Special contracts of the kind belong by nature to the common law; they will be considered in a later chapter.

§ 2. APPARENT INDORSEMENT.

What appears on its face to be an ordinary indorsement may often be shown to be something else, and that consistently with regarding the terms to be supplied by law, in order to make out the contract, as fixed; for that assumes that there is nothing in the circumstances, as distinguished from the actual terms, of the contract to affect it. Thus while evidence may not be admissible to show that what appears to be an indorsement in blank was understood to have been intended as indorsement without recourse, evidence of the time and circumstances under which it was made is admissible, and this may vary its effect materially, even to making it on the one hand practically an indorsement without recourse, or on the other of raising the grade of liability, or indeed of modifying it in any one of several ways.

Thus, an indorser may show that his own indorsement was made at the same time with that of one or more other indorsements, as part of one common transaction by which the parties named became jointly bound. That could not be done against a holder for value without notice; but it could be shown against one who had taken the paper with notice, so as to require him to sue them all together, if at all. And it could be shown between such indorsers themselves, if one of them, having taken up the paper, should call upon another to pay as a prior indorser; for we have already seen that joint indorsers are not indorsers at all between themselves.1

The time when a particular indorsement was made may But see contra, Partridge v. Davis, 20 Vt. 499; Myrick v. Hasey, 27 Maine, 9.

1 See Shaw v. Knox, 98 Mass. 214; L. C. 122.

be shown also for the purpose of affecting the order of liability. Suit can never be brought by one indorser, on taking up the paper, against a subsequent indorser; and the order in which the names appear on the paper affords only prima facie evidence of the real order in point of time. The apparent liability of one indorser to another may accordingly be shown to be apparent only and not real. For example (hypothetical): A negotiable promissory note bears the indorsements of A and B in that order. The liability of both is fixed on dishonor by the maker, and B takes up the note and brings suit against A. A show that his indorsement, though written above that of B, was in point of fact made on a day subsequent to B's indorsement.1

may

No such evidence, however, would be received against any one who indorsed or held the paper after the indorsement by the defendant. Towards the holder in such a case it would make no difference in what order the parties in fact indorsed: he could sue prior indorsers (or other prior parties) in any order he pleased; he could bring his action against the first indorser alone as well as against the last. Enough in such a case that the defendant's liability has been fixed.

What appears to be the ordinary contract of indorsement unmodified, may be shown to be something else also in the following cases: The relation of principal and agent may be shown to exist between the plaintiff and the defendant; in such a case the agent acquires no title, he merely holds in right of his principal. Again, it may be shown that the paper was indorsed to the holder for some special purpose, and is held in trust, as where it was indorsed for collection merely. And again the relation of principal and surety may be shown to exist between the parties, as

1 As to evidence of the kind touching anomalous indorsement, see ante, pp. 33-35.

where the indorsement was made by the defendant at the request and for the accommodation of the plaintiff; that too would defeat liability altogether.1 Or it might be shown, with the same result, that both plaintiff and defendant were co-sureties on the paper for another person. Or again, it might be shown that there was a defence arising from an antecedent transaction, including an agreement that the paper should be taken in sole reliance upon the responsibility of the maker or acceptor, and that it was indorsed in order to transfer the title in pursuance of such agreement, so that the attempt to enforce payment of the defendant was in the nature of a fraud.2

These are the chief if not the only cases in which what appears to be an ordinary indorsement may be shown to be something else, or rendered inoperative towards giving the immediate indorsee a right of action thereon. Of course want of consideration may be shown, as in other cases of contract; but that is a different thing, implying as it does that the defendant's act was a true indorsement. But where the defendant or the plaintiff makes an attempt to prove that what stands as a clear and unambiguous contract of indorsement was not intended to be such, merely by the declarations of the parties made at the time, by showing that the defendant indorsing in full said that he was not to be liable, and that the plaintiff received the indorsement accordingly, - that attempt, according to the current of authority, will not be allowed to succeed.

1 Case v. Spaulding, 24 Conn. 578.

3

as

2 Upon this whole subject, see Dale & Gear, 38 Conn. 15; Downer v. Cheseborough, 36 Conn. 39; Chaddock v. Vanness, 35 N. J. 517; First Nat. Bank v. National Marine Bank, 20 Minn. 63.

3 Dale v. Gear, 38 Conn. 15, explaining Case v. Spaulding, 24 Conn. 578; Patterson v. Todd, 18 Penn, St. 426; Hill v. Ely, 5 Serg. & R. 363. The Pennsylvania courts, and those of some other States, would, con trary to the general current, admit evidence of the kind if the indorsement were in blank. Supra, p. 67, note.

§ 3. NATURE OF THE CONTRACT.

The contract unmodified of the indorser of an inland bill of exchange, or of a promissory note, or of a cheque, is that he will pay the sum named in the paper upon the following conditions precedent, where presentment is for payment: (1) Due presentment and demand; (2) Due notice of dishonor. Of a foreign bill of exchange: (1) Due presentment and demand; (2) Due protest; (3) Due notice of dishonor.

Where presentment of a bill of exchange is for acceptance, and acceptance is necessary, the contract of an indorser of an inland bill is for payment upon the following conditions precedent: (1) Due presentment and demand; (2) Due notice of dishonor. Of a foreign bill: (1) Due presentment and demand; (2) Due protest; (3) Due notice of dishonor. Where acceptance is not necessary, then, in case of due presentment for acceptance, of an inland bill, due notice of dishonor; of a foreign bill, due protest and due notice of dishonor.

All this leads to a consideration of the steps necessary to fix the indorser's liability, transforming it from a conditional to an absolute obligation. But there is another subject which may properly be disposed of first.

36 LRA 117-120 note.

$ 4.

LEGAL EFFECTS OF INDORSEMENT.

What is now referred to is certain legal effects of indorsement which may be called the secondary aspects of the subject.

One of these effects, though probably an apparent effect only, is seen in indorsement in full, such as 'Pay to the order of A.' What that purports on its face to be is true as well of indorsement in blank: each is an order to pay the sum named, as designated. Indeed, as we have seen,

indorsement in general is said to be equivalent for certain purposes to drawing a bill. That statement, however, is only a free expression of a very general truth.

In the first place, the statement, to be exact, should be that indorsement is equivalent to drawing a bill or to drawing a cheque, according to circumstances. The indorsement of a cheque cannot properly be said to be equivalent to drawing a bill; for the question would arise at once, if the statement were made with full purpose, What kind of bill, a foreign or an inland bill? The difference is, as has just been noticed, material. The indorsement of a cheque cannot require protest; that would be to change the nature of the cheque. And the same may be said of indorsement of a promissory note.

It may be said, however, that indorsement is equivalent to drawing an inland bill; but why that rather than equivalent to drawing a foreign bill, that is, why that, so far as the nature of indorsement is concerned, especially in a case in which the cheque or the note is drawn or made and payable in different States? And then in regard to indorsement of a bill of exchange, could it be said that indorsement of a foreign bill was equivalent to drawing an inland bill? That again would be to change the nature of the instrument.

This shows that so far as there is any equivalency, the equivalency must have relation to the particular instrument, indorsement of a foreign bill to the drawing of a foreign bill, indorsement of an inland bill to the drawing of an inland bill, indorsement of a cheque to the drawing of a cheque, indorsement of a promissory note to the drawing of an inland bill.

But at best the equivalency is only for certain purposes; in no case is indorsement equivalent to the drawing of a bill for any of the special purposes considered in Chapter