Imágenes de páginas
PDF
EPUB

So, in Haddock, Blanchard & Co. Inc. v. Haddock, 118 App. Div. (N. Y.) 412, it was said: "The section does not purport to define the liability of one indorser to another. That matter is governed entirely by section 118. The two sections read well together, one as showing the position of the parties while the paper is with the public as a negotiable instrument; the other as defining the rights of the indorsers as between themselves where the negotiable character of the instrument is unimportant." And it has been held that under this section an indorser who signed for the accommodation of the maker, before the paper was indorsed by the payee, may defend upon the ground of invalidity, or want of consideration, in the same way that the maker could do, if the action were against him. Leonard v. Draper, 187 Mass. 536.

ILLUSTRATIONS.

Note made by A payable to order of B, indorsed by C, and afterward delivered to B. C is liable as indorser to B.

Note made by A payable to order of himself, indorsed by B, and afterward delivered to C. B is liable as indorser to C.

Note made by A to order of B, indorsed by C before B, but for accommodation of B, and discounted by Bank of X. C is liable as indorser to Bank of X and not to B.

§ 115. Warranty where negotiation by delivery, et cetera. - Every person negotiating an instrument by delivery or by a qualified indorsement, warrants (a):

I. That the instrument is genuine (b) and in all respects what it purports to be (c);

2. That he has a good title to it (d);

3. That all prior parties had capacity to contract (e); 4. That he has no knowledge of any fact which would impair the validity of the instrument or render it valueless (f).

But when the negotiation is by delivery only, the warranty extends in favor of no holder other than the immediate transferee. The provisions of subdivision three of this

section do not apply to persons negotiating public or corporate securities, other than bills and notes (g).

(a) This, of course, refers only to the implied warranty. An express warranty may be so framed as to exclude all other warranties which would otherwise be implied by the law. Giffert v. West, 37 Wis. 115.

(b) Littauer v. Goldman, 72 N. Y. 506; Whitney v. National Bank of Potsdam, 45 N. Y. 303; Herrick v. Whitney, 15 Johns. 240; Canal Bank v. Bank of Albany, 1 Hill, 287; Coolidge v. Brigham, 5 Metc. 68. But if at the time of the transfer he expressly decline to warrant the genuineness of the instrument no such warranty will be implied. Bell v. Dagg, 60 N. Y. 528. But a general refusal to guarantee will not of itself exclude the implied warranty of genuineness. (Id.) The sale and transfer, for a full and fair price, of a note past due, indorsed in blank by the person to whose order it is payable, implies a warranty by the vendor that such indorsement is valid. Giffert v. West, 37 Wis. 115. See next section.

(c) It will be noted that the warranty mentioned in the next section, that the instrument is valid, is omitted from this section. The inference from such omission is, that a person negotiating commercial paper by delivery merely, or by a qualified indorsement, does not warrant that it is an enforcible contract, as, for example, that it is not void for usury. This was the New York rule (Littauer v. Goldman, 72 N. Y. 506), and while it has been criticized and disapproved by the Supreme Court of the United States (Meyer v. Richards, 163 U. S. 385) it seems to be the more convenient rule in practice. The contrary rule would often work great hardship, and would make the business of dealing in commercial paper extremely hazardous. A broker, for example, buying and selling notes and bills, may assure himself that an instrument is genuine, and that the parties had capacity to contract, but he could not always know the circumstances under which the paper was made. On the other hand, the New York rule which is conceived to be the rule of the statute, does no injury to the purchaser; for if he desires a warranty, he has only to exact it, or to require the indorsement of the seller (see sec. 117).

(d) Meriden National Bank v. Gallaudet, 120 N. Y. 298, 303. (e) Littauer v. Goldman, 72 N. Y. 506, 509.

(f) Thus, if he has knowledge that the paper is void for usury, he will be liable to the purchaser. Littauer v. Goldman, 72 N. Y. 506. But in such case scienter must be alleged and proved. (Id.) Compare Meyer v. Richards, 163 U. S. 385; Wood v. Sheldon, 42 N. J. Law, 425.

(g) Otis v. Cullum, 92 U. S. 448. This was an action against the vendor of municipal bonds payable to bearer, which were afterward declared void because the legislature had no power to pass the acts under which they were issued. It was held that no recovery could be had in the absence of an express warranty. The application of the rule of commercial paper in such cases would work great hardship and much public inconvenience.

§ 116. Liability of general indorser.-Every indorser who indorses without qualification, (a) warrants to all subsequent holders (b) in due course:

I. The matter and things mentioned in subdivisions one, two and three of the next preceding section (c); and

2. That the instrument is at the time of his indorsement valid and subsisting (d).

And, in addition, he engages that on due presentment, it shall be accepted or paid, or both, as the case may be, according to its tenor (e), and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it (f).

