there is no reason for and it is virtually impossible to impose a liability upon the restrictive indorser, the cestui que trust, to the restrictive indorsee, the trustee. A contrary holding would, in effect, render a party liable to himself. In such a situation as this the restrictive indorser is the real beneficial owner, the indorsee under the restrictive indorsement being invested with certain rights and duties to be exercised and discharged for the benefit of the restrictive indorser.

In the second case, where the restrictive indorser has passed the title to the indorsee under the restrictive indorsement in trust for a third person, the reason for not imposing a liability upon the restrictive indorser disappears. The restrictive indorser has parted with his entire interest. If the instrument had been negotiated direct to the cestui que trust, clearly the indorser would have been liable to him. It should make no difference that the indorser passed the title to a trustee for such beneficial owner. The restrictive indorsee should, therefore, be able to charge the restrictive indorser under section 66. This result would easily be reached were it not for the language of section 37. Under this section the indorsee is given the right to bring any action which the indorser could bring. If this section means that the indorsee may bring only those actions which the restrictive indorser could bring, then the indorsee under the restrictive indorsement cannot hold the restrictive indorser liable. This would be unjust to the cestui where the transfer was made for a consideration. While the section apparently means that the indorsee cannot sue the restrictive indorser in any case, the courts are likely to avoid this result, even though it involves a strained interpretation of section 37 (2), in the case where the negotiation was to a restrictive indorsee in trust for a third party. In all other cases any duty which the restrictive indorser might owe to the restrictive indorsee would arise, not from the law of negotiable instruments, but from the law of trusts or agency or both.

SECTION 6.-RIGHTS OF THE HOLDER AGAINST THE

DRAWER

The liability of the drawer of a bill of exchange, like the liability of an indorser upon his indorsement, is both a conditional and an unconditional liability. The conditional does not arise until there has been a due presentment upon the drawee, dishonor by the drawer, and the notice of dishonor given to the drawer. Unlike that of the indorser, the drawer enters into no warranties, although he is estopped to deny the truth of certain facts. This liability is unconditional. There are some differences between the liability of the drawer of a check and the drawer of other bills of exchange. The sections involved are as follows:

N. I. L. Section 61. The drawer by drawing the instrument admits the existence of the payee and his then capacity to indorse,

and engages that on due presentment the instrument will be accepted or paid or both according to its tenor, 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. But the drawer may insert in the instrument an express stipulation negativing or limiting his own liability to the holder.

N. I. L. Section 186. A check must be presented for payment within a reasonable time after its issue or the drawer will be discharged from liability thereon to the extent of the loss caused by the delay.

N. I. L. Section 70. * * * Presentment for payment is necessary in order to charge the drawer and indorsers.

N. I. L. Section 89. Except as herein otherwise provided, when a negotiable instrument has been dishonored by non-acceptance or non-payment notice of dishonor must be given to the drawer and to each indorser and any drawer or indorser to whom such notice is not given is discharged.

N. I. L. Section 188. Where the holder of a check procures it to be accepted or certified, the drawer and all indorsers are discharged from liability thereon.

The questions raised by the foregoing sections involve more or less the further questions as to what constitutes a due presentment for payment and a due notice of dishonor. It is important to note here: (1) That the only unconditional liability on the instrument assumed by the drawer of a bill of exchange, including checks, is the admission of the existence of the payee and his capacity to indorse. (2) The drawer of a bill of exchange, other than a check, is absolutely discharged—(a) if there has been a failure to make a due presentment for payment upon the drawee; (b) or if after due presentment there has been a failure to give due notice of dishonor to the drawer. (3) The drawer of a check is not absolutely discharged by failure of the holder to make a due presentment for payment but is discharged only to the extent of the loss caused by the delay. (4) But the drawer of a check is absolutely discharged by a failure of the holder to give him due notice of dishonor. This last rule is unfortunate. Section 89 should be limited to drawers of bills of exchange other than checks, and section 186 ought to be amended so as to provide that a failure to give the drawer of a check due notice of dishonor should discharge such drawer only to the extent of the loss caused by the delay.

Cases illustrating the above sections are inserted in the next chapter where the further question is involved: What constitutes a due presentment for payment and the giving of due notice of dishonor? Section 188 is illustrated by the case following.

TIMES SQUARE AUTOMOBILE CO. v. RUTHERFORD NAT. BANK. (Court of Errors and Appeals of New Jersey, 1909. 77 N. J. Law, 649, 73 Atl. 479, 134 Am. St. Rep. 811.)

