CHAPTER VI. THE INDORSER'S CONTRACT. § 1. DEFINITION, MODES, AND FORMALITY OF In accordance with what was said in the chapter relating to the Drawer's Contract, all that part of the drawer's contract which is of the same tenor as the contract of an indorser will be considered under the present head, and that too without further mention, except so far as may be needful, of the drawer. That is to say, all that hereafter appears in regard to the indorser's contract will apply equally to the contract of drawer; what is peculiar to the drawer's contract having been considered in Chapter IV. 'Indorser's Contract' should be taken, therefore, to mean Contracts of Indorser and Drawer, so far as alike. Indorsement is an act whereby a person, not being acceptor or quasi-acceptor, surety or guarantor proper, writes his name upon a duly executed, negotiable bill of exchange, promissory note, or cheque,1 with or without terms of contract or liability, according to the law merchant, or writes an equivalent contract on a separate paper, annexed or not to the bill, note, or cheque; to which act the drawing of a bill of exchange is in substance, for the purposes now in hand, an equivalent. The act may be done by the holder of the paper, or by one having no interest in it. When done by the holder, 1 A negotiable cheque may be indorsed. Keene v. Beard, 8 C. B. N. S. 372. indorsement is an order upon the maker, drawee, or acceptor to pay the sum named to the next holder named, or to his order, or to the bearer, and has accordingly much the effect of drawing a bill of exchange; when done by one having no interest in the paper, indorsement merely adds security to the instrument. If the instrument is on its face, or by indorsement, payable to order, indorsement by the holder is necessary to pass the title by the law merchant; that is, to give to the next holder legal ownership and a corresponding right of action upon the instrument. If the instrument is on its face, or by indorsement, payable to bearer, indorsement is not necessary to pass the title. If the instrument is on its face payable to a person named, without words of negotiability, there can be no indorsement of it; but if on its face there are words of negotiability, it may be indorsed after an indorsement making it payable to a person named, without addition. Where indorsement is required to pass the (legal) title, transfer without indorsement, though with full intent to pass title, passes only an equitable title to the paper. Standing on such a title, the new holder can have no better rights than the person from whom he took the paper. For example: A is payee of a note payable to his order, but illegal in his hands. He transfers the paper to B for value and without notice, but without indorsement. The note is invalid in B's hands.1 1 Lancaster Bank v. Taylor, 100 Mass. 18; Beard v. Dedolph, 29 Wis. 136. But if the omission of indorsement was due to mistake, the transferee could compel indorsement by suit in equity. Brown v. McHugh, 35 Mich. 50, 52. And if that proceeding were before maturity and before knowledge of the invalidity of the paper, the result would be to give the transferee a perfect title, as if there had been an indorsement in the first place. Lancaster Bank v. Taylor, supra. After maturity it would be too late, according to that case, and also according to Whistler v. Forster, 14 C. B. N. s. 248. But see Beard v. Dedolph, supra. By the law merchant, indorsement need not be in the name of the indorser; enough that it is his act, intended as indorsement. For example: The payee of a bill of exchange payable to his order writes upon the bill '1, 2, 8,' as a substitute for his signature as indorser, and transfers the instrument to the plaintiff. The act is indorsement.1 Again: The wife of the payee in such a case, acting as the authorized agent of the payee, writes her own name upon the note. That is indorsement by the payee.2 When indorsement is required, in order to pass title, the act must be done by him who has the legal title, that is, generally by him to whose order it is payable, — though the entire beneficial interest be in another. Thus, one to whose order as trustee a promissory note is payable must indorse it, to pass the title to another; indorsement by the cestui que trust would pass the equitable title only, and payment could not be enforced in favor of the indorsee. So where paper is made payable to A, to the order of B, the meaning is that it is payable to A only upon the order of B; hence, B must indorse it in order to give to A the full right of legal ownership. Again, upon the death of the holder of paper the legal title passes to his executor if he left a will, or to his administrator if he died intestate; and this though the deceased gave the paper by will specifically to another. Hence, the executor must indorse it to pass title, if it is payable to order, to give the legatee the right to sue upon or to transfer it.3 The rule of indorsement finds frequent expression in cases of paper payable or indorsed to a partnership. The legal title being in the partnership, nothing short of an 1 Brown v. Butchers' Bank, 6 Hill, 443; L. C. 121. 