(a) As this and the preceding section include the case of every indorser, the warranty as to genuineness will apply to one to whom the paper has been indorsed restrictively, as for example, where the indorsement is "for collection." This undoubtedly changes the law; for the former rule was that the indorsement of a bank to which paper had been indorsed "for collection" did not import a guaranty of the genuineness of all prior indorsements, but only of the agent's relation to the principal as stated upon the face of the paper; and it was held that, in such a case, the collecting bank was not liable after it had paid the proceeds to its principal, though a prior indorsement was a forgery. United

States v. American Exchange Nat. Bank, 70 Fed. Rep. 232; Nat. Park Bank v. Seaboard Nat. Bank, 114 N. Y. 28. But this rule was exceedingly inconvenient in practice, and hence it was deemed expedient to make every indorser a warrantor of genuineness. There is no hardship in this rule, for each indorser has a right of recourse against all prior parties. The former rule, however, introduced such an element of uncertainty that the clearinghouse associations throughout the country adopted rules to obviate its effects, and the bankers sent letters to their customers requesting that they discontinue the use of the indorsement "for deposit," "for collection," etc. In this, as in several other instances where the law was changed, the needs of the business community were deemed of more importance than technical principles.

(b) Under this section, as under the rule of the law merchant, the warranty is in favor of subsequent holders only, and since the adoption of the statute, as well as before, the indorser does not warrant to the drawee that the signature of the drawer is genuine. Farmers' and Merchants' Bank v. Bank of Rutherford, 115 Tenn. 64, 70–71. Thus, if a check purporting to be drawn by A should be indorsed by B and cashed by C, the indorsement of B would be a warranty in favor of C, but not in favor of the bank on which the check is drawn.

(c) Leonard v. Draper, 187 Mass. 536. This is so, though he is an accommodation indorser, and the fact was known to the holder when he took the instrument. Packard v. Windholz, 88 App. Div. (N. Y.) 365, aff'd 180 N. Y. 549; Oriental Bank v. Gallo, 112 App. Div. 360. The provision of the statute refers to the condition of the instrument on leaving the hands of the indorser, and hence, if the paper should be altered after that time, and before delivery, there is no warranty. First Nat. Bank v. Gridley, 112 App. Div. (N. Y.) 398. Thus, where a note payable to the order of several payees jointly, was indorsed by one of them, and forwarded by mail to the maker, who, before negotiating the instrument, erased the word "jointly," and struck out the name of one of the payees, and inserted his own in place thereof, it was held that the indorser was not liable. (Id.) The indorsement of a promissory note is a guaranty by the indorser to the indorsee that the prior indorsements on the note and the signature of the payor are genuine, and made by parties author

ized to pass the title. McConeghy v. Kirk, 68 Pa. St. 200; Condon v. Pearce, 43 Md. 83; Lambert v. Pack, 1 Salk. 127; Critchlow v. Parry, 2 Camp. 182; Prescott Bank v. Caverly, 7 Gray, 216, 220. Thus one who indorses a promissory note, purporting to be executed by a firm, thereby impliedly contracts that the note was made by the firm in whose name it is executed, and he cannot dispute the fact in an action upon the indorsement. Dalrymple v. Hillenbrand, 62 N. Y. 5 And a second indorser cannot dispute the legal capacity of the payee to indorse on the ground that she was a married woman. Prescott Bank v. Caverly, 7 Gray, 216, 217. So, one indorsing the note of a corporation admits its capacity to execute the note. Glidden v. Chamberlin, 167 Mass. 486. But see Southern Loan Co. v. Morris, 2 Pa. St. 175.

(d) Thus, whether a promissory note made on the Lord's Day can be enforced by a payee against the maker is immaterial in a suit by the indorsee against the indorser, as the latter always warrants the existence and legality of the contract which he undertakes to assign. Prescott National Bank v. Butler, 157 Mass. 548.

(e) An indorser of a promissory note which contains a stipulation for a reasonable attorney's fee in case of suit is as much liable for the attorney's fee as for the principal of the note. Benn v. Kutzschan, 24 Ore. 28. See section 21. (f) The indorser has no right to require the holder to sue the maker or drawer, under the penalty of the indorser being discharged in case of non-compliance; and it is his duty to take up the note. Day v. Ridgway, 17 Pa. St. 303. Nor is the holder bound to anticipate and make provision for a breach of the contract. Bartlett v. Isbell, 31 Conn. 297. Parol evidence of an agreement which would vary the legal liability of the indorser under his indorsement is inadmissible. Smith v. Caro, 9 Ore. 278; Eaton v. McMahon, 42 Wis. 484. And while there has been some conflict in the decisions, the sounder doctrine puts all indorsements on substantially the same footing. The contract by a blank indorsement is fixed by law, and should not be rendered uncertain by parol, any more than when written out in full. Charles v. Denis, 42 Wis. 56, 58; Torbert v. Montague, 38 Colo. 325. This is the rule adopted in the statute, which makes the indorser's obligation absolute. Executors have no power to bind the estate of the testator by a contract of indorsement. Packard v. Dunfee, 119 App. Div. (N. Y.) 599.

« AnteriorContinuar »