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mercial paper that the interests of commerce require that a promissory note, fair on its face, should be as negotiable as a government bond. Every restriction upon the circulation of negotiable paper is an injury to the state, for it tends to derange trade and hinder the transaction of business. Commercial necessity requires that only slight evidence should be insisted upon to establish an estoppel in pais as to the validity of commercial paper. The only practicable rule is to make the face of the paper itself, when free from suspicion, sufficient evidence, in the absence of notice, against all who aided to put it into circulation in that condition, unless the note is void by the positive command of a statute, such as the act against usury. No other rule would work well, for it would be intolerable if every bank had to learn the true history of each piece of paper presented for discount before it could act in safety. It is better that there should be an occasional instance of hardship than to have doubt and distrust hamper a common method of making commercial exchanges.

While it is unnecessary that the defendant should describe herself as a guarantor by adding the word "surety" to her signature, for possession by her husband, who was prior in order of liability to herself, was notice that she did not indorse in the ordinary course of business, still if she regarded her indorsement as a New Jersey contract she should have given notice of that fact in some way so that a purchaser in good faith might know that it was not what it appeared to be, a New York contract. (Smith v. Weston, 159 N. Y. 194; Bank of Monongahela Valley v. Weston, 159 N. Y. 201.) Even in the state of New Jersey, where the common-law disabilities of married women have not been wholly removed, her indorsement would be enforced as a New York contract. (Thompson v. Taylor, 66 N. J. L. 253.)

Independently of the statute which will be cited presently, the argument in favor of an equitable estoppel rests mainly on the presumption that a note dated and payable in New York was made and indorsed in that state. While this question has seldom been before the courts, Mr. Daniel in his useful work on Negotiable Instruments says it is the law and the authorities support the assertion. (Daniel on Neg. Inst. [5th ed.] § 728; Maxwell v. Vansant, 46 Ill. 58; Towne v. Rice, 122 Mass. 67; Bedford v. Bangs, 15 App. Ct. Rep. 76; Lennig v. Ralston, 23 Penn. St. 137; Snaith v. Mingay, 1 M. & S. 87; Edwards on Bills, etc., § 378; Tiedeman on Bills & Notes, § 91.) Even if the question were entirely new, sound reasoning would lead to that conclusion. While the contract made by an indorser is independent of that made by the maker in the sense that it is of a different nature, and can be separately enforced, still it is dependent on the promise of the maker, because it is an agreement to perform his promise, upon certain conditions, if he does not. Therefore, the place where the maker promised, as stated in the note itself, must with all the other provisions thereof be read into the promise of the indorser, and it thus becomes

by fair presumption, in the absence of notice to the contrary, the place where the indorser promised also. The purchaser has no other guide as to a fact which may involve the validity of the contract, and hence it is a commercial necessity that both contracts, so closely connected that the second cannot exist without the first, should be presumed to have been made at the same place, unless the one with power so to do rebuts the presumption by timely notice.

The learned counsel for the defendant seems to recognize the existence of this presumption, as he says in his points that, "If we examine the note alone, then the negative inference might possibly arise that the defendant intended the note should be governed by the laws of another state." He insists, however, that as the plaintiff stipulated the facts at the trial, it knew the defendant did not so intend. The rights of the parties do not depend on what the plaintiff knew at the time of the trial, but on what it knew when it discounted the note, and at that time, owing to the absence of notice, which was the defendant's fault, it had no information but what the note gave. The defendant knew that her husband could use the note in any state, and the place of date and payment indicated the state where he expected to use it. Unless she intended that it should be used in a state where her indorsement would bind her, she must have intended to defraud and hence is estopped.

