors. It is believed, however, that the preponderance, if not the weight, of authority will be found to support the rules stated in the principal text.

Proceeding upon the theory that bills and notes in this respect are not specialties, but simple contracts, and because a simple executory contract is not extinguished by acceptance of another, it is generally held that, in the absence of agreement to that effect, acceptance of a bill or note of the debtor on account of the debt does not extinguish it. Yet the taking of the bill or note is not without effect upon the right of the creditor to enforce his debt. His remedy for its enforcement is suspended; but, if the bill or note is dishonored, his right to sue on the original debt revives. In other words, the presumption arises that the payment is conditional. So, where a bill or note of the debtor is accepted

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69 2 Ames Cas. Bills & N. 874.

70 It seems more accurate to say that, where the debtor who gives the instrument on account of his debt is a party to the instrument, the original debt becomes again due and payable, if such party defaults in his liability on the instrument to the creditor. Thus, where a debtor indorses a bill on account of a debt, if no notice of dishonor is given him, he cannot be sued upon the original debt, although clearly the instrument has been dishonored. Brown v. Schintz, 202 Ill. 509, 67 N. E. 172; Pink Front Bankrupt Store v. G. A. Mistrot & Co., 40 Tex. Civ. App. 375, 90 S. W. 75. Compare Fritz v. Kennedy, 119 Iowa, 628 (N. I. L.); American Nat. Bank v. National Fertilizer Co., 125 Tenn. 328, 143 S. W. 597 (N. I. L.); Williams v. Braun, 14 Cal. App. 396, 112 Pac. 465; Wood v. Luttrel, 1 Call (Va.) 232, 237.

71 Clark v. Mundal, 1 Salk. 124; Richardson v. Rickman, cited in 5 Term R. 517; Price v. Price, 16 Mees. & W. 232; Bank of United States v. Daniel, 12 Pet. 32, 9 L. Ed. 989; Lewis v. Davisson's Ex'r, 29 Grat. (Va.) 216; McLaren v. Hall, 26 Iowa, 298; Archibald v. Argall, 53 Ill. 307; Logan v. Attix, 7 Iowa, 77; Jones v. Shawhan, 4 Watts & S. (Pa.) 261; Lee v. Green, 83 Ala. 491, 3 South. 785; McGuire v. Bidwell, 64 Tex. 43; Henry v. Conley, 48 Ark. 271, 33 S. W. 181; Hopkins v. Detwiler, 25 W. Va. 748; Selby v. McCullough, 26 Mo. App. 67; Riverside Iron-Works v. Hall, 64 Mich. 168, 31 N. W. 152; Geib v. Reynolds, 35 Minn. 331, 28 N. W. 923; Merrick v. Boury, 4 Ohio St. 60; Cole v. Sackett, 1 Hill (N. Y.) 516. Compare Hunt v.

on account of a contemporaneous debt-as upon a sale of goods-the same presumption, though perhaps with even less reason, is held to arise."2 The same rule prevails where the debtor gives on account of a precedent debt the bill or note of a third person, whether the paper be indorsed by the debtor or be simply payable to bearer, and without the debtor's indorsement.73 Where, however, the debtor gives the bill or note of a third person on account of a contemporaneous debt, a distinction is drawn between paper indorsed by the debtor and paper payable to bearer, or indorsed in blank by the payee or drawee, but without the indorsement or guaranty of the debtor. In the first case the general rule holds good, such paper being regarded in the same light as a bill or note to which the debtor was an original party;" but in the second case the usual presumption is reversed and the creditor is presumed to accept the paper in absolute payment.75 "I am of the opinion, and always was," said Lord Holt, "notwithstanding the noise and cry that it is the use of Lombard street, that the acceptance of such a note [the note of a third person, payable to bearer] is not actual payment. Taking a note for goods sold is payment, because it was part of the original conPanhandle Lumber Co., 66 Wash. 645, 120 Pac. 538 (N. I. L.); Lester Whitney Shoe Co. v. Oliver Co., 1 Ga. App. 244, 58 S. E. 212.

72 Sheehy v. Mandeville, 6 Cranch, 253, 3 L. Ed. 215. See Daniel, Neg. Inst. § 1261.

73 Ward v. Evans, 2 Ld. Raym. 928; Ex parte Blackburn, 10 Ves. 204; Downey v. Hicks, 14 How. 249, 14 L. Ed. 404; Gallagher v. Roberts, 2 Wash. C. C. 191, Fed. Cas. No. 5,195; Noel v. Murray, 13 N. Y. 167; Gordon v. Price, 32 N. C. 388; McGinn v. Holmes, 2 Watts (Pa.) 121; Dougal v. Cowles, 5 Day (Conn.) 511; Slocumb's Adm'r v. Holmes' Adm'r, 1 How. (Miss.) 139; Cave v. Hall, 5 Mo. 59. As pointed out in note 68, supra, the condition is a different one where the debtor is as a party to the instrument liable to the creditor. This distinction seems to have been overlooked in Williams v. Brown, 80 App. Div. 628, 80 N. Y. Supp. 247.

74 Monroe v. Hoff, 5 Denio (N. Y.) 360; Shriner v. Keller, 25 Pa. 61. 75 Ward v. Evans, 2 Ld. Raym. 928, per Holt, C. J.; Clark v. Mundal, 1 Salk. 124; 12 Mod. 203; Bank of England v. Newman, 1 Ld. Raym. 442; Whitbeck v. Van Ness, 11 Johns. (N. Y.) 409, 6 Am. Dec. 383; Gibson v. Tobey, 46 N. Y. 637, 7 Am. Rep. 397; Bicknall v. Waterman, 5 R. I. 43.

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