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12. Parties to a promissory note.

There are two original parties to a promissory note— the maker and the payee. The person who makes the note is the maker, and the person to whom it is payable is the payee. The note, when made payable to the payee or his order, may be transferred by indorsement accompanied by delivery to another person, in which case the payee becomes an indorser and the person to whom the note is transferred becomes the indorsee. The holder of a note is the payee or indorsee thereof who is in possession of it, or the bearer thereof when such note is made payable to bearer.73 Where the note is made payable to the order of the maker and by him indorsed and delivered to another, it is, in legal effect, the same as an ordinary promissory note, in which the indorser is the maker and the indorsee is the payee." And where a note signed by two

trary to that of the whole of Westminster Hall, and there can be no doubt that promissory notes had exactly the same claim to legal recognition as bills of exchange, namely, the general custom of merchants through out England."

is obvious from the preamble of the statute, which merely recites that 'it had been held that such notes were not within the custom of merchants,' that these decisions were not acceptable to the profession or the country. Nor can there be much doubt that, by the usage prevalent among merchants, these notes had been treated as securities negotiable by the customary method of assignment, as much as bills of exchange properly so called. The statute of Anne may, indeed, practically speaking, be looked upon as a declaratory statute, confirming the decisions prior to the time of Lord Holt."

73. English Bills of Exchange Act, 1882, § 2. See also Neg. Inst. Law (N. Y.), § 2.

Opinion of Chief Justice Cockburn in the case of Goodwin v. Robarts, L. R., 10 Exch. (Eng.) 337 (1878), in commenting upon the case of Williams v. Williams, Carth. 269 (1692), continues as follows: "Thus far the practice of merchants, traders, and others, of treating promissory notes, whether payable to order or to bearer, on the same footing as bills of exchange, had received the sanction of the courts; but Holt having become chief justice, a somewhat unseemly conflict arose between him and the What constitutes a holder.-A permerchants as to the negotiability of son must be in actual or constructive promissory notes, whether payable to possession of a note to become the legal order or bearer, the chief justice tak holder thereof, and it must be shown ing what must now be admitted to that he was in legal possession. Lyhave been a narrow-minded view of the saght v. Bryant, 9 C. B. (Eng.) matter, setting his face strongly 46; Jenkins v. Tongue, 29 L. J. against the negotiability of these in- Exch. (Eng.) 147; Ancona v. Marks, struments, contrary, as we are told by 7 H. & N. (Eng.) 686. It is not authority, to the opinion of Westminster Hall, and in a series of suc- in the personal possession of the note; necessary that the indorsee should be cessive cases, persisted in holding them not to be negotiable by indorsement or possession by his agent is sufficient. delivery. The inconvenience of trade Richardson v. Lincoln, 5 Metc. (Mass.) arising therefrom led to the passing 201. The holder, even if not the owner, of the statute of 3 & 4 Anne, chap. 9, may maintain, in his own name, an acwhereby promissory notes were made tion on the note, with the owner's concapable of being assigned by indorse- sent. Wheeler v. Johnson, 97 Mass. 39. ment or made payable to bearer, and 74. Scull v. Edwards, 13 Ark. 24, such assignment was thus rendered 56 Am. Dec. 294. In this case it was valid beyond dispute or difficulty. It held that the indorsee acquires a prim

or more persons is made payable to one of them, who in turn indorses it, he is liable thereon as maker.75 In many of the States the rule has been declared, by statute or by the courts, that a promissory note made payable to the order of the maker, if issued for a valuable consideration without indorsement, has the same effect against the maker as if payable to bearer.76

D. OTHER FORMS OF COMMERCIAL PAPER.

13. Bank notes; definition and use.

A bank note may be defined as a promissory note, made by a bank or a banker, payable to bearer on demand." Bank notes are itive title and not derivative, and the vent the indorsee from maintaining indorsement to him is not technically suit thereon. Ormsbee v. Kidder, 48 such, but is a part of the instrument Vt. 361. itself. See also Towne v. Smith, Fed. Cas. No. 14,115; Winona Bank v. Wofford, 71 Miss. 711, 14 South. 262.

75. Schmidt v. Árcher, 113 Ind. 365, 14 N. E. 543. An instrument signed by two persons is not invalid as a promissory note because it is payable to the order of "myself." Jenkins v. Bass, 88 Ky. 397, 11 S. W. 293, 21 Am. St. Rep. 344.

