ILLUSTRATIONS. Where fraud is proved in an action on a bill of exchange, the burden of proof is then on the holder, to prove both that value had been given, and that it had been given in good faith, without notice of the fraud: Tatham v. Haslar, 23 Q. B. D. 345. Where a firm which had been in the habit of drawing bills on their English correspondent, drew bills on him after his requesting them to desist, and exchanged a bill so drawn for a note of H., and the firm afterwards failed, and the bill was returned dishonoured ;-Held, that if the firm drew the bill for which the note was given, having no expectation that it would be honoured, there was evidence that they practiced fraud in procuring the note: Gooderham v. Hutchison, 5 U. C. C. P. 241. Where one C. was induced to accept a bill by the fraud and misrepresentation of the indorsers prior to the holder, and without any consideration, and that D., the last of such indorsers, indorsed to the plaintiffs without any consideration or value given by them to him ;-Held, a good defence: Bank of Montreal v. Cameron, 17 U. C. Q. B. 636. The defendant was arrested on the charge of embezzling fines belonging to a township, which he had received as a Justice of the Peace, and while under arrest he compromised by giving security to procure his release, and the plaintiff gave a note to the tow ship for the amount claimed, and obtained from the defendant a note for the amount, indorsed by his wife. The plaintiff now sought to recover on the defendant's note;-Held, that the consideration therefor, being the stifling of a prosecution for felony was illegal, rendered the note void, and that the plaintiff was in no better position than the township would have been had they taken the note: Bell v. Riddell, 2 Ont. R. 25. * This clause is not in the English Act. Forfeiture of a security for usury was partly abolished in old Canada (now Ontario and Quebec), in 1853 (16 Vic. c. 80); and contracts were declared to be void only to the extent of interest above six per cent. But that Act excepted from its general relief Banks, Insurance and Loan Companies, leaving them (except as to banks which were limited to seven per cent.) subject to the prohibitions and penalties of the usury laws. Banks were afterwards relieved of the penalty of forfeiture (R. S. C. c. 120, ss. 61 and 62, and 53 Vic. c. 31 ss. 80 and 81). The present statutory provisions against usury in Ontario and Quebec are set out in R. S. C. c. 127 s. 10, and 11. S. 10 limits loan companies to six per cent. "for loan of any moneys, wares, merchandize, or other commodities ;" and insurance companies to eight per cent., "on any contract or agreement. S 11 is as follows: "All bonds, bills, promissory notes, contracts and assurances, whatsoever, made or executed in violation of the provisions of the section next preceding, whereupon or whereby a greater interest is reserved and taken than authorized by this or any other act or law, shall be void; and every corporation, company, and association of persons, not being a bank, authorized to lend or borrow money as aforesaid, which directly or indirectly, takes, accepts, and receives a higher rate of interest, shall incur a penalty equal to treble the value of the moneys, wares, merchandize or other commodities lent or bargained for. (2) Such penalty may be recovered by action in any court Sec. 30. Sec. 30. of competent jurisdiction, and one moiety thereof shall belong to Her Majesty for the public uses of Canada, and the other moiety for the person who sues for the same." There is another clause as to usury applicable to Nova Scotia, (s. 15); but there appears to be no penalties in the other Provinces. The words of this clause are large enough to affect all bills and notes offending against what are technically known as the " 'usury laws;" but doubtless judicial construction will answer the sense of the statute," and confine their effect to the corporations specially subject to the clauses of the usury law cited above. 66 * These clauses as to patent rights are not in the English Act, but are taken from R. S. C. c. 123, s. 12. When a statute inflicts a penalty for not doing an act provided for, the penalty enacted implies that there is a legal compulsion to do the act in question: Redpath v. Allan, L. R. 4 P. C. All rights reside in persons, and are rights to acts or forbearances on the part of other persons, They are capable of being enforced judicially against the persons who are bound to those acts or forbearances: Austin's Jurisprudence, 378. 