so. 9-5 declares a note to be payable to bearer when its last indorsement is in blank; 40 relates to a note where the last indorsement is special, and provides that it may then be transferred by delivery, in order to cover cases of good faith where title is frequently passed in that way, by persons ignorant of mercantile usage. In the case of a theft of a note from a special indorsee, which Dean Ames supposes, what harm can result? As before stated, the section validates a transfer by delivery, without the indorsement of the special indorsee, and so gives the holder a right to sue in his own name. This plainly implies proof of delivery from the owner, which would protect the parties in case of loss or theft of the note.

The first sentence of Sec. 40 is as follows:

"Where an instrument, payable to bearer, is indorsed specially, it may nevertheless be further negotiated by delivery; but the person indorsing specially is liable as indorser to only such holders as make title through his indorsement."

Sec. 9-5 reads:

"The instrument is payable to bearer: . . . when the only or last indorsement is in blank."

The Dean's stricture on the assumed repugnancy of these two sections begins, "Sec. 40 . . . provides that an instrument indorsed in blank, although subsequently indorsed specially, may nevertheless be further negotiated by delivery." But as a comparison shows, Sec. 40 does not refer to an "instrument indorsed in blank," but to an instrument "payable to bearer." The supposed inconsistency of the two sections arises entirely from the mistaken quotation of the learned Dean.

The first sentence of Sec. 49 is as follows:

"Where the holder of an instrument payable to his order transfers it for value, without indorsing it, the transfer vests in the transferee such title as the transferor had therein, and the transferee acquires in addition, the right to have the indorsement of the transferor." This section gives the transferee such title as the transferor had and the right to have an indorsement.

This is quite right. The holder in such a case, not taking title in the usual way by indorsement, may well be charged with notice of any defect in the title to the note, or of equities between the parties. The clause giving the right to require an indorsement could only be enforced in equity, upon proof of an agreement to that effect. Hence, the words added in the Colorado statute, "if

omitted by accident or mistake," were unnecessary. An indorsement so enforced would complete the title and thus cover the case of hardship which Dean Ames supposes. All cases of possible equities cannot be covered by legislation.

Sec. 64 provides that one, not otherwise a party to an instrument, who puts his signature thereon before delivery, is liable as an indorser. It is to cover cases where persons put their names on the back of notes before delivery, and where they have been variously held to be indorsers, guarantors and joint makers. The section makes the rule that he shall be liable to all subsequent parties. Dean Ames says he should be liable to the maker or drawer whom he has accommodated with his signature, in cases where the maker or drawer is the payee. Apparently, his idea is that if he is not liable to the drawer-payee, no title can be passed by the latter. But subsection 2 makes the party liable as indorser to all parties subsequent to the maker or drawer. The Dean's proposed substitute would defeat the purpose of the Act, which is to put the irregular party into the place of the indorser, by making him practically a joint promoter, because his signature would precede that of the indorser.

66

Sec. 65 makes a person, who transfers a note by delivery or by a qualified indorsement, warrant certain things. It then says: But when the negotiation is by delivery only, the warranty extends in favor of no holder other than the immediate transferee." Dean Ames objects that this last clause makes the warranty of the indorser, which is that of a vendor, run in favor of all subsequent holders, which he says is "an original invention of the Negotiable Instruments Act. But this is its only merit."

The Dean is unjust to himself. In 2 Ames, Cases on Bills and Notes, Index under head of "Indorser without recourse," 840, 882, is this syllabus: "An indorsement without recourse, like a transfer by delivery merely, being, in substance, a sale, the indorser is responsible to the indorsee and subsequent holders for the validity of the title and the genuineness of the instrument which he purports to sell." The selected case is Blethen v. Lovering, 58 Me. 240. It was not a case of subsequent parties, but the long note appended to it does not in this respect distinguish the case from the syllabus in the index.

The same rule is stated so far as relates to a qualified indorsement in Fourth Am. & Eng. Encyclopædia of Law, second edition, 481, in almost the same words, and in I Daniel on Negotiable In

struments, fourth edition, Par. 670, the language is: "The holder may sue the indorser." This is enough to show that the framers of the Negotiable Instruments Law must disclaim the credit of the invention which is accorded to them.

In the new Norton on Bills and Notes (Horn-Book Series), page 167, the editor gives the subsection in question from the Negotiable Instruments Law as the true law on qualified indorsements, quoting 2 Ames, Cases on Bills and Notes, 840, 882, as his authority. He seems to doubt, however, whether, among the conflicting cases, it was the law before made so by the Negotiable Instruments Law. He also thinks that the law laid down by Professor Ames in the passage above quoted that the warranty of the transferor by delivery also extends to subsequent parties, while not accepted as law elsewhere, ought to be the law. So that, instead of being guilty of the heinous crime of "novelty," the Negotiable Instruments Law is, on this matter, more conservative than either the Norton Horn-Book or Dean Ames' leading cases, where it lays down the rule, that "when negotiation is by delivery only, the warranty extends in favor of no holder other than the immediate transferee." The reasonableness of making a distinction between a transferor by delivery and an indorser without recourse, because in one case the name is on the paper and in the other is not, may or may not be doubtful. Norton's Horn-Book, Sec. 79, says they stand "much upon the same footing"; Dean Ames says their liability is identical. But that a certain and definite rule should be adopted, nobody can doubt.1