Where the instrument is given by one firm to another, both having a common member, it is not a promissory note until it is assigned by the latter firm; the assignee in such case is to be regarded, as between himself and the makers, as the real payee, and may maintain an action against the makers. Murdock v. Caruthers, 21 Ala. 785. Where the name of a firm

is signed by one of two partners to a note payable to the other, it is, in effect, merely the note of the former to the latter. Morrison v. Stockwell, 39 Ky. 172.

76. California.- Code, § 3102. And see Main v. Hilton, 54 Cal. 110.

Mississippi.-Columbus Ins. & Bank. Co. v. First Nat. Bank, 73 Miss. 96, 15 South. 138.

Missouri.-Lowrie v. Zankel, 49 Mo. App. 153.

The statutes of Kentucky provide (Gen. Stats., chap. 22, § 13), that where a note is made payable to the maker's order, and is indorsed by him, and then delivered, such signature and delivery operates as a promise to pay the face of the note at maturity to the person to whom the same shall be delivered. Under this statute it has been held that where a note, signed by the defendant and M., was made payable to the order of M, and the latter signed his name on the back of the note, and delivered it to the plaintiff, York formerly provided that a note that the defendant became liable to the made payable to the order of the plaintiff. Jenkins v. Bass, 88 Ky. 397, maker "shall, if negotiated by the 11 S. W. 293, 21 Am. St. Rep. 344, maker, have the same effect and be of See, generally, Pitcher v. Barrows, 34 the same validity as against the maker Mass. 361, 28 Am. Dec. 306; Heywood and all persons having knowledge of v. Wingate, 14 N. H. 73; Rombo v. the funds, as if payable to the bearer." Metz, 5 Strobh. (S. C.) 108, 53 Am. (Rev. Stat., pt. 2, chap. 4, tit. 2, § 5.) Dec. 694: Woods v. Ridley, 30 Tenn. This statute was repealed in 1897 by 194; Norton v. Downer, 15 Vt. 569.

New York. The statute of New

the Negotiable Instruments Law, and

Notes signed by firm payable to under section 27 of that law it is now member.- Where a note signed by all provided that a note made payable to the members of a firm is made payable the maker is payable to order. See the to the order of one of them, the legal following cases which arose under the disability of the payee to maintain an former act: action thereon, because he would be Alley, 79 N. Y. 536; Turnbull v. Bow

both

Irving Nat. Bank v.

Plaintiff and defendant, does not yer, 40 N. Y. 456; Shipman v. Bank of

disqualify him from indorsing the note New York, 126 N. Y. 318, 27 N. E. 371. to a third party for value, nor pre

77. Byles on Bills (16th ed.), p. 10,

78 The laws of many

generally issued for circulation as money. States authorize the issue of circulating notes by banks and bankers and provide for their redemption by the deposit with the State of ample security.79 The National Banking Act expressly provides for the issue of circulating notes by national banks organized under that act, to be secured by the deposit of United States bonds.80 The United States statutes do not prohibit the issue of circulating notes by State banks, under the sanction of State authority, but they impliedly discourage it by imposing a tax on all notes "of any person, or of any State bank or State banking association, used for circulation" and paid out by any national or State bank.81 It follows, therefore, that the bank notes in use in this country are those issued by national banks, under the direct control of Federal authority. These notes are a most important part of our circulating medium. Their payment being secured by the deposit of government bonds, and the banks issuing them being so closely supervised by the governmental departments having them in charge, they circulate without regard to the banks which

contains the following definition of a bank note: "A bank note is a promissory note, made by a banker, payable to bearer on demand, and intended to circulate as money."

Edwards defines a bank note as "a species of promissory note drawn payable to bearer on demand, and for many purposes treated and considered as cash." Edwards on Bills, etc., § 20. Parsons defines a bank note as a "promissory note of a bank payable on demand to bearer and therefore negotiable by delivery." 2 Parsons on Notes and Bills, 2, 88.

78. Byles on Bills (16th ed.), p. 10. 79. States authorizing circulating notes are Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Tennessee, Vermont, West Virginia. In the States of Arkansas, California, Mississippi, Nevada, Oregon, Texas, and Washington the issue of circulating notes is prohibited by the Constitution; and in the States of Alabama, Colorado, Florida, Idaho, Illinois, and Michigan such notes are proprohibited by statute.

ing association, State bank, or State banking association shall pay a tax of ten per centum on the amount of notes of any person, or of any State bank or State banking association, used for circulation and paid out by them."

