That since the Superior bank charged interest until the collection was made, and charged the drafts back if not paid, it was not an owner or holder in due course, and the same relation as to the drafts being deposited for collection existed between the Superior bank and plaintiff. (3) That at the time the drafts were received the Superior bank was insolvent, which was known to plaintiff and to the officers of the Superior bank, but unknown to defendants, and that when these conditions became known defendants rescinded the transaction. The action was tried to the court without a jury, which found generally for the defendants and rendered judgment of dismissal. Plaintiff appeals. * * * The question for determination is whether the draft was received by the plaintiff for collection, the title and ownership remaining in the Superior bank, or, did plaintiff become a holder in due course by the indorsement and receipt of the draft and the crediting of the Superior bank with the amount thereof? Defendant contends that the indorsement is restrictive, and shows that the title did not pass; that since the custom was that interest should be charged between the date of the receipt of the paper and the receipt of the money in payment thereof, and because if not paid it was the custom to charge the amount and protest fees back to the account of the Superior bank, the draft was taken for collection only. Is the indorsement restrictive? Whatever may have been held before the enactment of the Negotiable Instruments Act, it is clear that this question must be determined by the provisions of that statute. * * There is nothing on the face of this indorsement which prohibits the further negotiation of the instrument or constitutes the indorsee the agent of the indorser, or vests title in the indorsee in trust for the use of some other person, and hence, by the most elementary principles of statutory construction, the plain meaning of the language must be observed, and it must be held that the indorsement was not restrictive. In Bank of Indian Territory v. First Nat. Bank, 109 Mo. App. 665, 83 S. W. 537, a case which was decided before the Negotiable Instruments Act went into effect in that state, it was held, without any discussion of the reasons, that an indorsement such as this was a restrictive indorsement. In three cases decided in that state after the act was in force (National Bank of Rolla v. First Nat. Bank, 141 Mo. App. 719, 125 S. W. 513; National Bank of Commerce v. Mechanics' American Nat. Bank, 148 Mo. App. 1, 127 S. W. 429; Citizens' Trust Co. v. Ward, 195 Mo. App. 223, 190 S. W. 364) the same ruling was made; but in none of these cases was the language of the statute considered, and the holding is placed upon the authority of the first case, which, as we have seen, was decided before the act took effect. These cases are not authority upon the proposition as to whether such an indorsement is restrictive under the provisions of the act. Furthermore, any bank receiving a draft with such an indorsement has the right to again indorse it in blank or payable to any particular bank or person. This, of course, it would have no power to do if the indorsement was restrictive. If, however, the words "for credit," "for account," "for collection and return," had been added, the character of the indorsement would have been changed entirely, and it would have been restrictive, showing upon its face that the indorsee bank took it only as a collecting agent, and not as a holder for value. * * In First Nat. Bank of Belmont v. First Nat. Bank of Barnesville, 58 Ohio St. 207, 50 N. E. 723, 41 L. R. A. 584, 65 Am. St. Rep. 748, it is pointed out that the practice of indorsing checks "for collection," "for account" had become almost universal, but when it was decided. by the Supreme Courts of New York and Missouri that the drawee bank could not recover back money paid upon a forged draft in the one case from a collecting bank, or in the other from the bank owning the draft, "it startled the banks located in large cities, and awakened them to the dangers attending the payment of such drafts or bills, and the result was that in the year 1896, the clearing house in the city of New York adopted a rule to the effect that its members should not send through the exchanges any paper having any qualified or restrictive indorsements. such as 'for collection,' or 'for account of,' unless all indorsements were guaranteed by the bank sending such paper. This action was soon followed by the clearing houses in other cities, and in some of them all indorsements are required to be either in blank, or 'pay to or order.' By this action of the clearing houses, indorsements 'for collection' or 'for account of' have fallen into disuse, and the banking business of the country is now done, almost universally, upon unrestricted indorsements." We conclude then that the indorsement by the Superior bank was general, and not restrictive. Does the fact that, if protested, the Lincoln bank was entitled to charge back the amount of the draft and protest fees constitute it merely an agent for