The title, in all these cases, received by the transferee, is only that held by the transferrer, because this devolution of interest by operation of law is but an assignment of that interest. The executor, administrator and assignee in bankruptcy merely stand in the place of the original owner and can have no better position than he had.18 They pay nothing for the paper, neither do they take it in any commercial transaction, but it comes to them as part of the holder's property, to be collected and paid over to the creditors of the holder or persons entitled to it. And this also is the principle governing in the reduction to possession by a husband of the choses in action of a wife,1o and in the case of the survivor of joint owners.20

SAME BY NEGOTIATION

88a. "Negotiation" means transfer of a bill or note in the form and manner prescribed by the law merchant, with the incidents and privileges annexed thereby.21

89. There are two modes of negotiation: (a) Negotiation by indorsement, and (b) negotiation by delivery. The form of the instrument determines which mode is applicable."2

The effect of "negotiation" has already been somewhat discussed, and will be further considered hereafter. The incidents and privileges of negotiation may be briefly capitulated as follows: (1) The transferee can sue all parties to the instrument in his own name. (2) Consideration for the transfer is prima facie presumed. (3) The transferrer can, under certain conditions, give a good title, although he has none himself. (4) The transferee can further negotiate the bill, with like privileges and incidents.28

18 Billings v. Collins, 44 Me. 271.

19 Daniel, Neg. Inst. §§ 257, 258.

20 Daniel, Neg. Inst. §§ 1182, 1183, 1183a.

21 N. I. L. § 30.

22 N. I. L. § 30.

28 N. I. L. §§ 51, 24, 57, 191 (par. 7).

NEGOTIATION BY INDORSEMENT

90. A bill or note which is in legal effect payable to order is negotiated by indorsement.24

90a. The transferee of an instrument made payable to order without indorsement is the equitable owner, and

takes it subject to all the equities vested in prior parties.

The facts which determine whether or not the instrument is negotiable by indorsement are the terms of the face of the instrument. If the instrument be to order, then it was in contemplation of the parties that the money called for was to be paid to the payee, or to some person to whom he would direct it to be paid.25 It would be a violation of the terms of the contract to pay it otherwise. For the meaning of the words "or order" is that the original parties intended in the first place that the instrument might pass from the payee to some person, they did not know whom, and on again from him to another, who in turn might transfer it. They therefore may be deemed to promise to pay its amount to any one whatever, provided only that such person can show an order for its payment. And thus, as we have seen (see ante, p. 172), it is immaterial whether the indorsement contains words of negotiability or not.26 But the only method by which this order can be evidenced is an indorse

24 N. I. L. § 30.

25 N. I. L. § 30; German-American Nat. Bank v. Lewis (Ala. App.) 63 South. 741 (N. I. L.); Cock v. Fellows, 1 Johns. (N. Y.) 143; Hedges v. Sealy, 9 Barb. (N. Y.) 214. A note by R. B. & A. G., payable to J. B., was indorsed thus: "Pay the within to J. R. [Signed] J. B." It was held that the legal ownership of the note was not transferred to J. R. by this indorsement, so as to authorize him to maintain a suit upon the note in his own name against the makers. Robinson v. Brown, 4 Blackf. (Ind.) 128. In some states, by statute, words of negotiability are not required. See Rand. Com. Paper, 174.

26 N. I. L. § 36 (last par.); More v. Manning, Comyns, 311; Edie v. East India Co., 1 Wm. Bl. 295, 2 Burrows, 1216; Leavitt v. Putnam, 3 N. Y. 494, 53 Am. Dec. 322.

27

ment, although the indorsement may have various forms, and be made sometimes by the payee or indorsee and sometimes by persons upon whom their interests devolve. 28 And the words or order are construed as an express power given the payee to assign only in case the payee evidences his assent to the transfer by his indorsement.2

29

There is a large class of cases where, through accident, forgetfulness, mistake, or some other cause, a negotiable instrument is transferred in good faith, but without the indorsement of the person to whose order it is made. It is

27 In the case of Bryant v. Eastman, where one who was carrying on business for himself, but in the name of a company which had not been organized, though incorporated, received as payment for a debt due him in such business a note payable to the order of the company, it was held that such person might transfer the note by indorsing it in his own name. 7 Cush. (Mass.) 111. Warder, Bushnell & Glessner Co. v. Gibbs, 92 Mich. 29, 52 N. W. 73; Rand. Com. Paper, § 700; Byles, Bills & N. pp. 2, 151; Daniel, Neg. Inst. §§ 663, 664.