Object of tax; power to impose.This section does not lay a direct tax. Congress having undertaken, in the exercise of undisputed constitutional power, to provide a currency for the whole country, may secure the benefit of it to the people by appropriate legislation, and to that end may restrain, by suitable enactments, the circulation

of any notes not issued under its authority. Veazie Bank v. Fenno, 8 Wall. (U. S.) 533.

The tax is on the notes paid out, that is, made use of as a circulating medium. Such a use is against the Therepolicy of the United States. fore the banker who helps to keep up the use by paying them out, that is, employing them as the equivalent of money in discharging his obligations, The taxais taxed for what he does. tion is no doubt intended to destroy the use; but that, as has just been 80. U. S. Rev. Stat., §§ 5157-5189. seen, Congress has the power to do. 81. U. S. Rev. Stat., § 3412, which Merchants' Nat. Bank v. U. S., 101 provides that: "Every national bank- U. S. 1.

gave them life. The rules relating to negotiable instruments are not often applied to these notes.

14. Due bills and I O U's.

It has been generally held in this country that a due bill,— a paper whereby the maker acknowledges his indebtedness to the payee in form substantially as follows: "Due B. one hundred and fifty dollars, payable to his order. (Signed) A.,”—is a promissory note.82 This is upon the theory that the acknowledg ment of indebtedness on its face implies a promise to pay.' 83 As Kentucky.-Kalfus v. Watts, 16 Ky.

82. Forms of due bills.—“Due A. B. $325, payable on demand" held a promissory note. Kimball v. Huntington, 10 Wend. (N. Y.) 675, 25 Am. Dec. 590. See also Carver v. Hayes, 47 Me. 257.

A paper as follows: "$525. Conger, Aug. 23, 1865. Due G. S. W., on corn, five hundred and twenty-five dollars. (Signed) A. B." is a promissory note. Jacquin v. Warner, 40 Ill. 459. But a writing as follows: "I owe the estate of Zenas Warden, $190.15. May 13, 1863" was held to import a mere statement of balance, and not to be a promissory note. Bowles v. Lambert, 54 Ill. 237. See Lincoln v. Butler, 18 Gray (Mass.), 129; McGowen v. West, 7 Mo. 569. An instrument in these words: "Good to Robert Cochran, or order, for $30, borrowed money " is a valid promissory note. Franklin v. March, 6. H. 364, 25 Am. Dec. 462. But a similar instrument, in which the payee was not named, was held not to be a promissory note. Brown v. Gilman, 13 Mass. 157.

See also in general on this proposi

tion:

197.

Louisiana.- Spearing v. Zacharie, 26 La. Ann. 496.

Maine.- Carver v. Hayes, 47 Me.

257.

Massachusetts.- Lincoln v. Butler, 14 Gray (Mass.), 129.

Missouri.- Finney v. Shirley, 7 Mo. 42; McGowen v. West, 7 Mo. 569, 38 Am. Dec. 468; Brady v. Chandler, 31 Mo. 28.

V.

New York.- Luqueer v. Prosser, 1 Hill (N. Y.), 256; Sackett v. Spencer, 29 Barb. (N. Y.) 180; Russell Whipple, 2 Cow. (N. Y.) 536; Sheldon v. Heaton, 88 Hun (N. Y.), 535, 34 N. Y. Supp. 856.

Pennsylvania.- Potts v. Coal Co., 6 Phila. (Pa.) 249.

South Carolina.- Pepoon v. Stagg, 1 Nott & McC. (S. C.) 102.

South Dakota.- Schmitz v. Hawk

eye Gold Min. Co., 8 S. D. 544, 67 N. W. 618.

Tennessee.- Read V. Wheeler, 10 Tenn. 50; Cummings v. Freeman, 21 Tenn. 143; Marrigan v. Page, 23 Tenn. 247.

Texas.- Hopson v. Brunwankel, 24

Alabama.- Johnson V. Johnson, Tex. 607, 76 Am. Dec. 124.
Minor (Ala.), 263; Bowie v. Foster,
Minor (Ala.), 264; Fleming v. Burge,

6 Ala. 373.

See 7 Century Digest, "Bills and Notes," § 61.

83. Kimball V. Huntington,

10

Arkansas.- Huyck v. Meador, 24 Wend. (N. Y.) 675, 25 Am. Dec. 590.

Ark. 191.

See also Elder v. Rouse, 15 Wend.

