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APPENDIX IV.

CASES UNDER THE NEGOTIABLE INSTRUMENTS LAW.

The cases cited generally in this Appendix without abstracts are either cases in which the Court made no reference to the Negotiable Instruments Law (although the Law was in force at the time), or cases abstracted under other sections to which reference is made, or cases which involve no question of sufficient novelty or importance or in which the application of the Law is too plain to justify an abstract. Such cases are placed at the head of the cases under the respective sections, and are cited for the sake of completeness. A few cases in which the Law was not cited have, however, been abstracted because of their special interest or novelty, the fact that the Law was not mentioned being noted in the abstract. Cases which have been decided since the Law went into effect but to which it was not applicable because the instruments were issued before the Law was adopted, are not cited. The cases decided under the Law on any particular point may be found by first finding the section of the Law covering the point by the use of the Index, infra, p. 239, and then looking under the number of such section in this Appendix. The abbreviation "S. C. sec.," at the end of the citation of some of the cases herein, means that an abstract of the same case upon another point will be found under the section indicated by the numeral following the abbreviation.

[The figures in heavy-face type refer to the sections of the Negotiable Instruments Law.]

1. Benedict v. Kress, 97 App. Div. 65, 89 N. Y. S. 607; Borough of Montvale v. Peoples' Bank (N. J.), 67 Atl. 67, S. C. sec. 56.

A promissory note in due form is negotiable, although it is secured by a mortgage which provides that on default in interest or failure to comply with any of the conditions of the mortgage, the whole shall, at the option of the mortgagee, become due and payable. The court also cited sections 2-3 and 4-4. The latter, a new section composed of the words "at a fixed period after date or sight, though payable before then on a contingency," and of the last paragraph of section 4-3 N. I. L. Thorp v. Mindeman, 123 Wis. 149, 101 N. W. 417.

1-2. A draft in the ordinary form contained the following words after the sum: "400 c A. R. L. No. 3362 via A. R. L. B. L. direct." These words, under the custom and usage of business, notified the payee that a certain number of cases had been shipped by a certain line, and that the bill of lading went direct to the payee. Held, that the draft was an unconditional order and negotiable. Waddell v. Hanover Nat. Bank, 48 Misc. R. 578, 97 N. Y. S. 305.

An order to pay A., or order, "$300.00, or what may be due on my deposit book," is conditional. National Sav. Bank v. Cable, 73 Conn. 568, 48 Atl. 428.

Bonds otherwise negotiable in form issued by a joint-stock association are none the less negotiable because of a provision therein making them payable solely out of assets assigned to a trustee under a trust deed or out of other assets of the association, and exonerating the shareholders of the association from the individual liability to which they would otherwise be subject; and negotiability of the bonds renders the coupons negotiable.

Nor does the fact that the deed of trust securing the bonds reserves to a certain portion of the bondholders the right to waive default in payment of coupons and postpone the time of their payment, affect the negotiability of the coupons; the reservation relating to procedure under the trust deed, and not preventing enforcement of a bondholder's general remedies at law for the collection of the obligation. Hibbs v. Brown, 190 N. Y. 167, 82 N. E. 1108. See 19 Harv. Law Rev. 616, for criticism of this case in the Appellate Division.

A stipulation on the back of a note that it was secured by a mortgage, and that the payee agreed to look to mortgage security for its payment, became a part of the note, and rendered it non-negotiable. Allison v. Hollembeck (Iowa), 114 N. W. 1059.

1-3. Hibbs v. Brown, 190 N. Y. 167, 82 N. E. 1108, S. C. sec. 1-2; Union Stockyards Nat. Bank v. Bolan (Idaho), 93 Pac. 508, S. C. sec. 184.

An instrument in the following form:

"$250. Aug. 14, 1907. Mr. W. T. will please pay to R. J. T., or order, two hundred and fifty dollars and charge to my account. Due Oct. 1st, J. R." is payable Oct. 1st, and is a bill of exchange. Torpey v. Tebo, 184 Mass. 307, 68 N. E. 223.

