The order of time of the indorsements is presumptively that of the succession of the signatures upon the instrument; the drawer in the case of a bill of exchange or a cheque Order of time : being treated as a first indorser. But the pre- order of names sumption from the succession of signatures is not not conclusive. conclusive; and evidence is admissible between the parties to the transaction to show the actual order of liability, whether by showing that a prior signature in the written succession was in fact later than one or more following it, or by showing some special agreement between the indorsers.1

§ 7. NATURE OF THE CONtract.

The contract unmodified of the indorser of an inland bill of exchange, or of a promissory note, or of a cheque, is that he will pay to the holder the sum named in the paper upon the following conditions precedent, where presentment is for payment: (1) Due presentment and demand; (2) Due notice of dishonor. Of a foreign bill of exchange: (1) Due presentment and demand; (2) Due protest; (3) Due notice of dishonor.

Where presentment of a bill of exchange is for acceptance, and acceptance is necessary, the contract of an indorser of an inland bill is for payment upon the following conditions precedent: (1) Due presentment and demand; (2) Due notice of dishonor. Of a foreign bill: (1) Due presentment and demand; (2) Due protest; (3) Due notice of dishonor. Where acceptance is not necessary, then, in case of due presentment for acceptance, of an inland bill, due notice of dishonor; of a foreign bill, due protest and due notice of dishonor.2

All this leads to a consideration of the steps necessary to fix

1 Bank v. Layne, 101 Tenn. 45; Morrison Lumber Co. v. Lookout Mountain Hotel Co., 92 Tenn. 6; Blackmoré v. Granberg, 98 Tenn. 277; Moore v. Cushing, 162 Mass. 594; Ewan v. Brooks-Waterfield Co., 55 Ohio St. 596; Castle v. Rickey, 44 Ohio St. 490. See N. I. L. § 75.

2 On the nature of the contract of anomalous indorsement, see ante, p. 46. Where the holder of a bill of exchange drawn in a set indorses two or more of the parts to different persons, he is liable on every such part, and every indorser subsequent to him is liable on the part he has himself indorsed as if such parts were separate bills. N. I. L. § 187.

the indorser's liability, transforming it from a conditional to an absolute obligation. But there is another subject which may properly be disposed of first.

Proof of prior signatures: admission of genuineness.

§ 8. INCIDENTS OF THE CONTRACT.

As the indorser undertakes to pay on performance of the conditions precedent named in the last section, it follows that in an action against an indorser it is not necessary for the plaintiff to prove the genuineness of prior signatures, or of the promise or order itself which he has indorsed, or the existence, capacity, or authority of the prior parties to contract. It was usual in former times to say, accordingly, that the indorser by his indorsement admitted such genuineness, existence, capacity, and authority; the admission being conclusive in favor of a holder of the instrument in due And that is still the rule in England, under the Statute, so far as the Statute goes.2

course.

1

But without authority of any custom it has for a long time Warranty of come to be common for courts to say that indorsegenuineness, ment is a waranty of the supposed facts, genuineness, existence of the parties, and their capacity and authority to contract as they appear to have done. Obvi

etc. the Statute.

1 See among other cases State Bank v. Fearing, 16 Pick. 533; Glidden v. Chamberlain, 167 Mass. 486, 494; Coggill v. American Bank, 1 Comst. 113; Bank of Commerce v. Union Bank, 3 Comst. 230; Braithwaite v. Gardiner, 8 Q. B. 473; Smith v. Marsack, 6 C. B. 486; Barlow v. Bishop, 1 East, 432.

2 Bills of Exchange Act, § 55, (2): The indorser... is precluded from denying to a holder in due course the genuineness and regularity in all. respects of the drawer's signature and all previous indorsements'; also 'from denying... that the bill [or other instrument] was at the time of his indorsement a valid subsisting bill, and that he had then a good title to it.' The drawer of a bill is precluded from denying to a holder in due course the existence of the payee and his then capacity to indorse.' Id. § 55, (1).

