"In our form of mortgage." What does "provision" mean except a clause contractual in character or dealing with the subject-matter (i. e., renewals)? In the connection it is used, "ample" means full, complete, sufficient. So that on just analysis the language of the letter must be held to mean: "All these notes (save one) are renewal notes, for which renewals there is a full mortgage clause or provision inserted in the form of chattel mortgages used by this company"-which is no more and no less than to say that the company's form of mortgage is so written as to contemplate and provide for renewal notes. The sum of it all being as said, we find the record discloses that the mortgage had such provision. Therefore, taken by or large, the language complained of in the letter was literally true. As we have seen, then, the words of the letter do not import that the very note inclosed was at the very time the note was sent in to the bank secured on 1,180 head of cattle at or near Rush Springs, I. T., and subject to the mortgage, as alleged in the petition and as argued here. But learned counsel for respondent argue, as said, that the narrations of the letter must be read in connection with the narrations of the inclosed Huntley note, and that, read together, they assert that the Huntley renewal note was secured by that number of cattle then at the above point in the Indian Territory and subject to the mortgage. The first question to settle in this view of the case is whether the representation made by the Huntleys in their note is a representation by Hutton. Is it the law that when the president of a bank signs a letter prepared, say, by the cashier, and incloses in the letter a bundle of instruments or documents furnished by the cashier to be sent as an inclosure with the letter, that the president makes all the recitations in these documents and instruments his own by merely inclosing them with his letter? And this, too, to fasten actual fraud upon him? If we take that view of it, an agent of a corporation assumes a liability and responsibility hitherto unhinted at and undreamed of in the philosophy of the law. We deem the proposition unsound on its face; for the law must comport with reason. To know the law one must know the reason of the law, and what says our Lord Coke? "He who knoweth the law, and knoweth not the reason thereof, soon forgetteth his superfluous learning." * If we were to hold (which we shall not, in this form of action counting on actual fraud) that Hutton was charged with notice of what the books showed had become of the whole 1,180 cattle, yet that does not fasten such recklessness upon him as would amount to proof of the scienter and therefore of fraud. It would be a novel proposition in ethics and a most anxious and vexing precedent in commercial law to hold that Hutton, ignorant of the facts and innocent of wrongful intention, could be held so reckless as to be guilty of fraud in stating what he personally did not know to be true, when, in the usual course of the company's business, a trusted employee (presumably familiar with all the facts) prepared a statement for him. to sign and which he did sign in good faith relying on such employee. We shall not swell this opinion by extended excerpts from decided cases, but content ourselves with quoting from the syllabus of a leading case decided in the House of Lords, and which, as pointed out by learned counsel, met the approval of this court in Bank v. Byers, 139 Mo. 653, 41 S. W. 325. The case referred to is Derry et al. v. Peek, 14 App. Cas. (L. Rep.) 337. The syllabi correctly formulate the propositions ruled and are apposite and lucid statements of acceptable * * * * law-in part reading as follows: "In an action of deceit the plaintiff must prove actual fraud. Fraud is proved when it is shown that a false representation has been made knowingly, or without belief in its truth, or recklessly, without caring whether it be true or false. A false statement, made through carelessness and without reasonable ground for believing it to be true, may be evidence of fraud, but it does not necessarily amount to fraud. Such a statement, if made in the honest belief that it is true, is not fraudulent, and does not render the person making it liable to an action of deceit." The doctrine of the Derry Case accords with the doctrines of this court. * And, applying that doctrine to the facts here, we must acquit defendant of actual fraud or of such recklessness in statement as supplies proof of the scienter and amount to such fraud. Says Bleckley, J., in Hull v. Myers, 90 Ga. 677, 16 S. E. 654: "Good sense, good morality, and good law are one and the same so long as they are not sundered violently by legislation or ignorantly by judicial error." And in our opinion it is good sense, good morality, and good law to rule as announced. It is settled law that an agent, such as Hutton was, is not liable to third persons for mere negligence in nonfeasance. In such cases the rule is: Let the master answer (respondeat superior). But no agent masquerading under the cloak of a corporate name may escape liability for an actual fraud working an injury to a third person. The general rule is that in matters ex contractu a third person dealing with the known agent of another, whether that other be a person or a corporation is deemed to deal (not on the credit of the agent, but) on that of the principal. If that rule does not obtain in a given case, it is because fraud avoids the rule, and thereby the door to liability swings wide open to an action ex delicto. Now, fraud is commonly deeply hid away. Often it can only be got at by inference. It is scarcely ever proved by admissions; for it blows no trumpet. One cannot put his finger on it and say, "Lo, here it is!" or "There it is!"-palpable to the touch. But it is got at by following its tracks from results back to the inception of the affair or from the inception of the affair forward to results. Nevetheless actual fraud is malevolent and willful act. The difficulty of proving it does not dispense with the necessity of the proof. It must not be deduced from mere suspicion. It is not proved by insinuation and innuendo. It is never given body and form by mere presumptions. So that, where one of two views are open, as in the case at bar, the one noble and the other ignoble, courts of justice out of tenderness to humanity will not belittle mankind by taking the ignoble rather than the noble view. Applying that doctrine to this case it is clear the judgment against the defendant is wrong. Chapter PART III NEGOTIABLE INSTRUMENTS Introduction. I. Formal Requisites. II. Right of the Holder to Complete, to Sue Upon, and to Negotiate the Instrument. IV. Rights of the Holder Against the Maker and Acceptor. V. Rights of the Holder Against Indorsers and the Drawer. VII. Discharge. INTRODUCTION The commercial world is familiar with a number of instruments of credit, which are usually negotiable: Promissory notes; bills of exchange; certificates of deposit; corporate bonds; checks; drafts; trade acceptances; bank acceptances; certain types of bills of lading; warehouse receipts, etc. Not all of such instruments possess the characteristic of negotiability, but generally such instruments are negotiable. All of these instruments may be classified into one of two groups: Notes and bills of exchange. The distinguishing characteristic is that on a note there are two parties, the maker and the payee, while on a bill of exchange there are three parties, the