14. A certificate of deposit payable to "A or his assigns" is not negotiable under the N. I. L. nor under the law merchant. Zander v. N. Y. Security & Trust Co., 39 Misc. R. 98, 78 N. Y. Supp. 900, affirmed 81 App. Div. 635, 81 N. Y. S. 1151.

A promissory note not payable to order or to bearer is not negotiable. A former statute, otherwise providing, is impliedly repealed by the N. I. L. Gilley v. Harrell (Tenn.), 101 S. W. 424, S. C. sec. 123. See also, as to first point, Fulton v. Varney, 117 App. Div. 572, 575, 102 N. Y. S. 608; Westberg v. Chicago Lumber Co., 117 Wis. 589, 94 N. W. 572, S. C. sec. 137.

1-5. Rinker v. Lauer (Idaho), 88 Pac. 1057.

2-1. Baumeister v. Kuntz (Fla.), 42 So. 886, S. C. secs. 64-1, 109.

2-3. Thorp v. Mindeman, 123 Wis. 149, 101 N. W. 417, S. C. sec. I.

2-5. Semble, the attorney's fee is due if the unpaid note is placed in the hands of an attorney for collection, although no suit is brought. A stipulation in a mortgage securing the note for fees in case of suit on the mortgage is cumulative and not restrictive of the provision of the note. Morrison v. Ornbaun, 30 Mont. 111, 75 Pac. 953.

3. Waddell v. Hanover Nat. Bank, 48 Misc. R. 578, 97 N. Y. S. 305, S. C. sec. 1-2; Hibbs v. Brown, 109 N. Y. 167, 82 N. E. 1108, S. C. sec. 1-2.

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3-1. An order drawn by the X Company directing payment of a certain sum, on account of contract between you (the drawee) and the X Company' held negotiable, the words "on account of" not having the same effect as out of the proceeds of." First Nat. Bank v. Lightner, 74 Kans. 736, 88 Pac. 58. An order to pay on or before a fixed day and "charge the same to the $1800 payment," is not conditional. Shepard v. Abbott, 179 Mass. 300, 60 N. E. 782.

3-2. Fulton v. Varney, 117 App. Div. 572, 102 N. Y. S. 608, S. C. sec. 1-4; National Sav. Bank v. Cable, 73 Conn. 568, 48 Atl. 428, S. C. sec. 1-2.

A promissory note given for a chattel, and stipulating that the title to the chattel shall remain in the vendor-payee until the note is paid, is not conditional, and the maker is liable thereon although the chattel was destroyed before the maturity of the note. The N. I. L. was not mentioned. Whitlock v. Auburn Lumber Co. (N. C.), 58 S. E. 909. See supra, pp. 44-45, 61-62, 103-106.

4. Thorp v. Mindeman, 123 Wis. 149, 101 N. W. 417, S. C. sec. 1; Schlesinger v. Schultz, 110 App. Div. 356, 96 N. Y. S. 383, S. C. secs. 7-1, 71, 73; Union Stockyards Nat. Bank v. Bolan (Idaho), 93 Pac. 508, S. C. sec. 184. 4-2. Torpey v. Tebo, 184 Mass. 307, 68 N. E. 223, S. C. sec. 1-3. 5-2. A note which contains a provision authorizing a confession of judgment at any time thereafter, whether due or not, is not negotiable. Wisconsin Yearly Meeting v. Babler, 115 Wis. 289, 91 N. W. 678. Nor is a note containing an authority to confess judgment "as of any term." Milton Nat. Bank v. Beaver, 25 Pa. Superior Ct. 494.

6-1. Church v. Stevens, 56 Misc. R. 572, 107 N. Y. S. 310.

6-2. McLeod v. Hunter, 29 Misc. R. 558, 61 N. Y. S. 73, S. C. sec. 24.

6-5. A check payable "in current funds" is not payable in money and is not negotiable. Dille v. White, 132 Iowa 327, 109 N. W. 909, following former Iowa cases, but not citing the N. I. L. S. C. sec. 65.

7-1. A note payable on demand after date is a demand note, and presentment need not be made the day after date but only within a reasonable time to hold an indorser. Hardon v. Dixon, 77 App. Div. 241, 78 N. Y. S. 106, holding that the Statute of Limitations did not begin to run on such a note until the day after its date, said to have no application. Schlesinger v. Schultz, 110 App. Div. 356, 96 N. Y. S. 383, S. C. secs. 71, 73.

