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title passed from the indorser to the indorsee, subject to the trust, but that there was nothing retained to the drawer or indorser.98 e. Effect of restrictive indorsement; statutory provision. The Negotiable Instruments Law provides that:

"A restrictive indorsement confers upon the indorsee the right: "1. To receive payment of the instrument;

"2. To bring any action thereon that the indorser could bring; "3. To transfer his rights as such indorsee, where the form of "the instrument authorizes him to do so.

"But all subsequent indorsees acquire only the title of the first indorsee under the restrictive indorsement." 99 This section is substantially the same as that of the English Bills of Exchange Act;1 and such act further provides that where a restrictive indorsement authorizes further transfer, all subsequent indorsees take the bill with the same rights and subject to the same liabilities as the first indorsee under the restrictive indorsement.2 The rules applicable to the effect of a restrictive indorsement have already been considered under other heads of this section and do not need to be here discussed. It would seem that, for the most part, a restrictive indorsement constitutes the indorsee an agent for the indorser, and his powers and duties in respect to the paper indorsed are to be measured and enforced in accordance with the expressed terms and circumstances of the indorsement.3 If the indorsement, or the circumstances under which an indorsement is made, authorizes the indorsee to transfer his rights as such indorsee, independent of the statute and under the common law, the

98. Hook v. Pratt, 78 N. Y. 371. In general it has been said that the indorsement upon drafts, notes, checks, or bills of exchange determine the relation of the parties thereto; and where the owner of the draft indorses it to a person or bank for collection," or "for account of," or "on account of," the owner, such indorsement is a restricted as distinguished from a general indorsement, and gives notice that the draft is the property of the owner who so indorsed it, and that it is no longer negotiable paper; and no one into whose hands it comes can claim protection as an innocent purchaser. People's Bank of Lewisburg v. Jefferson County Sav. Bank, 106 Ala. 524, 17 South. 728.

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3. Potts v. Reed, 6 Esp. (Eng.) 59. See also Blaine v. Bourne, 11 R. I. 119, 23 Am. Rep. 429; White v. National Bank, 102 U. S. 658, 26 L. Ed. 250, where it was held that, by the terms of an indorsement, Pay to A., or order, for account of B.," A. became merely the agent of B. for the collection of the money; Armour Bros'. Banking Co. v. Riley County Bank, 30 Kan. 163, 1 Pac. 506; Leary v. Blanchard, 48 Me. 269; Lawrance v. Russell, 77 Pa. St. 460; Freeman's Nat. Bank v. National Tube Works, 151 Mass.

99. Neg. Inst. L. (N. Y.), § 67. 413, 24 N. E. 779.

subsequent indorsees or transferees can only succeed to the rights of the person to whom the indorsement has been restrictively made.1

§ 61. Qualified indorsement.

a. In general.—A qualified indorsement differs from a restrictive indorsement in that the former does not in any way affect the negotiability of the instrument.5 The only result of such an indorsement is to restrict and limit the liabilities of the indorser as imposed by the general principles of the commercial law. An indorsement without recourse transfers the whole interest of the indorser in the note, and to this extent has exactly the same effect as a general indorsement. By such an indorsement the interest of the indorser in the note is transferred but he is not subjected to the liabilities of a general indorser. By such an indorsement the

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4. Treuttel v. Barandon, 8 Taunt. court said: "It was stated in the (Eng.) 100; Lloyd v. Sigourney, 5 argument for the defendant that this Bing. (Eng.) 531; Sweeney v. Easter, note was indorsed without recourse, 1 Wall. (U. S.) 166. from which it was contended that the indorsee was to be regarded as the agent of the indorser, to collect it for his use. This, if it was so indorsed, is not a just conclusion. Such an indorsement transfers the whole interest, and the clause "without recourse,' merely rebuts the indorser's liability to the indorsee and subsequent holders. It has indeed been sometimes considered that this clause, with other circumstances, tends to show that the note was not indorsed for value, and in the usual course of business, giving the indorsee an absolute title, without set-off, or such other defense as the maker might have, if sued by the promisee. But in the present case, if the defendant had any such set-off, or other defense as against the promisee, it would be fully open to him, not only because the note was indorsed without recourse, but because it was indorsed after it had been long overdue." See also Seeley v. Reed, 28 Fed. 164; MacIntire v. Preston, 10 Ill. 48; Chase v. Hathorn, 61 Me. 505; Keyes v. Waters, 18 Vt. 479.

