in its enforcement and which do not destroy negotiability, pass with an indorsement of the note.

Thus one who receives a note which has been secured by collateral, is entitled to the collateral for the purposes for which it was given; and mortgages should be assigned with the debt which they secure.

So authority to confess judgment, waivers of rights, agreements to pay costs, attorney's fees, etc., all pass to the holder of the note, because they are incidental to the debt.

Sec. 55.

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PRESUMPTIONS AS TO INDORSEMENT.

(1) Presumption

as to time. Presumed unless dated after maturity to have been before Instrument was overdue.

Indorsements after maturity though good to transfer title, subject one to defenses, if any, as we shall note later; hence the importance of this presumption. Indorsements are not usually dated.

(2) Presumption as to place. Presumed unless contrary appears, to have been at place where Instrument is dated.

The place of dating is important to determine what law will govern when there is a conflict.

Sec. 56. MISCELLANEOUS RULES CONCERNING INDORSEMENT.

(1)

Indorsement to "Cashier."

An indorsement to the fiscal officer of a corporation or bank, so describing him, is deemed prima

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facie an indorsement to the bank or corporation. And may be negotiated further either by the cashier's or the institution's indorsement. This applies to paper payable to any fiscal officer.

(2) Payee or Inaorsee misdescribed or name misspelled.

If a payee or indorsee's name is misspelled or he is otherwise misdescribed he may indorse as described, adding his correct name, if he choose, or is so required.

(3) Striking out Indorsement.

Holder may

strike out any indorsement not necessary to his title. This discharges the indorser whose name is so stricken and all indorsements subsequent thereto.

(4) Negotiation by prior party.

If an instrument is negotiated back to a prior party he may re-issue and further negotiate the instrument, but cannot enforce payment against any party to whom he was personally liable.

B. Kinds of Indorsement.

A

Sec. 57. SPECIAL INDORSEMENT. special Indorsement is one which specifies a particular Indorsee.

An indorsement to a certain person naming him in the indorsement is called a special indorsement. An instrument so indorsed cannot be further

negotiated except by indorsement until it is subsequently indorsed in blank. If the special indorsee indorses in blank, the paper will then pass by delivery. (But if the instrument is payable to bearer, it may pass by delivery notwithstanding it has been specially indorsed and there is no blank indorsement.)

Sec. 58. BLANK INDORSEMENT. A blank Indorsement is one which does not specify any particular Indorsee.

A blank indorsement is accomplished by merely writing the name of the indorser on the back of the instrument. It may then pass by mere delivery, but the holder may convert it into a special indorsement by writing above it "Pay to John Brown."

A special indorsement and an indorsement in blank carry with them the same liability. The contract in each instance is the same. A blank indorsement is not so safe as a special indorsement, because being transferable by delivery, a thief or finder thereof could give a good title to an innocent purchaser for value before maturity.

The three following sections relate to indorsements which modify the indorser's contract. Either a special indorsement or one in blank may be qualified, restrictive, or conditional.

Sec. 59. QUALIFIED INDORSEMENT. A special or blank Indorsement may be accompanied with words qualifying, that is to say, limiting the Indorser's contract.

The indorser's contract has already been noted and will hereafter be particularly considered. The

indorser may, however, if the indorsee will consent, qualify his contract. This is usually done by adding the words "without recourse," but even in such case the indorser warrants certain things, as noted later. Either a blank or special indorsement may be so limited. The qualification has no effect on the negotiable character of the instrument and it may be further negotiated with the same freedom as though not so indorsed.

Sec. 60. RESTRICTIVE INDORSEMENT. A special or blank Indorsement may be accompanied with words restricting further Indorsement.

A restrictive indorsement is an indorsement made not for the purpose of transferring the title to the instrument generally, but a special purpose, that is to say, for purposes of collection, or in trust, etc. It stops further negotiation except as authorized by the terms of the indorsement or for the purpose of carrying out the restrictive indorse

ment.

Sec. 61. CONDITIONAL INDORSEMENT. A special or blank indorsement may be accompanied with words making its effect conditional.

One may indorse to another on some condition. The party compelled to pay the instrument may disregard the condition, whether it has been performed or not, the condition being between indorser and indorsee. But the conditional indorsee or his transferee, will hold the instrument or the proceeds thereof subject to the condition.

CHAPTER 10.

THE TITLE OF A TRANSFEREE OF NEGOTIABLE PAPER.

Sec. 62. IN GENERAL. The title of a transferee of negotiable paper involves the two-fold inquiry, (1) whether the party liable on such paper had any defense, and if so what defense, against any prior party, and (2) whether the present transferee is a holder in due course of trade.

It has heretofore been indicated that a transferee of negotiable paper may take a better title than had his transferor; that the transfer of negotiable paper by way of negotiation defeats the right of the maker of the paper to make certain defenses, but does not defeat him of the right to make others; and in the present chapter we shall inquire in detail concerning such transferee's title. We shall assume, first, that the paper in question is negotiable; second, that some prior party has a defective title, that is to say, that some defense could be made against him by the party or parties liable on such instrument; and third, that the present transferee acquired the paper by way of sufficient negotiation (indorsement or delivery) and not by way of assignment. We shall assume the defect of title in a prior a prior party, that is to say the existence of some defense to which he would be subject, because otherwise our inquiry would lose its pertinence. If the party or parties apparently liable on an instrument have no defense to make against any prior party, the present holder (90)