7-2. Didato v. Coniglio, 50 Misc. R. 280, 100 N. Y. S. 466, S. C. sec. 17-5; McLeod v. Hunter, 29 Misc. R. 558, 61 N. Y. S. 73, S. C. sec. 24.

9-3. A requested a bank to draw a draft to the order of C. Bros., an existing firm who were ignorant of the transaction. A indorsed the draft in the name of C. Bros., and the indorsee collected it from the drawee. Held, that the knowledge of the drawer of the fictitious or non-existing character of the payee controls, not the knowledge of the person at whose request the draft is drawn. That the draft was not payable to bearer and that the drawee could recover the money from the indorsee. Seaboard Nat. Bank v. Bank of America, 51 Misc. R. 103, 100 N. Y. S. 740. See also cases cited under sec. 23. Cf. cases under sec. 7 (3) B. E. A.

9-4. In an action against the drawer of a check payable to cash, the production of the check is prima facie evidence of ownership. Cleary v. DeBeck Co., 54 Misc. R. 537, 104 N. Y. S. 831.

9-5. A promissory note indorsed in blank by the payee is payable to bearer. Mass. Nat. Bank v. Snow, 187 Mass. 159, 72 N. E. 959, S. C. secs 16, 56, 124, 191; Unaka Nat. Bank v. Butler, 113 Tenn. 574, 83 S. W. 655 (a check), S. C. sec. 56.

14. First Nat. Bank v. Gridley, 112 App. Div. 398, 98, N. Y. S. 445, S. C. secs. 66, 109, 119–5; Stanley v. Davis (Ky.), 107 S. W. 773.

The purchaser of a negotiable instrument with an unfilled blank is put upon inquiry as to the authority of the person intrusted with the incomplete instrument. Sec. 14 N. I. L. changes the law. Guerrant v. Guerrant, 7 Va. L. Reg. 639 (payee); Boston Steel & Iron Co. v. Steuer, 183 Mass. 140, 66 N. E. 646 (amount), S. C. sec. 52.

Defendant signed a note in blank and gave it to A. with the authority to fill it up not in excess of $200. A. filled it up for $2000 payable to plaintiff, and delivered it to him in payment of a debt. Held, that defendant was not liable to plaintiff on the note, although plaintiff was ignorant of A's abuse of his authority. Plaintiff was a holder, but not a holder in due course to whom the instrument had been "negotiated." Herdman v. Wheeler, [1902] 1 K. B. 361, supra, p. 191, followed, Vander Ploeg v. Van Zuuk (Iowa), 112 N. W. 807. But see Boston Steel & Iron Co. v. Steuer, 183 Mass. 140, 66 N. E. 646, holding that the payee of a completed check received in payment of a debt due from the remitter of the check is a holder in due course, under sec. 52, without regard to the question whether it has been "negotiated" within sec. 14. See statement of this case infra, sec. 52. See also Lloyd's Bank v. Cooke, [1907] I K. B. 794, supra, p. 191, in which Herdman v. Wheeler is criticised by Fletcher Moulton, L. J.

16. Colborn v. Arbecam, 54 Misc. R. 623, 104 N. Y. S. 986; Moak v. Stevens, 45 Misc. R. 147, 91 N. Y. S. 903; Viets v. Silver (N. Dak.), 106 N. W. 35; Borough of Montvale v. Peoples' Bank (N. J.), 67 Atl. 67, S. C. sec. 56; Baumeister v. Kuntz (Fla.), 42 So. 886, S. C. secs. 64–1, 109.

A holder in due course can recover upon a negotiable note indorsed in blank by the payee and stolen from him. Mass. Nat. Bank v. Snow, 187 Mass. 159, 72 N. E. 959 (action against payee as indorser), S. C. secs. 9-5, 56, 124, 191; Greeser v. Sugarman, 37 Misc. R. 799, 76 N. Y. S. 922 (action against makerpayee); Poess v. Twelfth Ward Bank, 43 Misc. R. 45, 86 N. Y. S. 857 (check), semble, S. C. secs. 51, 187.