Assignment by bank for benefit of creditors. Where a bank, to which drafts or checks have been sent for collection, makes a general assignment for the benefit of its creditors, its assignee does not acquire any title to such paper; and if the collections made thereon by collecting agencies are paid to him, he is answerable for the amounts thereof to the owners of such drafts and checks, and is not relieved from liability by the fact that he paid out such moneys in good faith, and as authorized by the court having jurisdiction over him. National Butchers & Drovers' Bank v. Hubbell, 117 N. Y. 384, 22 N. E. 1031, 15 Am. St. Rep. 515. And it was also held in this case that an assignee for the benefit of creditors can acquire no better title to a draft or check indorsed to his assignor for collection, than the latter had; and if he disposes of or pays out paper or money, though in good faith, and not under the order of the court, to which his assignor had no title, he is answerable to the owner thereof.

5. Story on Promissory Notes, § 146; Rice v. Stearns, 3 Mass. 225, 3 Am. Dec. 129.

6. Effect of indorsement without recourse. In the case of Richardson v. Lincoln, 5 Metc. (Mass.) 201, 204, the

7. Negotiability not affected by qualified indorsement. In the case of Rice v. Stearns, 3 Mass. 225, 3 Am. Dec. 129, the court said: "Another point of some importance arises, which involves the question, whether, by this restricted indorse

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indorser is liable in the same way and to the same extent as is a transferrer of a note, the title to which will pass by delivery alone; unless otherwise agreed, the indorser impliedly warrants that the paper is genuine; that it is of the kind or description it purports to be;10 that the parties to it are sui juris and capable of contracting; that it has not been paid, and that he has done nothing and will do nothing to prevent the transferee from collecting it;12 and he is liable for any fraud practiced by him in the transfer. 13

b. How made.

The usual form of making a qualified indorsement is by the use of the words "sans recourse," without re

ment, the property of the note passed to the indorsee so that he may sue upon it in his own name. If the restriction applied to the quality of the contract so as to render a negotiable instrument no longer negotiable, there would be some difficulty in allowing, consistently with legal principles, an indorsement of this effect to operate as a transfer of the note. But this is not the effect of the restriction; the note remains negotiable in the hands of the indorsee, although he has no remedy against the indorsee; and in whose hands so ever the note may come, the maker is still liable, according to the terms of his original contract, to pay to the promisee, or his order." See also Richardson v. Lincoln, 5 Metc. (Mass.) 201; Craft v. Fleming, 46 Pa. St. 140; Watson v. Cheshire, 18 Iowa, 202, 87 Am. Dec. 382; Merrill v. Hurley, 6 S. D. 592, 62 N. W. 958, 55 Am. St. Rep. 859. 8. Watson V. Cheshire, 18 Iowa, 202, 87 Am. Dec. 382; Dayton v. Tillorton, 39 Iowa, 404; Dumont v. Williamson, 18 Ohio St. 515, 98 Am. Dec. 186.

9. Jones v. Ryde, 1 Marsh. (Eng.) 157, 5 Taunt. (Eng.) 489; Fuller v. Smith, Ryan & M. (Eng.) 49, 1 Car. & P. (Eng.) 197; Aldrich v. Jackson, 5 R. I. 218; Lyons v. Miller, 6 Gratt. (Va.) 427, 52 Am. Dec. 129; Morrison v. Currie, 4 Duer (N. Y.), 79.