Sec. 66 is more explicit and does make a change in the law, but it is in the line of aiding negotiability. It follows the English Act (Par. 55) in holding an indorser liable to a holder in due course, as to genuineness and regularity, and extends the liability only as to the warranty that the note was valid at the time of his indorse

1 On this point I have cited chiefly the new Norton Horn-Book, on Bills and Notes, just edited by Mr. Francis B. Tiffany, not only because it is one of the ablest and most interesting discussions on this special point, but because the editor seems to have taken most of the new matter in the book equally from the Negotiable Instruments Law and Professor Ames' Leading Cases on Bills and Notes. The preface says: “The present editor wishes to express his great obligation to Professor Ames, whose Index and Summary at the end of the cases, unquestionably the most important contribution to the subject that has been made in America, he has constantly consulted." It is hence doubly reassuring to note that, with so orthodox an authority for "constant" reference as the Leading Cases on Bills and Notes, Mr. Tiffany quotes a score of definitions bodily from the Negotiable Instruments Law, and, so far as I have observed, does not seem to disagree with its statement of law on any point.

ment. As a note usually gets its strength from the names of its indorsers, it seems to be just that the warranty should be included, if, indeed, it really adds anything to the English Act.

Sec. 68 treats joint-payers and indorsers, who indorse, as indorsing jointly and severally. Theoretically, this may, as the Dean says, "seem to be a blunder." But, practically, it is a convenience in suing, and was, doubtless, inserted for that purpose.

Sec. 70 provides that presentment for payment is not necessary to charge the person primarily liable on the instrument. The section was intended to apply to the maker of a note, who, of course, is liable if he does not pay according to its tenor. But, the Dean says, "it should except the cases of bank notes and certificates of deposits." In view of the fact that no person would be likely to bring a suit on such instruments when he could get the money at the bank, and the further fact that no harm could come to the promisor, excepting as to costs, which are in most, if not all the States, subject to the discretion of the court, the objection does not seem to be practical.

Sec. 119-4 provides that an instrument is discharged by an act which will discharge a simple contract for the payment of money. The objection is that if the holder of a note accepts a horse in satisfaction, before maturity, and then transfers the note, the maker is still liable. The section evidently relates to acts between the parties. If the maker allows his note to remain outstanding, and so to be transferred, of course he should be held liable.

Sec. 120-3 discharges a person secondarily liable by the discharge of a prior party. This too, evidently, means some act between the parties. The law has long been settled that the discharge of the liability of a bankrupt maker of a note does not affect the liability of the other parties on the note. It is generally held that the statute of limitations against an indorser runs, not necessarily from the date of the note, but from the time when the indorser's liability accrues. When, therefore, the language of subsection 3 is used (exactly as given in a number of the text books), it of course refers to a discharge by the holder and not a discharge by act of the law, as the whole context, referring to acts of the parties and not to any acts of the law, clearly indicates. Thus Randolph, second edition, Sec. 769, says "the release of a prior indorsement discharges subsequent indorsers," assuming of course their release by the holder. That this is the natural meaning and interpretation of subsection 3, Sec. 120, is fairly infer

1

able from this fact. Ten books on commercial paper have been published since the Negotiable Instruments Law was legislatively adopted. All of them treat more or less fully of that law; Huffcut, Randolph, Bigelow, Norton, generally, and Selover and Crawford and the special books on the New York and Colorado Acts, treating of that Act alone. Not one of these ten authors intimates that subsection 3 has changed the law in the slightest degree. In all the reports of the various Commissioners to their respective States, elaborately stating every change of law made by the Negotiable Instruments Law, no allusion is made to subsection 3.

It is not necessary in this instance to invoke the aid of the rule of law stated in Sutherland on Statutory Construction, Sec. 156, that codes which condense and reaffirm in general the rules of the common law, do not repeal the exceptions to these rules which they reaffirm; or the similar doctrine in Endlich on Statutes, sections 127-205, that in statutes or revisions condensing or in general re-stating the common law, no change is presumed except by the clearest and most imperative implication.1 How far this doctrine is carried in England, in regard to the Bills of Exchange Act, is shown in the case of Bank of England v. Vagliano, L. R. 1891, Appeal Cases, page 144. But were this doctrine invoked the simplest application of the rule or of Sec. 196 would at once relieve the subsection in question of the misinterpretation put upon it by the Dean. Nevertheless our critic, whose adjectives here and there are surprisingly vigorous, describes this aphorism of the Law Merchant as "the most mischievously revolutionary provision of the new code." 2

As to subsections 5 and 6 of Sec. 120, the objection of inaccuracy is based upon the case of an accommodation drawer or

1 Because of the necessity of preserving this presumption in all its integrity, the sub-committee declined to accept some slight changes proposed by the Dean, such as adding to subsection 120-3 the words "by the holder." It would be (1) assuming a doubt where we had no doubt, and (2) assuming the doctrine from Sutherland and Endlich, supra, not to be true. A doctrine without strict adherence to which codes would have to be as long as text-books.

2 The reasons attributed by the Dean for one or two of the changes of the law, made in the Negotiable Instruments Law, are, I think, misapprehensions. I expected to have received from Mr. Crawford, the draftsman, a paper stating the real grounds for such changes, in his own mind, but pressure of business on his part has prevented him from rendering any assistance during the brief time allowed for the preparation of this article, and the same is true of my colleagues on the committee. So the respon sibility for any heresies in this paper must rest on my own shoulders.