Restrictive This is not restrictive. It is in effect a simple indorsement to D. or order.1 indorse ment. Explanation 2.---The mere omission to add words of negotiability to a special indorsement does not make it restrictive. Art. 107. NOTE. An indorsement in the form "Pay D. only" is probably restrictive, as being in terms a mere authority to D. to collect. If it appeared that D. was a holder for value, it is doubtful how far the restriction would be operative. Under German Exchange Law, Art. 15, if C. indorse a bill "pay D. only," the result is this: D. can still indorse the bill away, but C. is not liable on his indorsement. It is in effect an indorsement "without recourse," and not a restrictive indorsement. Explanation 3.-A restrictive indorsement gives the indorsee no power to transfer his rights as indorsee unless it expressly authorize him so to do.3 ILLUSTRATION. Bill indorsed "Pay to D. for my account." D. cannot, by indorsing it to E., authorize E. to collect it. Aliter if the indorsement ran pay D. or order for my account." 66 Explanation 4.-A restrictive indorsement gives the indorsee the right to collect the bill and to sue any party thereto that his indorser could have sued.* NOTE. It has never been attempted to make the payor responsible for the due application of the proceeds by the indorsee, and it is clear that he is not responsible. In the cases where the indorsee has sued the bill has been payable to him "or order." Can the omission of these words make any difference? 5 Explanation 5.-The indorsee, under a restrictive indorsement, may transfer his rights as indorsee if he be authorized by the terms of the indorsement so to do. In such case, the second and every subsequent 1 Buckley v. Jackson (1868), 3 L. R. Ex. 135. 2 Cf. Edie v. East India Co. (1761), 2 Burr. 1225-1227, per Denison, J., and Wilmot, J.; Rice v. Stearns (1807), 3 Mass. at 225. 3 Lloyd v. Sigourney (1829), 5 Bing, at 532 Ex. Ch. ; Cf. Pothier, No. 89 ; German Exchange Law, Art. 17. Evans v. Cramlington (1687), 2 Show. 509, Ex. Ch.; Wilson v. Holmes (1809). 5 Mass. R. 543. Cf. German Exchange Law, Art. 17. Cf. Dehers v Harriot (1691), 1 Show. 103, when the indorser sued. indorse indorsee takes the bill with the same rights and Restrictive subject to the same liabilities as the original restricted ment. indorsee.1 Explanation 6.-When a bill is indorsed restrictively, the relation between the indorser and the indorsee is that of principal and agent.2 ILLUSTRATIONS. 1. C. indorses a bill "Pay D. or order for my use." D. indorses it to, and discounts it with, E. on his own account. E. collects it at maturity. C. can recover the amount of the bill from E.3 2. C. indorses a bill "Pay D. or order for the use of X." D. collects the bill at maturity. If he misappropriate the money, X. cannot sue him. The action must be brought by C.5 3. C. indorses a bill "Pay D. or order for account of X." D. is X.'s agent. D. indorses the bill to E. who collects it. X. can sue E. for the amount so received." 4. A. draws a bill on B., and indorses it to C. C. indorses it, "Pay D. or order for my use." The bill is dishonoured, and D. sues A. the drawer. If A. have any defence against C., he may set it up against D." 8 NOTE. The restricted indorsee is frequently termed a trustee, but he is only a trustee in the sense that an agent is a trustee. German Exchange Law, Art. 17, deals with restrictive indorsements, and accords with English law as stated above. In France the mere omission of the statement of the value received makes an indorsement restrictive. The indorsee is then deemed to be the agent or "mandataire" of the indorser. Pothier, Nos. 23 and 88— 90, has worked out the results with great clearness. 1 Treuttel v. Barandon (1817), 8 Taunt. 100; Lloyd v. Sigourney (1829), 5 Bing. at 531; Sweeney v. Easter (1863), 1 Wallace R. 166, Sup. Ct., U.S.; German Exchange Law, Art. 17. 2 Cf. Dehers v. Harriot (1691), 1 Show. 163; Potts v. Reed (1806), 6 Esp. at 59; Rice v. Stearns (1807), 3 Mass. at 225; Blaine v. Bourne (1875), 23 Amer. R. at 432; by analogy, Maguire v. Dodd (1859), 9 Ir. Ch. 452; Pothier, Nos. 23 and 89-90. 3 Lloyd v. Sigourney (1829), 5 Bing. 525, Ex. Ch. 4 Wedlake v. Hurley (1830), Lloyd and Welsby, 330. 5 Id. at 332, per Vaughan, B. 6 Treuttel v. Barandon (1817), 8 Taunt. 100. If D. had not been X.'s agent, C. must have brought the action. 7 Wilson v. Holmes (1809), 5 Mass. R. 543. 8 Cf. Cook v. Lister (1863), 13 C. B. N. S. at 597, Willes, J. 9 Cf. French Code Art. 138; Nouguier, § 744. De facto holder tiate. Who may negotiate a bill. Art. 125. A bill must be negotiated by the de facto must nego- holder. The transfer of a bill by any other person does not operate as a negotiation of the instru Bill to bearer. ment. person Explanation."De facto holder" means the in possession of a genuine bill, to whom it is in terms payable, whether he be lawfully in possession thereof or not. NOTE. The term "holder" is used in the cases in different senses. It is generally used to denote the "lawful holder," and as such it is defined in Art. 3. It then includes-(1) the person to whom a bill is in terms payable, and whose title is good against all the world; (2) the person to whom a bill is in terms payable, and who, as against third parties, is entitled to