10. Allen v. Pegram, 16 Iowa, 163, in relation to illegal bank stock. And see Gompertz v. Bartlett, 2 El. & B. (Eng.) 849, 24 Eng. L. & Eq. (Eng.) 156, where the vendor of a bill was held liable though he did not put his name on it.

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Lobdell v. Baker, 1 Metc. (Mass.) 193, 35 Am. Dec. 358; Jones v. Crosthwaite, 17 Iowa, 393.

12. Eaton v. Mellus, 7 Gray (Mass.),

566.

13. Watson v. Cheshire, 18 Iowa, 202, 87 Am. Dec. 382, citing Welch v. Lindo, 7 Cranch (U. S.), 159; Epler v. Funk, 8 Pa. St. 468, 469; Prettyman v. Short, 5 Harr. (Del.) 360; Waite v. Foster, 33 Me. 424.

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Genuineness of signatures.- While the words "without recourse accompanying an indorsement clearly indicate that the party making the transfer does not intend to assume the position of an unconditional indorser, or to incur any liability if the note is not paid at maturity upon due demand, or even if all the parties to the paper should prove to be wholly insolvent, we think they cannot be construed as importing more than this. At least they do not divest such indorser of his character as a vendor of the note, nor exempt him from the liabilities arising from a sale and transfer by delivery, where the note is capable of being thus transferred. In such a case, then, there is an implied warranty on the part of the vendor that the note is not forged — that it is in fact what it purports on its face to be. Dumont v. Williamson, 18 Ohio St. 515, 98 Am. Dec. 186.

Liability as vendor.-See also Bevan v. Fitzsimmons, 40 Ill. App. 108.

Individual contract. Where the payee of a note indorses it without recourse, it is his individual contract of indorsement, and a subsequent indorser cannot take advantage of it. Doom v. Sherwin, 20 Colo. 234, 38 Pac.

11. Theall v. Newell, 19 Vt. 202; 56.

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course," or "without recourse to me." Other words, however, showing the same intent will be sufficient; as a transfer of "all my right and title in the within note to be enjoyed in the same manner as may have been by me;" or "I order the contents of this note to be paid to M. R. at his own risk,' or "Indorser not holden." 18 If it be the intent of the parties that an indorsement should be without recourse to the indorser, such intent should be clearly expressed in the indorsement itself, for, as against a subsequent bona fide holder without notice, the liability of a person who has indorsed unqualifiedly in full or blank cannot be altered by evidence that there was a parol agreement that the indorsement should be without recourse.17 It has been held that a charge to a jury that the words without recourse must be written in such a manner that they could be read by a man of ordinary ability and understanding in order to exonerate the indorser, was errone

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14. Hailey v. Falconer, 32 Ala. 536. 15. Rice v. Stearns, 3 Mass. 225, 3 Am. Dec. 129.

16. Ticonic Bank v. Smiley, 27 Me. 225, 46 Am. Dec. 593; Hankerson v. Emery, 37 Me. 16.

17. Dale v. Gear, 38 Conn. 15, 9 Am. Rep. 353; Lee v. Pile, 37 Ind. 107, 110; Dolittle v. Ferry, 20 Kan. 230, 27 Am. Rep. 166; Hill v. Shields, 81 N. C. 259, 31 Am. Rep. 299; Martin v. Cole, 104 U. S. 30.

Intent to limit liability should be clearly expressed. In the case of Doolittle v. Ferry, supra, the court says: "If a transfer of title without assumption of liability is sought, equally apt and well-known words are at hand.