collection and not a holder in due course? While there is some conflict in the authorities, the better view is that the deposit of a check or draft in a bank with a general indorsement and the giving of credit for its amount by the bank to the depositor, in the absense of other evidence as to the intention of the parties, passes the title to the bank, and makes it a holder for value, entitled to recourse on prior indorsers upon the protest of the paper. In other words, when such a state of facts is proved there is a prima facie case made that the title has passed, and the fact that it, the receiving bank, may charge back a protested draft does not .affect the relation. In Higgins v. Hayden, 53 Neb. 61, 73 N. W. 280, before the enactment of the Negotiable Instruments Act, it was held that a bill of exchange drawn to the order of a bank by its customer, the amount of which was placed to his credit, and on which he drew, and the bank paid checks, became the property of the bank, such conduct being inconsistent with the theory of a bailment for collection. * * * That credit to the drawer was entered by the Superior bank in a passbook in which was printed, "This bank in receiving out of town checks and other collection acts only as your agent and does not assume any responsibility beyond due diligence on its part," cannot affect the right of the plaintiff to recover in this case. The fact that the drawers put the paper in circulation, and that the Superior bank was thus able to negotiate it as its owner and holder, received full credit for it, the plaintiff bank having no knowledge of any infirmity, makes it a holder for value as defined in section 5233, Rev. St. 1913. The Minnesota case (In re State Bank, 56 Minn. 119, 57 N. W. 336, 45 Am. St. Rep. 454) is not in conflict with these views, since in that case the controversy was between the original parties, and not between a holder for value without notice and the drawer, and such. was the relation between the parties in the other cases cited in which a printed notice was on the passbook. * * *The fact that a custom between banks and grain dealers is that when any draft bearing a general indorsement was unpaid it was protested and either charged back or paid by the drawer is an argument in favor of the plaintiff's position and not in favor of the defendant because such a custom clearly recognizes the liability of the drawer to pay a dishonored draft to the indorsee who has failed to collect the same. Even though by the custom between the drawer and the Superior bank, the drafts were taken only for collection, there is absolutely no proof in the record that the plaintiff had any knowledge whatever of this state of affairs. It received the draft with the general indorsement and credited the Superior bank with the amount in its deposit account which was drawn upon from day to day. Under section 5379, Rev. St. 1913: "The drawer by drawing the instrument admits the existence of the payee and his then capacity to indorse; and engages that on due presentment the instrument will be accepted or paid, or both, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it. But the drawer may insert in the instrument an express stipulation negativing or limiting his own liability to the holder." The benefit of this liability in case of dishonor was transferred to plaintiff by the general indorsement. When the Superior bank closed its doors, its assets became the property of the receiver for the purpose of liquidating its affairs. The rights of its receiver against the plaintiff or plaintiff's right to apply the fund in its hands to the payment of the debt of the Superior bank are not involved in this case, since the receiver is not a party to the suit and the case must be determined without regard to this fund. That the bank was in fact insolvent at the time of the deposit, under the circumstances of this case, does not seem to be material: First, because plaintiff bank took the draft in good faith for value without notice or knowledge of any infirmity in the title; and, second, because the drawers between the time of the deposit of the first drafts and the closing of the bank drew out over $4,000 more than the credit given and within a few hundred dollars of the total amount deposited within this period, leaving the account of the drawers substantially as it was before the drafts were deposited. Under the provisions of the Negotiable Instruments Act and the evidence in the case the defendants are liable as drawers for the full amount of the drafts and protest fees. The judgment of the district court is reversed, and the cause remanded, with directions to enter judgment for the amount due. SECTION 8.