28 The various forms are arranged as follows: (1) If payable to A. or order, A. must indorse. (2) If payable to A., and he is dead, B., as executor of A., must sign. Thus, in the case of Stone v. Rawlinson, it was held that the executor or administrator of a person to whom or whose order a bill is payable has the absolute property in such bill, and may assign it to whomsoever he pleases, and such assignee may maintain an action in his own name. Willes, 559. In such case the indorsement of one of several executors is good. Sanders v. Blain, 6 J. J. Marsh. (Ky.) 446, 22 Am. Dec. 86. But if payable to A., B., C., and D., executors of A., all must sign. Johnson v. Mangum, 65 N. C. 146; Smith v. Whiting, 9 Mass. 334. But see Daniel, Neg. Inst. § 266. (3) If payable to A., and he is bankrupt, B., as assignee of A., must sign. Smith v. De Witts, 6 Dowl. & R. 120. (4) If payable to A., wife of B., B. must sign. gan, 2 Adol. & E. 30; Cotes v. Davis, 1 Camp. 485.

Mason v. Mor(5) If payable

to A., B., C., and D., a copartnership, any member may sign by the firm name. See N. I. L. § 41. Thus, a note, made payable to E. & R. or order, was indorsed by R. in his own name to his partner E. It was held that E. could not maintain an action as payee, since the indorsement must be in the partnership name. Estabrook v. Smith, 6 Gray (Mass.) 570, 66 Am. Dec. 443. (6) If payable to A., B., C., and D., not partners, all must sign. N. I. L. § 41. Thus, a bill payable to father and son, not partners, was indorsed by the son alone. Such indorsement was held not good, as both payees should have indorsed. Carrick v. Vickery, 2 Doug. 653, note.

29 Nicholson v. Sedgwick, 1 Ld. Raym. 180; Hodges v. Steward, 1 Salk. 125.

true that an indorsement of an instrument and an assignment of it such as we have been endeavoring to explain are widely distinct. An indorsement is a negotiation, and carries with it the legal title, and the assignment carries with it only the equitable one.30 The transferee stands in the position of an assignee. He owns the note. He, in turn, may transfer it, but he owns it and transfers it subject to the rules applicable in case of an assignment of any other chose in action. And although he subsequently obtains

30 Freund v Importers' & Traders' Nat. Bank, 76 N. Y. 352; U. S. v. White, 2 Hill (N. Y.) 59, 37 Am. Dec. 374; Baker v. Moran (Or.) 136 Pac. 30. Under N. I. L. § 49, a transferee for value without indorsement may sue in his own name, as he gets "legal title" notwithstanding N. I. L. §§ 30, 31. Meuer v. Phenix Nat. Bank, 94 App. Div. 331, 88 N. Y. Supp. 83 (N. I. L.); Swenson v. Stoltz, 36 Wash. 318, 78 Pac. 999, 2 Ann. Cas. 149 (N. I. L.), semble. But he takes the note subject to all equities available against his transferrer. Mayers v. McRimmon, 140 N. C. 640, 53 S. E. 447, 111 Am. St. Rep. 879 (N. I. L.); Landis v. White Bros., 127 Tenn. 504, 152 S. W. 1031 (N. I. L.). See Johnston County Sav. Bank v. Scroggin Drug Co., 152 N. C. 142, 67 S. E. 253, 136 Am. St. Rep. 821 (N. I. L.). After a transfer for value without indorsement, the transferrer cannot maintain an action on the instrument. Bank of Bromfield v. McKinley, 53 Colo. 279, 125 Pac. 493 (N. I. L.).