Connecticut.- Smith v. Allen, 5 Day (N. Y.) 220; Sackett v. Spencer, 29 (Conn.), 337; Currier v. Lockwood, 40 Barb. (N. Y.) 184; Woodward v. Conn. 349, 16 Am. Rep. 40.

Genet, 37 Barb. 527.

But in Connecticut it has been held

17 Ga. 574; Brewer v. Brewer, 7 Ga. that while the law implies a promise Georgia. Mitchell v. Rome R. Co.,

v. Conner, 21 Ga. 384.

knowledgment of debt, if the promise

27 III. 337; Sears v. Wesleyan Univer- the instrument cannot be classed with Illinois.- Bilderback v. Burlingame, is simply implied and not expressed,

sity, 28 Ill. 183.

promissory notes. Currier v. Lock

84

suggested by the foot-note, there is some conflict of authority as to effect of the promise to pay implied in a due bill; many nice distinctions have been drawn, none of which are entirely satisfactory. A mere acknowledgment of debt evidenced by an IO U is held not to be a promissory note in England, and many authorities in this country are to the same effect.85 It seems well settled, however, that if the due bill or IO U contains words which would import a promise to pay and render the instrument negotiable it should be treated as a promissory note.86 If an IO U contains an agreement that it is to be paid on a given day, or on demand, it will be a promissory note.87 Some of the States have, by statute, extended the law of bills and promissory notes to all instruments in writing whereby any person acknowledges any sum of money to be due to any other person.

wood, 40 Conn. 349, 16 Am. Rep. 40. And in Louisiana a due bill is a mere acknowledgment of debt, and, the promise to pay money being only implied, it does not fall within the definition of a promissory note. Garland v. Scott, 15 La. Ann. 143. But this case seems overruled by Spearing v. Zacharie, 26 La. Ann. 496.

And in Missouri it has been held

that a memorandum stating that a certain sum is due, with interest, but containing no express promise or time of payment, and naming no payee, is not a promissory note. Biskup v. Oberle, 6 Mo. App. 583.

Story says (Promissory Notes, § 14) that "to constitute a good promissory note, there must be an express promise on the face of the instrument to pay money; for a mere promise implied by law, founded upon an acknowledged indebtedness will not be sufficient." But this declaration of the rule is not upheld by the weight of authority either of the decisions as above cited, or of the text-writers. See Byles on Bills, p. 8; Parsons on Notes and Bills, $ 24: Chitty on Bills, p. 428.

88

W. 216; Fesenmayer v. Adcock, 16
Mees. & W. 449.

85. In Massachusetts it has been held that a mere promise implied by law, founded on an acknowledgment of indebtedness, is not sufficient to constitute a promissory note; as where the instrument was in the following form:

"Marlboro', Sept. 23, 1881. seventeen dolls. 5/100, for value re"I O U, E. A. Gay, the sum of

ceived.

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JOHN R. ROOKE."

Gay v. Rooke, 151 Mass. 115, 23 N. E. 835, 21 Am. St. Rep. 434, 7 L. R. A. 392. In this case the court said: While in a few States it has been held otherwise, the law as generally understood in this country is, that in the absence of any statute, a mere acknowledgment of a debt is not a promissory note, and such is, we think, the law of this Commonwealth." The following cases are cited: Gray v. Bowden, 23 Pick. (Mass.) 282; Commonwealth Ins. Co. v. Whitney, 1 Metc. (Mass.) 21; Daggett v. Daggett, 124 Mass. 149; Almy v. Winslow, 126 Mass. 342; Carson v. Lucas, 13 B. Mon. (Ky.) 213.

86. Russell v. Whipple, 2 Cow. (N. Y.) 536; Wardwell v. Sterne, 22 La.

84. Most of the English cases arose under the Stamp Act and they held that such paper did not require a stamp as it was only an evidence of Ann. 28. indebtedness. Israel V. Israel, 1 Campb. 499; Gould v. Coombs, 1 C. B. 543; Childers v. Boulnois, Dowl. & R. 8; Smith v. Smith, 1 Fost. & F. 539; Beeching v. Westbrook, 8 Mees. & W. 411; Melanotte v. Teasdale, 13 Mees. &

87. Byles on Bills (16th ed.), p. 35. See Brooks v. Elkins, 2 Mees. & W. 74; Waithman v. Elsee, 1 C. & K. 35; Brown v. Gilman, 13 Mass. 158.

88. Gay v. Rooke, 151 Mass. 115, 23 N. E. 835, 21 Am. St. Rep. 434, 7

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