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law has attached certain implications, those implications should be as conclusive upon all the parties as though the full contract were reduced to writing." And the court also quotes from the opinion in the case of Dale v. Gear, 38 Conn. 15, 9 Am. Rep. 353, as follows: "But this plea (that regular indorsement was without recourse) shows no agency, trust, equitable relation, or equity connected with an antecedent transaction constituting a consideration for the agreement, or which would justify a court of equity in interfering to prevent an enforcement of the contract of warranty which the law implies. It presents a naked case of an attempt to prove by parol, that a clear 'Without re- and unambiguous contract of warranty the law furnishes such apt, brief, and is not such, and to contradict it in well-known expressions for making the indorsement accomplish exactly what the parties may desire, wise policy demands that each form of indorsement should conclusively carry with it the liability which it implies. There are no instruments concerning which it is more important that the rules should be clear, settled, and conclusive than note, that the indorser shall not be negotiable paper. Such paper subserves an invaluable purpose in business transactions, and should tell upon its face the whole story of its obligations. Where for convenience, and to facilitate business, certain short forms and expressions are used, to which the

course' relieves the indorser. Where

terms to turn an indorsement with

out restriction, before maturity, into a restricted indorsement. Such a plea cannot be sustained without a violation of essential principles."

As between the original parties, it has been held that an agreement, made at the time of an indorsement of a

liable thereon, but only indorses to transfer title of the note, operates to render the indorsement equivalent to an indorsement without recourse. Davis v. Brown, 94 U. S. 423, 24 L. Ed. 204; Johnson v. Williard, 83 Wis. 420, 53 N. W. 776.

ous.18 And where a firm was discontinued, and during the adjustment of its affairs, was succeeded by a new firm of the same name as the old, of which the defendant was a member, and he indorsed a note with the words "old firm in liquidation," it was held not to be an indorsement without recourse.

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c. Statutory provision.- The Negotiable Instruments Law provides that: "A qualified indorsement constitutes the indorser a mere assignor of the title to the instrument. It may be made by adding "to the in lorser's signature the words without recourse' or any "words of similar import. Such an indorsement does not impair "the negotiable character of the instrument." 20 The English Bills of Exchange Act provides that "the drawer of a bill, and any indorser, may insert therein an express stipulation (1) negativing or limiting his own liability to the holder." 21

§ 62. Conditional indorsement.

a. In general.-Story defines a conditional indorsement as one which involves some fact or event, upon the occurrence of which the validity of the indorsement is ultimately to depend, and which is either to give effect to it, or to avoid it; and it may be either a condition precedent or a condition subsequent.22 A conditional indorsement on the back of a note does not affect its negotiability; its only effect is to give notice of the consideration to subsequent holders.23 As has already been stated, if the instrument has a

18. Hayden v. Strong, 23 Hun (N. Y.), 527.

19. Fassin v. Hubbard, 55 N. Y. 465.

20. Neg. Inst. L. (N. Y.), § 68. For the same section in the statutes of other States see Appendix.

21. English Bills of Exchange Act, 1882, § 16 (1).

22. Story on Promissory Notes, § 149.

Chitty on Bills and Notes (12th Am. ed.), p. 268 has the following: "It is competent also for an indorser to make only a conditional transfer of the bill; and, therefore, if the payee of a bill annexes a condition to his indorsement before acceptance, the drawee who afterward accepts it is bound by the condition; and if the terms of it be not performed, the property in the bill reverts to the payee and he may recover the sum payable in an action against the acceptor."

23. Tappen v. Ely, 15 Wend. (N. Y.) 362.

Conditional indorsement does not affect negotiability. In the case of Upham V. Prince, 12 Mass. 14, the payee of a negotiable note indorsed it, "I guarantee the payment of this note within six months." The court held that the note did not lose its negotiability by such an indorsement, any more than it would if it had been indorsed with the words "Without recourse to the indorser," which is a common form of an indorsement where the indorser does not intend to remain liable. See also Blakey v. Grant, 6 Mass. 386.

A distinction should be made between an indorsement upon a note made by the indorser in transferring it, and a memorandum attached to a note at the same time that the note is executed It has been held that a memorandum upon a note, made

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