new bank? This must be answered in the affirmative in view of the circumstances of the transfer of the assets from the private to the new bank.

* *

TIMLIN, J. (dissenting). * The majority of the court seem to have overlooked the force and significance of this undisputed evidence regarding the delivery of the note in suit. *The agreement to pay interest and the payment of interest, the agreement to renew, and the renewals pursuant to that agreement are consistent only with absolute delivery. The agreement that the payee should carry the note at the bank even where the payee owned the carrying bank means that the note was considered by the parties to have been delivered. All of these are inconsistent with nondelivery or with conditional delivery. Again, in the light of the additional testimony above quoted interpreted in harmony with the pleading, the whole testimony of Boyd is plainly to the effect that it was orally agreed that he should give his note for $2,500 for certain shares of mining stock to be held by the seller as collateral security to that note, that the note was to run six months and to be twice renewed, Boyd to pay interest thereon and to have the right to avail himself of any rise in the price of the stock in the meantime, but if he did not during or at the end of the 18 months avail himself of this right to take the shares, Ellis was to take or keep the stock and cancel or discharge the note. There is here no evidence of nondelivery or of conditional delivery, but rather evidence showing delivery coupled with an oral agreement that the note should be discharged or paid in a certain manner differing from that specified in the instrument itself. ** * I have no doubt the oral contract between Boyd and Ellis collateral to this note was founded upon a valuable consideration and enforceable by Boyd against Ellis. It was a sale of the shares to Boyd with an agreement to repurchase at the end of the 18 months at the same price at the option of Boyd. *

CHAPTER II

RIGHT OF THE HOLDER TO COMPLETE, TO SUE UPON, AND TO NEGOTIATE THE INSTRUMENT

Section

1. Introduction.

2. Completion of the Instrument.

3. Right to Sue Prior Parties.

4. What Constitutes a Negotiation.

5. Negotiation by Special Indorsement.

6. Negotiation by Blank Indorsement.

7. Negotiation by Restrictive Indorsement.

8. Negotiation by Qualified Indorsement.

9. Negotiation by Conditional Indorsement.

10. Transfer of Unindorsed Paper Payable to the Order of the Transferor. 11. Surrender to the Drawee.

12. Other Formal Requisites and Aspects of Negotiation.

SECTION 1.-INTRODUCTION

The particular rights of the holder of a negotiable instrument with which we are concerned in this chapter are those rights. which are common to holders in due course and to holders not in due course. The special rights of the holder in due course constitute the subject-matter of succeeding chapters. The Negotiable Instruments Law contains provisions relating to three special rights which are taken up in this chapter: (1) The privilege of the holder to fill in blanks; (2) the right of the holder to demand payment of prior parties; (3) the power of the holder to transfer the instrument.

The circumstances which make one a holder are thus prescribed in the act:

Section 191, clause 7. "Holder" means the payee or indorsee of a bill or note who is in possession of it, or the bearer thereof. Section 191, clause 4. "Bearer" means the person in possession of a bill or note which is payable to bearer.

SECTION 2.-COMPLETION OF THE INSTRUMENT Section 13. Where an instrument expressed to be payable at a fixed period after date is issued undated, or where the acceptance of an instrument payable at a fixed period after sight is undated, any holder may insert therein the true date of issue or acceptance, and the instrument shall be payable accordingly.

Section 14. Where the instrument is wanting in any material particular, the person in possession thereof has à prima facie authority to complete it by filling up the blanks therein. And a signature on a blank paper delivered by the person making the signature in order that the paper may be converted into a negotiable instrument operates as a prima facie authority to fill it up as such for

any amount. In order, however, that any such instrument when completed may be enforced against any person who becomes a party thereto prior to its completion, it must be filled up strictly in accordance with the authority given and within a reasonable time.

The clauses in sections 13 and 14 dealing with the rights of the holder in due course of instruments originally issued in blank and subsequently filled up in excess of authority have here been omitted, as these provisions concern the subject-matter of chapters IV and V. It is to be noted that the privilege of the holder to fill in blanks, such as to the amount, interest rate, place of payment, attorney fees, the name of the payee, etc., is conditional upon his having completed the instrument (1) strictly in accordance with the authority given, and (2) within a reasonable time. If either of these two elements is wanting, the act will then operate as a material alteration, which avoids the instrument in the hands of all holders other than holders in due course. The particular difficulty will be to determine when authority has been given to fill up blanks. Such authority may be shown by oral testimony of the granting of express authority, whether by words or conduct; but whether the authority may legitimately be inferred exclusively from the fact that the instrument was issued in blank is not clear. Certainly the bare issuance of an instrument containing blanks as to certain features which commonly are filled up would not in itself be sufficient in all cases to confer authority to fill them up. For example, a blank as to the rate of interest could not be filled. up merely because there appeared on the instrument such a blank. Containing no express provision with respect to the interest rate, the instrument should be interpreted as stipulating for the legal rate. The act of inserting another rate would be a material alteration. There may be a special problem as regards the right to fill in the name of the payee in order paper, arising from the fact that section 8 (6) provides that "where the instrument is payable to order the payee must be named or otherwise indicated therein with reasonable certainty." If this provision should be interpreted as meaning that the paper must be so designated at the time of issuance, then the holder would have no right to fill in the name of the payee, even if given express authority to do so. Even if this interpretation were adopted, a court of equity would probably reform the instrument in accordance with the express authority given.