GUMMERE, C. J. One Purdy, being desirous of purchasing a secondhand automobile, employed Millard Ashton, an automobile salesman, to assist him in making a proper selection. Ashton took him to the salesroom of the Times Square Automobile Company, and, after looking over its stock, Purdy, with Ashton's approval, selected a car, the price of which was $600, and gave his check on the Rutherford National Bank for the purchase price. The check was drawn to the order of Ashton who indorsed it and delivered it to the manager of the automobile company. Immediately after receiving it, the automobile. company sent it by special messenger to the banking house of the Rutherford National Bank with a request that it be certified. This request was complied with. Afterward, when the check was presented for payment, the bank refused to honor it, upon the ground that it had received instructions from Purdy not to pay it. The automobile company thereupon brought suit against the bank on its contract of certification. The defendant admitted that it had certified the check, and that it did so at the request of the plaintiff, the holder thereof, but sought to justify its refusal to pay upon the ground that Purdy had been induced to purchase the car by false representations made by the manager of the plaintiff as to its condition and value. It was contended on behalf of the plaintiff that this defense was not open to the defendant. It was, however, admitted over its objection. At the close of the case plaintiff asked for a direction of a verdict in his favor. This request was refused, the case was sent to the jury, and a verdict in favor of the defendant was rendered. The plaintiff now seeks a reversal of the judgment entered upon that verdict, on the ground that its request for a direction in its favor should have been complied with.

The effect of the certification of a check by the bank upon which it is drawn depends upon whether it is done at the request of the drawer or of the holder. When a check is presented by the drawer for certification, the bank knows that it has not yet been negotiated, and that the drawer wishes the obligation of the bank to pay it to the holder, when it is negotiated, in addition to his own obligation. A certification under such circumstances does not operate to discharge the drawer (Minot v. Russ, 156 Mass. 460, 31 N. E. 489, 16 L. R. Ă. 510, 32 Am. St. Rep. 472 * * *); and so long as the drawer remains undischarged, such a defense as that set up in the present case is open both to him and to the bank. But when the certification by the bank is done at the request of the holder, the effect is radically different. The transaction, then, is virtually this: The bank says: "That check is good; we have the money of the drawer here ready to pay it; we will pay it now, if you will receive it." The holder says: "No, I will not take the money now; you may retain it for me until the check is presented for payment." The bank replies: "Very well, we will do so." First Nat. Bank of Jersey City v. Leach, 52 N. Y. 353, 11 Am. Rep. 708. The result is to discharge the drawer from any further liability on the check (Negotiable Instrument Act * * and to substitute a new contract between the holder and the bank by the terms of which the money called for by the check is transferred

* ),

from the account of the drawer to the account of the holder. In contemplation of law the obligation of the bank to the holder, when the certification is at his request, is the same as if the funds had been actually paid out by the bank to him, by him redeposited to his own credit, and a certificate of deposit issued to him therefor.

* * *

The defendant, in refusing payment of Purdy's check, apparently considered that its obligation to the holder was no greater than if its certification had been made at Purdy's request. It failed to realize that its act operated as a payment of the check, so far as Purdy was concerned, and transferred the moneys which it called for to the account of the plaintiff. The situation was the same, so far as the defendant was concerned, as if Purdy had paid cash to the plaintiff for the car which he had purchased, and the plaintiff had then deposited the cash in the defendant's bank. Having accepted the plaintiff's money, and issued to him a certificate of deposit therefor, it did not concern the defendant from whom, or how, or under what circumstances the money had been obtained. Its contract required it to pay the amount of the deposit to the plaintiff or its order, and it could not avoid its obligation to do so by showing that the plaintiff had fraudulently obtained the money which it had deposited with the defendant.

The defense interposed should have been overruled, and a verdict directed for the plaintiff. The judgment under review will be reversed.

Section

1.

CHAPTER VI

PRESENTMENT, NOTICES OF DISHONOR,
AND PROTEST

Introduction.

2. Time of Presentment for Payment of Demand Notes.

3. Time of Presentment for Payment of Demand Bills of Exchange, in Order to Charge the Drawer and Indorsers, Drawers of Checks Excepted.

4. Time of Presentment of Checks in Order to Charge the Drawer.

5. Time of Presentment of Instruments Bearing a Fixed Maturity. 6. Other Aspects of a Due Presentment for Payment.

7. Presentment for Acceptance.

8. Notice of Dishonor.

9. Protest.

SECTION 1.—INTRODUCTION

It appears from the preceding chapter that a part of the liability of the drawer of a bill of exchange and the indorsers of bills of exchange and notes is a conditional liability. Their duty to pay the holder does not arise until the fulfillment of certain conditions precedent; i. e., due presentment for payment, the fact of dishonor, the giving of due notice of dishonor, and, in the case of foreign bills, of protest. This chapter is devoted to the consideration of the question: What constitutes a fulfillment of these conditions precedent to the liability of secondary parties to the holder?

SECTION 2.-TIME OF PRESENTMENT FOR PAYMENT OF DEMAND NOTES

At what time must the holder of a demand note present the same to the maker for payment in order to be able to hold the indorsers thereon in the event of its dishonor?

N. I. L. Section 71. Where the instrument is not payable on demand presentment must be made on the day it falls due. Where it is payable on demand presentment must be made within a reasonable time after issue, except that in the case of a bill of exchange, presentment will be sufficient if made within a reasonable time after the last negotiation thereof.

We are interested here only in the first clause of the second sentence. In view of the fact that the last clause deals with bills of exchange, the word "it" in the first clause refers only to notes. Therefore, a demand note must be presented within a reasonable time after issue. What is a reasonable time?

N. I. L. Section 193, provides: In determining what is a "reasonable time" or an "unreasonable time" regard is to be had to the nature of the instrument, the usage of trade or business (if any) with