But, to clinch the argument, we have only to refer to the Negotiable Instruments Law, which provides that: "Except where the contrary appears, every indorsement is presumed prima facie to have been made at the place where the instrument is dated." (L. 1897, ch. 612,

76.) This statute was prepared for uniform action in all the states, and it has already been adopted in many. It is regarded as simply declaratory of the common law upon the subject under consideration. (Eaton & Gilbert on Commercial Paper, § 66.) Therefore, when the note was presented for discount in New York, the plaintiff had the right under the statute to presume that it was indorsed in the state where it was dated, because nothing appeared to the contrary. The defendant, by her indorsement, aided in the negotiation of a note carrying with it that presumption, both at common law and according to the statute, and after the plaintiff had acted on the presumption she cannot be heard when she attempts to say that she indorsed in a state where her indorsement is not binding, and that she did not intend to be bound by her promise when she made it.

The judgment should be affirmed, with costs.

CULLEN, Ch. J., GRAY, BARTLETT, HAIGHT and WERNER, JJ., concur; O'BRIEN, J., absent.

Judgment affirmed."

This case is reported with notes in 2 L. N. S. 299, and in 5 A. & E. Ann. Cas. 158.

On the question of the conflict of laws as applied to the liability of parties NEGOT. INSTRUMENTS- -20

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29 APPEAL CASES (DIST. OF COL.) 535. 1907.

ACTION on note against maker, and against payee Jerman who had indorsed in blank. Following the blank indorsement were the words: "To acc't of Benjamin F. Edwards," and on the face of the note appeared the stamp of the Washington Savings Bank. Whether the words just recited were written by Edwards, or were indorsed by the savings bank as an indication of the credit to be entered by it in case of its collection of the note, did not appear. Plaintiff produced

Edwards as a witness, who proved the signatures of the maker and indorser. The defendants objected to the note on the ground of variance. Plaintiff then, without any ruling by the court, struck out the words "To acc't of Benjamin F. Edwards" in the presence of the court and again offered the note. Objection was again made on the ground that this was a restrictive indorsement, that it was stricken out without right, and that the plaintiff was not the bona fide holder of the note as she was not the indorsee of the same, and was not entitled to maintain an action thereon. Plaintiff claimed the right to strike out the indorsement under section 1352 of the Code. The court overruled the objection, and permitted the note to be read to the jury. Defendants offering no evidence, the court instructed the jury to return a verdict for the plaintiff.

Mr. Chief Justice SHEPARD delivered the opinion of the court:

We think there was no error in the action of the court. Assuming, as contended by the appellants, that the note had been actually indorsed by Benjamin F. Edwards to the savings bank for collection for his account, the bank failed to collect it, and returned it presumably

to negotiable instruments, see the following cases: Union Nat. Bank v. Chapman, 169 N. Y. 538, 57 L. R. A. 513 (note), 88 Am. St. Rep. 614 (note); Spies v. Nat. Cit. Bank, 174 N. Y. 222, 61 L. R. A. 193 (with exhaustive note); Amsinck v. Rogers, 189 N. Y. 252, 12 L. N. S. 75 (note), 121 Am. St. Rep. 858 (note), 12 A. & E. Ann. Cas. 450 (note); Sykes v. Cit. Nat. Bank, 78 Kan. 688, 19. L. N. S. 665 (note); Brown v. Gates, 120 Wis. 349.

See also the following notes discussing some of the above cases: 2 Col. Law Rev. 253, 257; 8 id. 134; 1 Mich. Law Rev. 508; 2 id. 627; 6 id. 338. — C. N. Y., § 78.-C.

to him. Plaintiff's title as holder did not pass under that indorsement, but through the delivery to her by Benjamin F. Edwards, who appeared as a witness on her behalf. She took title by delivery under the blank indorsement of the payee, Jerman, the effect of which was to make the note payable to bearer, and pass by delivery.* Code, 1338 (31 Stat. at L., ch. 854). Whether the further indorsement, if in fact made by Benjamin F. Edwards, was a restrictive one, as defined in section 1341' is a question of no materiality, as the plaintiff did not claim the title thereunder, and there was no defense to the note as against either Renjamin F. Edwards, the savings bank, or the plaintiff. This indorsement not being necessary to the title of the plaintiff, she had the right to strike it out. Code, § 1352. This provision of the Code is but declaratory of the law as it was recognized before the adoption of the Negotiable Instruments Act. See Vanarsdale v. Hax, 107 Fed. 878, 880, and cases cited.