SECTION 3.-RIGHT TO SUE PRIOR PARTIES

Section 51. The holder of a negotiable instrument may sue thereon in his own name; and payment to him in due course discharges the instrument.

The first clause of this section makes it clear that the rule of the common law that an assignee of a chose in action must sue in

the name of his assignor is not applicable to holders of negotiable instruments. A special indorsee may sue in his own name, and also a holder under a blank indorsement or a holder of an instrument on its face payable to bearer. The definition, in section 191, clause 4, of a bearer as being the person in possession of a bill or note which is payable to bearer, if interpreted in its widest sense, would permit a thief or finder of bearer paper to recover upon it. This section would probably not be so interpreted. Even if it be contended that a thief has legal title, it could still be held that all remedies for the enforcement of his legal title have been destroyed by his wrongful act. The status of an illegal contract furnishes an analogy. In such cases there is a contract between the parties, but, being illegal, no remedies are available for its enforcement. The case of a finder is more difficult. He is not a wrongdoer; still his attempt to enforce the instrument may be taken as evidence to convert the proceeds to his own use, sufficient to defeat his action on the instrument, except where such action by the finder is necessary to protect the interests of the unknown owner, as perhaps might be the case where the statute of limitations was about to run on the instrument. Certainly the finder would not be permitted to sue against the active opposition of the true owner, who had intervened to protect his rights. To have the right to sue, it is not necessary that the plaintiff be the beneficial owner. If he has been given power to sue by the owner, that fact is sufficient. Payment to a thief or finder of bearer paper by an obligor, who had no knowledge that the party demanding payment was a thief or finder, would, however, discharge the obligation.

LANCASTER v. BALTZELL.

(Supreme Court of Maryland, 1836. 7 Gill & J. 468, 28 Am. Dec. 233.) BUCHANAN, C. J. A bill or note, payable to order, can only be transferred by indorsement; and as an action against the acceptor or drawer can only be sustained by one who has legal title, which cannot be derived through the medium of forgery, it is incumbent on the plaintiff in such an action to show his interest in the bill or note, which must be done by proving that it was indorsed by the person to whom, or to whose order, it was made payable.

This is an action by the second indorsee against the maker of a promissory note, payable to the payee or order, which was resisted at the trial on the ground that the first indorsement, purporting to be by the payee, was a forgery, of which proof was offered by the defendant. On the part of the plaintiffs, it was proved that the defendant, on being called on by their counsel, after the indorsement to them, to pay the note, examined it, and said it was right, and he would settle it with them. Upon which the court instructed the jury that, if they believed the defendant, when the note was presented to him by the counsel of the plaintiffs, had examined the indorsements, and said it was right, the plaintiffs were entitled to recover, although they might believe the indorsement of the payee's name had been forged, and notwithstanding that acknowledgment had been made, after the trans

fer of the note by these indorsements to them, on an exception to which instruction the case is brought up.

Apart from the alleged conversation between the defendant and the counsel of the plaintiffs, it is very clear that the plaintiffs are not entitled to recover, if the first indorsement in the name of the payee of the note was forged, as the title was not and could not thereby be transferred, but continued in the payee, who, on obtaining possession of the note, might sue upon it, and recover against the maker, notwithstanding he should have paid it to him, into whose hands it came, through the medium of the forgery; for, besides that, in such case the payee has not parted with his title, the payee of a note, whose name is forged, knows nothing of it, and the maker, before he pays it to the holder as indorsee, should look carefully to the indorsements, and, if one is to suffer, the loss should fall on him who is most in fault, or most negligent.

The only question, then, in this case is whether, if, after the indorsements had been made, the defendant, on the note being presented to him, by the counsel of the plaintiffs, examined the indorsements and said it was right, that makes any difference? And we think it does not. By saying so, he gave no credit to the note, and did not thereby induce the plaintiffs to take it. That had been done before, and not on the faith of what he said. The plaintiffs might before they took the note, have inquired whether the first indorsement was by the payee or not, and, not having done so, they must abide by the consequence, and cannot throw the loss upon the defendant, who had done nothing to mislead them or induce them to take the note, and who, if made to pay the amount in this action, may be made to pay it over again by the payee, whose right remains unimpaired.

It is not like the case of a drawee of a bill, who, if on being asked if the acceptance is in his handwriting, says that it is and that it will be duly paid, cannot afterwards set up as a defense the forgery of his name; because by saying so he had accredited the bill and induced another to take it, which being his own fault, the loss ought to fall on him, and not on another, who has been induced to take the bill on the faith of his assurance.

Judgment reversed.

GREENE v. MCAULEY.

(Supreme Court of Kansas, 1905. 70 Kan, 601, 79 Pac. 133, 68 L. R. A. 308.) Action by F. F. Greene against A. T. McAuley. Judgment for defendant, and plaintiff brings error.

MASON, J. F. F. Greene sued A. T. McAuley upon two notes, for $130 each, executed by McAuley to H. E. Stearns, and assigned in writing by Stearns to the plaintiff. Defendant admitted the execution and assignment of the notes, but in his answer alleged that they belonged to Mrs. Laura Sims Thomas, and that plaintiff did not own them, and had no right to maintain an action upon them. The case was submitted to a jury upon the issue of the ownership of the notes, and a verdict was given for the defendant. A judgment followed, from which the plaintiff prosecutes error. The principal, and indeed the only substantial, question involved is whether the evidence given in behalf of the defendant had any tendency to establish a defense.