drawer, the drawee, and the payee. It is important to understand and to keep in mind throughout the study of negotiable instruments the primary purpose which is sought to be accomplished by their use. The leading object is to give to certain kinds of obligations, evidenced by a writing, attributes and characteristics which will make these instruments perform the function of money. Negotiable instruments are used instead of money. It is absolutely necessary to do so, because there is an insufficient supply of money in the country to supply the needs of business. A comparison of bank clearings with the figures showing the volume of gold, silver, and paper money in circulation, shows emphatically that a great bulk of business transactions is carried through by means of credit instruments. Very few purchases are actually paid for in money. Throughout the study of the law of negotiable instruments we must therefore keep in mind the fact that these instruments are called upon to do the work of money. If that point is noted, it will explain many detailed rules, which otherwise might seem purely arbitrary It has been said that negotiable instruments are used in place. of money. It is perfectly apparent, of course, that the personal obligation of any individual is not as valuable as gold and silver coin, or the various issues of paper. money. The promise of A. to pay a specified sum of money is not as valuable as the promise of the United States government to pay the same amount of monB.& B.BUS. LAW (631) ey. The law of negotiable instruments does not attempt the impossible task of making the obligation of a person who signs a note or bill of exchange as valuable as a gold certificate, but there are a great many things which the law can do to induce people to take negotiable instruments instead of money. At this point it is well to recall some of the principles of the law of simple contracts. We saw in our study of contracts that there are a great many kinds of cases where one person may think that he has a right to recover a sum of money from another person, but where the law denies him a right of recovery. It may be because there was no valid offer in the first place. It may be because there was no acceptance of a valid offer. It may be that there was no consideration to support the promises which resulted from the acceptance of an offer. It may be that, although in the beginning there was an enforceable contract between the parties, the obligor subsequently discharged his obligation by payment or otherwise. We also examined a number of cases where, in the beginning, there was a binding contract, but where the obligee's right to demand performance by the obligor was dependent upon the obligee's performing his obligation. In such a case the obligor's promise was simply conditioned upon the performance of a promise by the obligee. Again, we found cases where the obligee had obtained the promise of the obligor by fraudulent representations. With all of these phases of the law in mind, we then took up the study of the assignability of contract rights, and we found that the obligee could, in many instances, but not in others, sell his right to a third party.. Such a transaction is called an assignment. As a general principle, it appeared that the assignee of such chose in action acquired no rights which were superior to those possessed by his assignor. To put the proposition in other words, we discovered that the obligor, if he had any of the defenses, such as want of consideration, failure of consideration, payment, fraud, or prior breach of contract, could, when he was sued by the assignee, set up any of these defenses. The assignee could recover from the obligor only when the assignor could have recovered from the obligor. We have now approached a little nearer to the law of negotiable instruments. It is apparent that a business man would not be willing to take the note or check or other bill of exchange from the payee, or from one to whom the payee had sold the instrument, if he incurred all of the risk that an assignee of an ordinary chose in action incurs. A business man, if he is taking the obligation of a third party whom he does not know, would want to feel at least that there was no question but that that individual owed the amount of money which was called for by the instrument. He may be willing to take the risk of that person's solvency, but he would like to be free from all of the ordinary defenses which are available in suits on simple contracts. And so the law of negotiable instruments has taken an entirely different view of the rights of the person who purchases the obligation of a third party. The most fundamental doctrine in the whole law of negotiable instruments is the proposition that the purchaser of a negotiable instrument before it is due, who has no knowledge of the existence of a defense between the original parties, takes it free from all these defenses. Except in a very few cases, such as forgery of the maker's or drawer's name, the bona fide purchaser before maturity can rest assured that the instrument evidences the unquestioned legal obligation of the parties whose names appear thereon. The only risk the purchaser takes is that the parties are insolvent. The elimination of all these personal defenses goes a long way toward making commercial instruments as valuable as money. Having regard for the enormous volume of business done, the risk of insolvency is relatively small. In this way, therefore, the law has singled out certain kinds of choses in action which we call negotiable instruments, and has given to them attributes. which are not common to ordinary choses in action. The effect is to make them much more desirable and valuable than they otherwise would be. There are a great many rules in the law of negotiable instruments, but most of them are subordinate to this one doctrine, or they are the natural outgrowth of its application to varied situations. The above statement explains in general what we mean by the term "negotiable," and we find that in its most important sense the term "negotiable" means the attribute or quality of assignability free from equities or defenses. There are two ideas here: First, the idea that the owner of a negotiable instrument has the power to sell it. The second idea brings out the legal effect of such sale, that the purchaser takes it free from the ordinary defenses which exist between the original parties. The term "negotiable" also carries with it the idea that it is assignable in a particular way, viz. by indorsement, or in some cases by delivery. The law has simply prescribed a number of ways by which an owner may dispossess himself of title and vest that title in another. The different methods of indorsement and the legal effect of each will be developed in the cases. It is simply necessary at this point to call to mind the fact that the term "negotiable" carries with it the notion that the instrument so described is assignable by indorsement. We shall also come to find out that, when a person brings a suit upon an instrument which is described as negotiable, the law raises a presumption that the instrument evidences a then existing legal obligation. The importance of this rule of presumption is that the plaintiff is under no obligation to introduce any evidence to support his right to sue upon the instrument, other than the bare introduction in evidence of the instrument which is the subject of the action. When a person brings an action for breach of |