31 Sublette v. Brewington, 139 Mo. App. 410, 122 S. W. 1150 (N. I. L.), semble, and Marling v. Fitzgerald, 138 Wis. 93, 120 N. W. 388, 23 L. R. A. (N. S.) 177, 131 Am. St. Rep. 1003 (N. I. L.), are contra. The opinion expressed in the first, and the decision in the latter, of these cases, however, cannot be supported. See Brannan, Anno. N. I. L. (2d Ed.) pp. 51, 52, 40. N. I. L. § 49, probably would not deprive the transferee for value of an accommodated payee of the right to hold the maker or acceptor, since the real reason why the accommodated party cannot sue the accommodating party is that recovery would lead to a circuiting of action, and hence accommodation as against a transferee for value is, properly speaking, not an equity. Prof. Ames criticised N. I. L. § 49, as apparently providing that “the transferee even for value of an accommodated payee could not hold the maker, which would be unjust and contrary to the American cases.' Brannan, Anno. N. I. L. (2d Ed.) p. 50. See Mersick v. Alderman, 77 Conn. 634, 60 Atl. 109, 2 Ann. Cas. 254 (N. I. L.); First National Bank of Salem v. Grant, 71 Me. 374, 36 Am. Rep. 334; Renwick v. Williams, 2 Md. 356. Under B. E. A. § 31 (same as N. I. L. § 49), it was held, however, that the transferee could sue the accommodating party, where there had been value paid, even though the accommodated party had not indorsed. Hood v. Stewart, 17 Session Cases (4th

33

an indorsement,32 if he has in the meantime acquired knowledge of the equities, or if the indorsement be after maturity, he still holds the instrument subject to the same defenses. In the language of the Negotiable Instruments Law,35 "for the purpose of determining whether the transferee is a holder in due course, the negotiation takes effect as of the time when the indorsement is actually made."

86

There is, indeed, some authority to the effect that if it was the intention of the parties that the instrument should be indorsed, but the indorsement was omitted through accident, mistake, or fraud, the indorsement, when subsequently obtained, will relate back to the time of the delivery, and operate as if then given, the holder standing as a bona fide. purchaser as of that date. But it is doubtful, to say the least, whether any such exception can be reconciled with principle. The governing principle is that, in order that a purchaser may take title discharged of equities, three things must concur: (1) Bona fides, (2) the giving of value, and (3) the transfer of the legal title. In the cases which fall within this supposed exception, when the legal title is subsequently acquired the essential element of bona fides is wanting. Indeed, it is questionable whether these cases Series) 749 (Scotland). If the maker of a note payable to his own order transfers it for value without indorsement, the transferee cannot charge the maker on the note. Market & Fulton Nat. Bank v. Ettenson's Estate, 172 Mo. App. 404, 158 S. W. 448 (N. I. L.), semble. Compare Walters v. Neary, 21 T. L. R. 146 (B. E. A.), where the drawer-payee of an accepted bill was charged by his transferee for value without indorsement.

32 As to the kind of indorsement to which the transferee is entitled, see Seeley v. Reed (C. C.) 28 Fed. 164.

33 Whistler v. Forster, 14 C. B. (N. S.) 248, 1 Ames Cas. Bills & N. 341, 345, note 1 (citing cases); LANCASTER NATIONAL BANK v. TAYLOR, 100 Mass. 18, 1 Am. Rep. 71, 97 Am. Dec. 70, Moore Cases Bills and Notes, 144; Clark v. Whitaker, 50 N. H. 474, 9 Am. Rep. 286; Osgood's Adm'rs v. Artt (C. C.) 17 Fed. 575.

34 Haskell v. Mitchell, 53 Me. 468, 89 Am. Dec. 711; Lyon, Potter & Co. v. First Nat. Bank, 29 C. C. A. 45, 85 Fed. 120.

35 N. I. L. § 49.

36 Daniel, Neg. Inst. § 745, citing Southard v. Porter, 43 N. H. 380; Watkins v. Maule, 2 Jac. & W. 237; Hughes v. Nelson, 29 N. J. Eq. 547. See, also, Tied. Com. Paper, § 248; Benj. Chalm. Bills & N. 119.