Evidence of a contemporaneous oral agreement is admissible as against parties not holders in due course to show that the instrument was not to take effect until some condition was performed. Hodge v. Smith, 130 Wis. 326, 110 N. W. 192, S. C. secs. 52–3, 55; see also Key v. Usher (Ky.), 99 S. W. 324, in which, however, the N. I. L. was not cited.

17-5. An instrument in the following form:
"$1000.

New York
Pay to the order of Rosario Didato
Value received and charge on account

190.

to 38 Stanton Street. Lansa Rosalia."

may be declared upon as a promissory note. Didato v. Coniglio, 50 Misc. R. 280, 100 N. Y. S. 466.

17-6. This provision applies only to cases of doubt arising out of the location of the signature. Therefore one who signed in the place of the maker's name is not an indorser. Germania Natl. Bank v. Mariner, 129 Wis. 544, 109 N. W. 574, S. C. secs. 63, 64.

17-7. Ullery v. Brohm, 20 Colo. App. 389, 79 Pac. 180.

18. Seattle Shoe Co. v. Packard, 43 Wash. 527, 86 Pac. 845; N. Y. Life Ins. Co. v. Martindale (Kans.), 88 Pac. 559.

This section has no application to an oral guaranty by the payee upon transferring a note for value without indorsement, the guaranty being an original and absolute obligation to which the note is collateral. Swenson v. Stoltz, 36 Wash. 318, 78 Pac. 999, S. C. sec. 49. Such oral guaranty is not within the Statute of Frauds, Ib.

20. Germania Nat. Bank v. Mariner, 129 Wis. 544, 109 N. W. 574, S. C. secs. 17-6, 63, 64.

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A note was written on a lithographed receipt form, with the name of a corporation at the head, and the impressed seal of the company upon the paper, but not referred to in the note, and the defendants added the words "president and "secretary" respectively to their signatures. Held, not such disclosure of a principal as will exempt the signers from personal liability. Daniel v. Glidden, 38 Wash. 556, 80 Pac. 811, sub nom. Daniel v. Buttner.

A trustee under a will, without authority to borrow, executed a note as trustee as evidence of a loan, and applied the money to the use of the trust. Held, that, regardless of the form of the note, he was individually liable and that the estate was not. Tuttle v. First Nat. Bank of Greenfield, 187 Mass. 533, 73 N. E. 560.

Where defendant signed a note as "trustee," held, that as to holders in due course the principal must be disclosed on the face of the note in order to relieve defendant of personal liability (semble), but as between defendant and the payee the disclosure might be made aliunde, and is a question of fact for the jury. Megowan v. Peterson, 173 N. Y. 1, 65 N. E. 738.

If the payee knows the nature and object of the trust, and that the maker of the note was acting in his capacity as trustee, the maker is not individually liable to the payee, although none of such information appears on the note. Kerby v. Ruegamer, 107 App. Div. 491, 95 N. Y. S. 408.

A note was signed "The X Co. A. Pres. B. Sec'y." In an action by the payee against A. and B., held, that evidence was admissible to show that the note was the obligation of the company and not of A. and B. If no representations were made to the payee, his understanding could not debar the defendants from showing their intention in signing. Former cases in the state were cited, but the N. I. L. was not. Western Grocer Co. v. Lackman (Kan.), 88 Pac. 527. A note reading "We promise to pay" and signed "The X Co. J. L. M.," held ambiguous and that evidence was admissible to show that the note was that of the company and accepted as such by the payee. The N. I. L. was not cited. Dunbar Co. v. Martin, 53 Misc. R. 312, 103 N. Y. S. 91.

22. Oppenheim v. Simon Reigel Cigar Co., 90 N. Y. S. 355, S. C. sec. 29 (indorsement by a corporation); Willard v. Crook, 21 App. D. C. 237 (indorsement by a corporation), S. C. sec. 66.

23. Casey v. Pilkington, 83 N. Y. App. Div. 91; Blum v. Whipple, 194 Mass. 253; 80 N. E. 501; Oriental Bank v. Gallo, 112 App. Div. 360, 98 N. Y. S. 561; Lonier v. State Sav. Bank, 149 Mich. 483, 112 N. W. 1119.

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