511. ILLUSTRATIONS. A note was given for a patent right in a shingle machine, but as the letters patent were void, it was held there was a failure of consideration : Earle v. Page, 6 N. H. 477. D. gave C. two promissory notes for patent rights, payable to C. or bearer, but having indorsed on each of them, contemporaneously with their making, the words "the within note not to be sold," which indorsement formed part of the contract between the parties. The notes were transferred to S., with the word "not" in one of the above indorsements erased (which S. noticed), and in the other the whole of said indorsement torn off, but without destroying any part of the face of the note :+Held, that S. was not an innocent holder, and the words of the above indorsement were part of the original contract; and the effect of it was to prevent C. disposing of the notes to a holder for value, so as to preserve to the makers all defences and equities, as against the first holder and volunteers under him: Swaisland v. Davidson, 3 Ont. R. 320. A. made a note upon the representations on the part of the payee and indorser, as to the formation of a company for the sale of a patent right controlled by the payee, the note being given in consideration of a share to A. in such company; but it was doubtful whether any such company existed at all, or if so, whether A. was ever placed in the position of becoming a shareholder ;-Held, that as there was nothing on A.'s part to be repudiated and rescinded, A. was not precluded from setting up the defence that it had been obtained from him by fraud: Waddell v. Jaynes, 22 U. C. C. P. 212. The object of the legislature in requiring the words "given for a patent right" to be on the face of notes so given, is to give the transferee notice, and subject him to any defence the maker may have: Girvin v. Burke, 19 Ont. R. 204. Where notes had been given with the words " given for a patent right" on them, and subsequently cancelled, and new notes given without such words;-Held, that the substituted notes were subject to the same defences as the original notes: Ibid. Negotiation of Bills. Sec. 31. one Negotiation of 31. A bill is negotiated when it is transfered from person to another in such a manner as to constitute the defined. transferee the holder of the bill:1 2. A bill payable to bearer is negotiated by delivery :2 Imp. Act,8.31 Payable to bearer. order. 3. A bill payable to order is negotiated by the indorse- Payable to ment of the holder completed by delivery: 3 without in 4. Where the holder of a bill payable to his order Transfer transfers it for value without indorsing it, the transfer dorsement. gives the transferee such title as the transferer had in the bill, 4 and the transferee in addition acquires the right to have the indorsement of the transferer: 5 in repre 5. Where any person is under obligation to indorse a Indorsement bill in a representative capacity, he may indorse the bill in sentative such terms as to negative personal liability. 6 1 The negotiation of a bill or note means that which is equivalent to a purchase or sale of such bill or note, so as to give the title in it to another. There must be the mental assent of the owner, and the manual acts of indorsement (if payable to order) and delivery, either by the owner or his agent. In order to constitute a valid indorsement of a bill as against the indorser, there must be the writing of the name of the holder, and a manual delivery by him of the bill with the intention, not only to pass the property in it, but to guarantee the payment, if the acceptor makes default; and evidence of the facts showing the absence of this intention is admissible under a traverse of the indorsement: Denton v. Peters, L. R. 5 Q. B. 475. A negotiable instrument is transferable to any person holding it, so as, by delivery thereof to give a good title to any person honestly acquiring it. Where an instrument is, by the custom of trade transferable like cash, by delivery, and is also capable of being sued upon by the person holding it pro tempore, then it is entitled to the name of a negotiable instrument; and the property in it passes to a bona fide transferee for value, though the transfer may not have taken place in market overt. But that if either of the above requisites be wanting, i. e., if it be either not accustomably transferable, yet if its nature be such as to render it incapable of being put in suit by the party holding it pro tempore, it is not a negotiable instrument, nor will delivery pass the property of it to a vendee however bona fide, if the transferor have not himself a good title to it, and the transfer be made out of market overt: 1 Smith's Leading Cases 259. Instruments in the shape of bills or notes, unless they are for the payment capacity Ind. Act, 8. 29. Sec. 31. of money only, are not negotiable: Hodges v. Winton, Mart. (N. C.) 76. This Act only deals with the negotiation and transfer of bills and notes according to the rules of the law-merchant. But where the transfer is by aid of the law, the rules of the general law govern as to their transfer as chattels, or choses in action. See the definition of holder s. 2; and of "holder in due course," s. 29. 