a negotiable contract as of the law merchant. For example: The defendant, payee of a negotiable promissory note, writes on the back of it, 'I guaranty the payment of the within note,' signing the same, and transfers the note to another who indorses it to the plaintiff. At maturity the plaintiff presents the note for payment, and payment being refused, gives notice at once to the defendant, as if he were an indorser. The writing quoted is deemed an indorsement, and the defendant's liability is duly fixed.1

But the question at once arises why should a contract of the common law, as such incapable of negotiability, become negotiable by being written upon a negotiable instrument ? It is true that when written there by the holder, and followed by transfer, the holder parts with his title; but it does not follow that he parts with it as the law merchant requires in order to give the act the special features of the law merchant. Indeed, in so far as it departs in substance from the requirements of the law merchant, it falls short, or should fall short, of acquiring the features pertaining to an act done in conformity to such requirements. The law merchant knows nothing of guaranty, except in so far as indorsement is guaranty; it requires indorsement to transfer full legal title to paper payable or indorsed to order, and what indorsement is, the law merchant has carefully and consistently laid down, as we have seen. Pursuing this or some such line of reasoning, certain later authorities have refused to follow the earlier ones, considering that a guaranty is still a guaranty though written upon a negotiable instrument, and not an indorsement. For example: The defendant is maker, and the plaintiff transferee, of a prom

1 Partridge v. Davis, 20 Vt. 499. So Myrick v. Hasey, 27 Maine, 9; Leggett v. Raymond, 6 Hill, 639; Manrow v. Durham, 3 Hill, 584. But these New York cases were never satisfactory at home, and they have been overruled. Spies v. Gilmore, 1 Comst. 321; Hall v. Newcomb, 7 Hill, 416; Waterbury v. Sinclair, 26 Barb. 455.

issory note payable to A. The only writing upon the note by A is in the words, 'I hereby guaranty the within note;' but with this writing upon it A transfers the note to F and L who indorse it to the plaintiff, who now as an indorsee sues the maker. The plaintiff is not entitled to recover, the writing quoted being a guaranty, and not an indorsement or the equivalent of an indorsement.1

Of course, the result of such a ruling is more than technical. It is not merely a ruling that the transferee cannot sue in his own name, a ruling which would be abrogated by statute in many States, it is a ruling that no perfect legal title, such as the law merchant recognizes, has been transferred. The tranferee has acquired no more than an equitable title; and hence his demand may be defeated by the existence of equities or defences which would be available by the defendant in a suit by the payee, regardless of the rule in whose name he should

sue.

The considerations above presented against allowing the guaranty to draw negotiability from the principal contract apply in principle, however general the language of the guaranty towards the holder. The contract, being a contract of the common law, is incapable of negotiability by any intention of the guarantor, however expressed, so long as his contract is expressed in the language of guaranty. Authorities, however, are not wanting which decline to take this strictly logical view; and, while not readily allowing negotiability to a simple guaranty of negotiable paper, allow negotiability to the guaranty if the intention to make it negotiable is plainly expressed upon the instrument assured. It is probable, however, that the courts

2

1 Belcher v. Smith, 7 Cush. 482; Tuttle v. Bartholomew, 12 Met. 452, overruling Blakely v. Grant, 6 Mass. 386, and Upham v. Prince, 14 Mass. 14.

2 The guaranty of bonds and similar instruments of corporations

which treat such a guaranty as negotiable would not strain the law further by allowing negotiability to a guaranty not written upon the note, bill, or cheque. And it is certain that there could be no such thing as a negotiable guaranty of an unnegotiable instrument.

In regard to the third peculiarity of contracts of the law merchant, grace, no serious question can be raised. The guaranty itself does not draw grace from the law merchant, and is not entitled to grace under any other law, while the contract assured may or may not be. But of course there can be no breach of the guaranty until there is a breach of the principal contract, which cannot occur until the last day of grace, if the principal contract is entitled to grace.

One question more remains: Does a guaranty draw from the negotiable instrument assured the properties of indorsement touching presentment and notice? Those courts which treat the guaranty as practically an indorsement for the purpose of negotiability would probably be driven to the conclusion that the guarantor would have the right to insist upon all the steps which an indorser could require. Otherwise the contract would be very anomalous; it would be indorsement and not indorsement at the same time.

Those courts, however, which decline to treat a guaranty as the equivalent of an indorsement will find no difficulty. now; the guaranty not being indorsement, the steps to fix the liability of an indorser cannot be required to fix the liability of a guarantor. The guaranty stands upon its own footing as a common law contract; what is required touching it in that aspect is now required, and nothing more.

stands upon a footing of its own. guaranty negotiable in such cases. written guaranties.

Custom or statute makes the The text refers only to private

What has been said thus far must be understood as applicable to cases already referred to of anomalous indorsement 'indorsement' by a stranger to secure whether such cases are called cases of

the payee

guaranty or of suretyship.

We are now brought to suretyship in the specific sense mentioned in section 1, namely, where the assurance is part and parcel of the contract assured. And that subject may be more shortly disposed of.

The two engagements now are one, as where the instrument runs, in common form, 'I, A B, as principal, and I, C D, as surety, promise' etc., or 'We promise to pay' etc. followed by the signatures 'A B,' C D, surety.' And accordingly the consideration which supports the engagement of the principal supports that of the surety; there can be no occasion for any separate consideration to support the latter's contract. But the contract being within the Statute of Frauds, the same doctrine in regard to reference to consideration prevails as in the case of guaranty. Now, however, the contract of principal and surety being one, the only requirement that can be made, in the nature of things, in those States in which there must be a reference to consideration, is in the one contract signed by both principal and surety. It should be noticed in regard to that point that the contract, in such States, may be good against the principal and, for want of reference to consideration, bad against the surety; indeed it would be bad against both if the contract is joint.

No question of course can arise in regard to negotiability. The surety's contract being part of the principal's contract, it is, of necessity as much a contract of the law merchant as the principal's contract itself. And the same is to be said in regard to grace, and in regard to presentment and to most other questions.

CHAPTER XII.

HOLDER'S POSITION.

§ 1. CHANGE OF POINT OF VIEW.

THUS far we have been investigating the several particular contracts of our subject, in other words, the several positions of the parties liable; now we come to the consideration of questions arising on the opposite side of the law, questions which in general affect alike all the particular contracts heretofore under consideration. These questions will relate mainly to mediate parties; that is, to cases in which the holder is separated by at least one link from the defendant, the plaintiff accordingly being either an indorsee, or the payee of a bill of exchange. The subject of rights of immediate parties has been indirectly disposed of already.

§ 2. RIGHT TO SUE MEDIATE PARTY.

The first thing that calls for remark is that the right of the holder to sue mediate parties is a right given by the law merchant in its adoption of the custom of merchants as explained in Chapter I. That right is as perfect, when the plaintiff holds the paper conformably with the custom, as the right to sue an immediate party can be under the common law. And further, as a mere right to sue, that is, leaving out of sight any other question, the right rests upon the same footing substantially as the right of any other plaintiff suing upon a written contract of the common law; possession of the instrument thus held raises,