2 Stevens v. Beals, 10 Cush. 291. 3 Crist v. Crist, 1 Cart. (Ind.) 570. See also Hersey v. Elliot, 67 Maine, 526. The executor or administrator will indorse without recourse.' It makes no differ act by the firm can be indorsement. ence to whom the paper is to be passed; one of the partners, acting merely in his own right, could not indorse the paper even to his sole co-partner.1 Of course the partner might indorse the paper over as the act of the partnership; and it would make no difference that he did it in his own name, if the act were the act of the firm.2 Nor would the act be ineffective because the paper was indorsed over to one of the partners. Such indorsee could not, indeed, maintain an action upon the paper against the partnership; but his right of action would be perfect against other parties. 8 Upon the death of a member of the partnership, the survivors may indorse, in the name of the partnership, paper payable or indorsed to the firm. The survivors acquire by survivorship full and complete title to such paper for the purpose of settling the affairs of the now dissolved partnership, and hence, for indorsing over the paper; the proceeds going to the benefit of the estate of the deceased partner to the extent of his interest.4 A different rule prevails, it seems, in those cases in which indorsement of the firm paper is not necessary to pass title; that is, where the paper is payable to bearer, or is already indorsed in blank. In such a case it does not follow that because the legal title and ownership may be in a partnership the partnership indorsement is necessary to pass the paper, even while the partnership continues to exist unchanged. No indorsement by a member of the partner 457. 1 Estabrook v. Smith, 6 Gray, 570; Robb v Bailey, 13 La. An. 2 Estabrook v. Smith, supra. 8 So a note made by a partnership payable to the order of one of the partners may be indorsed over by the payee so as to give a good title to his indorsee. Thayer v. Buffum, 11 Met. 398. Story, Promissory Notes, § 125; Crawshay v. Collins, 15 Ves. 218, 226; Jones v. Thorn, 2 Mart. N. s. 463. ship in his own right would pass title in favor of a person having notice of the wrongful act; but the paper itself would not carry notice, and one who purchased for value and without notice would acquire a perfect title. And upon death of one of the partners, it would not be necessary, it for the survivors to indorse such paper over as surviving partners.1 seems, There is much doubt whether the same rule would apply concerning such cases of indorsement where the firm has been dissolved, not by death, but by the act of the parties, or by the law. There are authorities which deny the power of one of the partners to indorse the paper over in such a case,2 even though that partner have authority to settle up the partnership business. The contrary would be true, however, if the indorsee had no notice of the dissolution, or if the paper was payable or indorsed to the particular partner (for the partnership) who after dissolution indorsed it." 8 4 A bill, note, or cheque payable to the order of one who receives it as agent for another is payable in law to his principal's order; and no indorsement by the agent is needed to give the principal or any subsequent holder a perfect title. For example: A promissory note is payable to the order of 'A, Cashier' of a bank. The note is payable to the order of the bank, and the cashier's indorsement is not necessary to pass the title." Again there can be no transfer by indorsement which passes less than the entire title to the paper. A part 1 Attwood". Rattenbury, 6 J. B. Moore, 579; Bigelow's L. C. Bills & Notes, 136. 2 Sanford v. Mickles, 4 Johns. 224. 3 Abel v. Sutton, 3 Esp. 108; Humphries v. Chastain, 5 Ga. 166; Foltz v. Pourie, 2 Desaus. Eq. 40. 4 Cony v. Wheelock, 33 Maine, 366. 5 Temple v. Seaver, 11 Cush 314. 6 First Nat. Bank v. Hall, 44 N. Y. 395. |