2 The effect of the transfer of such a bill or note by delivery, is defined in s. 58. Prior to 1872 the bonds and debentures of companies and corporations, even although payable to bearer, were not transferable: Woodside v. Toronto Street Railway Co., 14 Grant 409. But by 35 Vic. c. 12 (now R. S. O. 1887 c. 122, s. 9), the bonds or debentures of corporations made payable to bearer, or to any person named therein or bearer, may be transfered by delivery, and if payable to any person or order, shall (after a general indorsation thereof by such person) be transferable by delivery, from the time of the indorsement. See the definitions of "bearer" and of 'delivery," s. 2, and the effect of delivery of a bill or note, s. 21. 66 * This is the more usual practice of negotiating bills and notes. Transfered or negotiated, means passed away from the original holder to another person; presentment for acceptance is not negotiating: Griffin v. Wetherby, L. R. 3 Q. B. 761. Every indorsement of a bill operates in the nature of a new drawing of the bill: Penny v. Innes, 1 C. M. & R. 141. The different kinds of indorsements are defined in ss. 32, 34, 35. The title of a holder of a bill who negotiates it bona fide, is described in ss. 29 and 38. ILLUSTRATIONS. Where a note is transferred by an agent without authority, if the owner of the note afterwards ratifies the act, the transfer will relate back to the time it was made by such agent: Persons v. McKibben, 5 Ind. 261. The writing of his name by an indorser on the face of a bill is a good indorsement: Young v. Glover, 3 Jur. N. S. 637 ; s. p. Herring v. Woodhull, 29 Ill. 92. A special indorsement does not transfer the property in bills of exchange until delivery: Rex v. Lambton, 5 Price 428. After One F. gave B. a bill drawn on D. payable to B. or his order. 4 The effect of a transfer without indorsement is to give the transferor the law-merchant; and not to a transfer which is valid in equity accord- Sec. 31. ing to the doctrine respecting the assignment of choses in action. Until the holder obtains the indorsement of his transferor, he will be affected with notice of a fraud attaching to the bill or note while it was in his transferor's hands. ILLUSTRATIONS. A mere discount of a bill, without the indorsement of the person who receives the money, does not give the holder of the bill any claim against such party for the money advanced: Ex parte Roberts, 2 Cox 171. Nor can such person prove a claim against the estate of his transferor in insolvency: Ex parte Shuttleworth, 3 Ves. 368. But if such note is indorsed, after the transferor's insolvency, it becomes a good petitioning creditor's debt: Ex parte Thomas, 1 Atk. 73, 126. The transfer by delivery only of a note payable to order, but not indorsed by the payee, gives but an equitable title, and the transferee takes it subject to all equities against the payee: Seymour v. Leyman, 10 Ohio St. 283. Where the payee of a note dies without having parted with its possession, it cannot be further negotiated without a new indorsement by his personal representatives. An indorsement written by the payee in his lifetime is not sufficient: Clark v. Sigourney, 17 Conn. 571; s. p. Bromage v. Lloyd, 1 Ex. 32. S. transferred a note for value to G. without indorsing it, but gave a written agreement to be responsible for the amount of it to G. G. negotiated the note and agreement to M., after which all the prior parties to the note became insolvent ;—Held, that M. could not prove against G.'s estate, but was entitled to have the amount made an item in the account of G., and to stand in his place: Re Barrington, 2 Sch. & Lef. 112. In order to pass the title in a bill, the transfer must be made by indorsement, the indorsement of a document given as a receipt for such bill will not pass to the transferee the legal title: Gookin v. Richardson, 11 Ala. 889. 5 If there be an assignment of a bill or note without indorsement, the holder will thereby acquire the same rights only as he would acquire upon the assignment of a bill not negotiable. If by mistake, accident, or fraud, a bill has been omitted to be indorsed upon a transfer, when it was intended that it should be, the party may be compelled by a Court of Equity to make the indorsement; and if he afterwards become insolvent this will not vary his right or duty to make it; and if he should die, his executors or administrators will be compellable in like manner to make it: Story on Bills, s. 201. Where a bill or note requires the transferor's indorsement in order to complete the title of a holder in due course, such transferor will be ordered to indorse such bill or note: Ex parte Greening, 13 Ves. 206. But a holder of such a bill or note has no authority to indorse the bill in the name of the payee, and sign it per proc., where such indorsement has been omitted by mistake. "If you were to allow this, it would be very dangerous to introduce into contracts upon which so much wealth depends, the principle that a party may supply the indorsing of a name which had been omitted by inadvertance:" Per Erle, C. J.. in Harrop v. Fisher, 6 Jur. N. S. 1059. |