It follows that the judgment must be affirmed, with costs. It is so ordered.

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ARTT gave the R. & M. R. Co. his negotiable note for $2,500 secured by mortgage. The R. & M. R. Co. gave Osgood a bond for $2,500 and in it "assigned and transferred" Artt's note and mortgage as security, and specified that "said note and mortgage are hereto apJended." The bond, note and mortgage were attached firmly together with eyelets in the order named. Each had the number 1964 written

it. Osgood at this time had no notice of any defense to Artt's note. Subsequently Osgood learned of the defense (failure of consideration

*The note was originally payable, not to bearer, but to the order of Jerman.-C.

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7 N. Y., § 67. Reference should apparently be to § 1340, which in N. Y. is § 66.-C.

8 N. Y., § 78.-C.

"The note had been indorsed by the plaintiff before maturity to a bank, and deposited with it for collection. It was protested, and then returned to the plaintiff. When produced at the trial, it bore this indorsement to the bank, uncanceled. The defendant contends that upon these facts it appears that the bank has the legal title, and was the only proper party to sue. bank received the title for the sole benefit of the plaintiff. When it returned

The

and fraud), and thereafter the R. & M. R. Co. indorsed the note by writing its name upon the back.

HARLAN, J., (after stating the facts). These facts have been especially found by a jury, and the sole question for determination is whether, upon this finding, the plaintiffs are entitled to judgment. The only issue of fact made on the third plea is whether Osgood, prior to the indorsement of the note, had notice of the alleged fraud and failure of consideration.

1. It is a settled doctrine of the law merchant that the bona fide purchaser for value of negotiable paper, payable to order, if it be indorsed by the payee, takes the legal title unaffected by any equities which the payer may have as against the payee.

2. But it is equally well settled that the purchaser, if the paper be delivered to him without indorsement, takes, by the law merchant, only the rights which the payee has, and therefore takes subject to any defense the payer may rightfully assert as against the payee. The purchaser in such case becomes only the equitable owner of the claim or debt evidenced by the negotiable security, and, in the absence of defense by the payer, may demand and receive the amount due, and if not paid, sue for its recovery, in the name of the payee, or in his own name, when so authorized by the local law.

3. As a general rule the legal title to negotiable paper, payable to order, passes, according to the law merchant, only by the payee's indorsement on the security itself. The only established exception to this rule is where the indorsement is made on a piece of paper, so attached to the original instrument as, in effect, to become part thereof, or be incorporated into it. This addition is called, in the adjudged cases and elementary treatises, an allonge. That device had its origin in cases where the back of the instrument had been covered with indorsements, or writing, leaving no room for further indorsements thereon. But, perhaps, an indorsement upon a piece of paper, attached in the manner indicated, would now be deemed sufficient to pass the legal title, although there may have been, in fact, room for it on the original instrument.

4. But neither the general doctrines of commercial law, nor any established exception thereto, make words of mere assignment and

the note protested, the plaintiff became an indorsee in possession, and invested with the rights belonging to all holders of commercial paper. Gen. St. 1902, § 4170 [N. Y., § 2]. One of these was to cancel the indorsement which it had made. Gen. St. 1902, § 4218 [N. Y., § 78]. Whether it exercised this right or not was immaterial. Its mere possession of the note was sufficient evidence of ownership to support the suit. Gen. St. 1902, § 4221 [N. Y., § 90]; Dugan v. United States, 3 Wheat. 172." BALDWIN, J., in New Haven Mfg. Co. v. New Haven Pulp and Board Co., 76 Conn. 125, 131.

See also Berney v. Steiner Bros., 108 Ala. 111, and Middleton v. Griffith, 57 N. J. L. 442. — C.

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