-NEGOTIATION BY QUALIFIED N. I. L., Section 38. A qualified indorsement constitutes the indorser a mere assignor of the title to the instrument. It may be made by adding to the indorser's signature the words "without recourse" or any words of similar import. Such an indorsement does not impair the negotiable character of the instrument. The indorsement here referred to is commonly called the indorsement "without recourse." In form it consists in adding the words "without recourse," or words of similar import, either to a blank or special indorsement. The effect of the indorsement "without recourse" is to limit the liability of the indorser. The extent to which the liability is so limited is a subject in which we are not here interested. This matter will be taken up in the chapter dealing with the liability of indorsers. At this point we are interested in the indorsement "without recourse," only in so far as it is necessary to note, first, that it may be added to a blank or to a special indorsement and that the addition does not affect the manner of negotiating the instrument, for the last sentence of this section states that such an indorsement does not impair the negotiable character of the instrument. If the words were added to a blank indorsement the instrument is still negotiated by delivery. If added to a special indorsement the instrument is negotiated only by the indorsement of the special indorsee. The transferee under either indorsement gets the title just the same as though the words "without recourse" has been omitted, nor do these words prevent such an indorser from being a holder in due course. SECTION 9.—NEGOTIATION BY CONDITIONAL INDORSEMENT N. I. L., Section 39. Where an indorsement is conditional, a party required to pay the instrument may disregard the condition, and make payment to the indorser or his transferee, whether the condition has been fulfilled or not. But any person to whom an instrument so indorsed is negotiated will hold the same, or the proceeds thereof, subject to the rights of the person indorsing conditionally. In form the conditional indorsement is a special indorsement with an added term, illustrated as follows: Pay A., upon condition that (here stating the condition upon which payment is to be made to A.). From a practical standpoint this indorsement is of little importance. It is seldom used. It is to be noted that the condition does not affect the rights of a party who is bound to pay the instrument for he is allowed to disregard the condition and to pay the holder whether the condition has happened or not. The indorsement affects only the rights of the party to whom payment was made. If the condition has not happened, the party receiving payment will hold the money virtually in trust for the conditional indorser. SECTION 10.-TRANSFER OF UNINDORSED PAPER PAYABLE TO THE ORDER OF THE TRANSFEROR N. I. L., Section 49. Where the holder of an instrument payable to his order transfers it for value without indorsing it, the transfer vests in the transferee such title as the transferor had therein, and the transferee acquires in addition, the right to have the indorsement of the transferor. But for the purpose of determining whether the transferee is a holder in due course, the negotiation takes effect as of the time when the indorsement is actually made. It has heretofore been stated that where the instrument is not in form payable to bearer, it cannot be negotiated except by the indorsement of the holder. While this is strictly true the rule does not prevent a disposition of the instrument in some way other than by negotiation. The instrument may still be transferred without the indorsement of the special indorsee. There is no one word that describes the status of such a transferee. He cannot rightly be called an indorsee, but he may be referred to as a transferee of unindorsed paper payable to the order of the transferor. In many respects such a transferee is in just as good a position. as an indorsee occupies, but in some important situations his position is not so strong. Section 49 gives to the transferee of the unindorsed paper the same rights as the transferor had, but no greater rights. The indorsee, if a purchaser for value in good faith before maturity, will be able to enforce the instrument free from most of the defenses which the maker had against the party with whom he dealt. Moreover, the transferee of unindorsed. paper will have greater difficulty in proving his right to the instrument than the indorsee would have because there is nothing on the instrument which indicates that the party in possession is the owner. This section will be referred to again in the chapter dealing with the holder in due course. In the case following, is the court correct in saying that the transferee could acquire only an "equitable title," in the light of the language of section 49 which declares that "the transfer vests in the transferee such title as the transferor had therein"? * * 11 A. L. R. 937.) CAPITOL HILL STATE BANK v. RAWLINS NAT. BANK OF RAWLINS. (Supreme Court of Wyoming, 1916. 24 Wyo. 423, 160 Pac. 117, POTTER, C. J. * However, it is well settled that a negotiable instrument payable to order may be transferred by the payee or holder without indorsement, though in such case the transferee takes only the title and right of the one so transferring it, and does not become the holder in due course, but has only the equitable instead of the legal title. * * And this principle is recognized by the Ne * |