enforce payment-though as between himself and his transferor, he is a mere agent or bailee with adefeasible title (e.g., an indorsee for collection). But "holder" is also used to denote an unlawful holder, that is, the person to whom a bill is in terms payable, whose possession is unlawful, but who nevertheless can give-(a) a valid discharge to a person who pays it in good faith (see Art. 236), and (4) a good title to a person who takes it before maturity in good faith and for value (see Art. 137). An unlawful holder must be distinguished from the mere wrongful possessor: e.g., a person holding under a forged indorsement, or a person who has stolen a bill payable to order, who has no rights and can give none. When, then, a proposition is laid down which applies equally to lawful and unlawful holders, the term de facto holder is used to include both. Art. 126. The de facto holder of a bill payable to bearer (Art. 107) is the person in possession of it. ILLUSTRATIONS. 1. C., the payee of a bill, indorses it in blank and transmits it to D. for some special purpose (e.g., discount or collection). As long as D. retains possession, D. and not C. is the de facto holder, and he alone can negotiate it.1 1 Marston v. Allen (1841), 8 M. & W. at 504. bearer. 2. C. is the holder of a note payable to bearer. C. loses it and Bill to D. finds it. D. and not C. is the de facto holder, and he alone can negotiate it. negotiate Art. 127. The de facto holder of a bill payable to Who may order is the person in possession of it, and to whose bill to order it is payable. NOTE.-See in illustration, Arts. 103-104. Explanation. If the person to whose order a bill is meant to be payable is wrongly designated, or if his name is mis-spelt, he may negotiate the bill by indorsing it as described.1 ILLUSTRATION. A bill is indorsed to J. Smythe. The man's real name is T. Smith. He can validly negotiate the bill by indorsing it as J. Smythe.2 NOTE. The usual and proper course is for the holder to sign first the name as described or spelt in the bill, and then to put underneath his proper signature-e.g., in the case given the indorsement would be signed, J. Smythe, T. Smith. If a person trades under an assumed name, can he validly negotiate a bill payable to him under his trade name by indorsing it in his individual name, or vice versâ ?—e.g., John Smith trades as "Brown and Co." A bill is drawn payable to the order of "Brown and Co." He indorses it as John Smith. Is the presentment for payment of this bill by the indorsee a due presentment? In Massachussets it seems it is.3 The point was raised in Walker v. Macdonald (1848), but the decision proceeded on the ground that there was a prior indorsement in blank, and therefore the bill was payable to bearer. Exception. When the title to a bill payable to order is transmitted by act of law, and the person to whom the title is transmitted obtains possession of the bill, he becomes the de facto holder. 1 Williamson v. Johnson (1823), 1 B. & C. at 149, Holroyd, J.; Schultz v. Astley (1836), 2 Bing. N. C. at 553, Tindal, C. J. 2 Id. & Cf. Willis v. Barret (1816), 2 Stark. 29. Cf. Art. 9. 3 Bryant v. Eastman (1851), 61 Mass. 111. 4 2 Exch. 527. order. Who may bill to order. NOTE. See transmission by marriage (Art. 98), death (Art. 99), negotiate execution (Art. 100), bankruptcy (Art. 101), reputed ownership (Art. 102). See also dissolution of partnership (Art. 80). In America another exception is admitted in the case of corporations. Thus a bill payable to the order of the cashier or other officer of a bank is deemed to be payable to the bank; therefore, any person who can indorse for the bank can negotiate such a bill--e.g., C. is the cashier of the "X. Bank," and D. is the President. A bill bought by the bank is indorsed " pay to the order of C., cashier." The "X. Bank can sue on the bill in the corporate name, and D. the President can validly indorse it away without a previous indorsement by C.' The expediency of this exception is doubtful. Several payees or Art. 128. Where a bill is payable to the order of indorsees. two or more persons who are not partners, all must indorse. Certainty as to indorsee. Explanation. One may indorse on behalf of the rest if he have authority so to do.2 ILLUSTRATIONS. 1. B. accepts a bill payable to the "order of C. and D." D. alone indorses it to E. This is insufficient. E. cannot sue B.3 2. Bill payable to "the order of C. and D." C., by D.'s authority, indorses it to E. "for self and D." This is sufficient. 3. Bill payable to "C. and D. or the order of either." C. alone indorses it to E. This is sufficient." To whom a bill may be negotiated. Art. 129. When a bill is specially indorsed, the indorsee must (probably) be designated with the same certainty that is requisite in the case of an original payee.5 NOTE.-Art. 123 creates the doubt. See the question there discussed. As to payee, see Art. 9. 1 Watervliet Bank v. White, 1 Denio, 609; First Nat. Bank v. Hall (1871), 44 New York R. 395. 2 Carrick v. Vickery (1781), 2 Dougl. 652; and cf. Heilbut v. Nevill (1869), 4 L. R. C. P. at 356, 358, per Willes, J. 3 Id. 4 Cf. Watson v. Evans (1863), 32 L. J. Ex. 137. 5 Cf. Pothier, No. 38; Soares v. Glyn (1845), 8 Q. B. at 30, Ex. Ch. ; Murray v. East India Co. (1821), 5 B. & Ad. 204. |