3 Dale v. Gear, 38 Conn. 15; Willis v. French, 84 Maine, 593; Prescott Bank v. Butler, 157 Mass. 548, 550; Erwin v. Downs, 15 N. Y. 575; Lennon v. Grauer, 159 N. Y. 433 (indorsement contracts for genuineness); Crosby v. Wright, 70 Minn. 251; McKleroy v. Southern Bank, 14 La. An. 458; Birmingham Bank v. Bradley, 103 Ala. 109. See also First National Bauk v. First National Bank, 58 Ohio St. 207; Mechanics' Bank v. Valley Packing Co., 70 Mo. 200; Northwestern Bank v. Bank of Commerce, 107 Mo. 402.

ously this is not a necessary result of the indorser's conditional undertaking to pay; and, in the absence of plain public policy calling for it, the existence of such a warranty, taking the word in its ordinary sense, should depend upon the custom. The judicial dicta (and generally the language of the courts in the matter is nothing more) have however become so common as to create the belief that warranty is an incident of indorsement; and the Statute at last has confirmed the belief and turned a number of loose and unnecessary dicta into law, while at the same time it follows the custom in regard to the incidents of the contracts of the drawer and of the acceptor, treating their acts as admissions merely.2

The Statute accordingly declares' that indorsement without qualification warrants' in favor of subsequent holders in due course that the instrument is genuine, and in all respects what it purports to be; that the indorser has a good title to it; that all prior parties had capacity to contract; and that the instrument at the time of indorsement was valid and subsisting; — all this 'in addition' to the undertaking of indorsement of its own inherent force according to the law merchant."

Uncertainty of

difficulties.

It is not quite clear however whether the Statute uses the word 'warrants' in its proper legal sense, or in some secondary sense which would make it mean that indorsement is a conclusive admission of the things named, in the Statute: favor of holders in due course. If that be its meaning, the only criticism to be made is that it does not say so, and hence perpetuates instead of removing a doubt. But the fact that the American Statute departs, at this point, from the English Statute, on which it is based, which indeed it generally follows ipsissimis verbis, and that it makes a distinction in terms between the incidents of indorsement and those of drawing and accepting, leads to the inference that the

1 N. I. L. § 73. That the language of warranty is loosely used in the cases is seen by the fact that courts of the same State speak of the act now as an admission, now as a warranty. See Glidden v. Chamberlain, 167 Mass. 486, 494 (admits'); Prescott Bank v. Butler, 157 Mass. 548, 550 (' warrants '). 2 Id. §§ 68, 69. 3 Id. § 73.

word (warrants') is used in its primary sense. Something certainly is meant beyond indorsement according to the legal import of that act, for the indorser warrants,' 'and in addition he engages,' etc.

Assuming that the word is used in its proper legal sense, some difficulties cannot escape notice. The warranty,' if broken at all, is broken when made; for in the case supposed some prior indorsement for instance was not genuine, or some prior party was not competent to contract. Is there then a right of action by reason of the breach of warranty regardless of the fact that payment of the instrument may not be due at the time, and hence without the steps (presumptively) required for fixing the indorser's liability? What does 'in addition' mean? Do the words mean that there are two separate and distinct contracts? That would be their natural meaning, and if that is their real meaning then the indorser becomes liable absolutely for breach of warranty, or conditionally upon his indorsement, at the holder's election. But it is hard to believe that an innocent indorser can be held to pay where the steps prescribed by the law merchant have not been taken.1 Perhaps the way out of the difficulty is to construe the words 'in addition' (with what follows) as a proviso in regard to the indorser's liability for breach of the warranty; thus making him liable on his warranty only after the ordinary steps for fixing his liability as an indorser. That however would put the warranty, so far, virtually to silence.

clear.

Whatever be the meaning of the Statute, it is still true that the indorser cannot allege want of genuineness or capacity, or the What remains like, of prior signatures or parties. The Statute certainly has not cut down the rule of the unwritten law merchant. The rule is clear to the extent named. For example: The defendant is indorser and the plaintiff indorsee in due course of a promissory note payable to the order of A, and purporting to bear A's indorsement. The steps for fixing the defendant's liability have been taken. But it is

1 This might of course be after the indorser had been discharged from liability by omission of the steps, as well as before maturity.

conceded by the plaintiff, if the evidence is admissible against him, that the supposed indorsement by A is a forgery, of which however both parties were ignorant at the time of the defendant's indorsement. The evidence is not admissible, and the defendant is liable notwithstanding the forgery.1 Again: The defendant is indorser and the plaintiff indorsee in due course, of a promissory note, executed by a person incompetent to contract to the plaintiff's knowledge when he took the note. The defendant's liability has been duly fixed; but he now sets up the incapacity of the maker. That is no defence.2

It should be noticed that the warranty of the Statute is made negotiable, like the indorsement itself; though warranty, being a contract of the common law, is not The warranty naturally negotiable.

is negotiable.

impeach the

Another question of a kindred nature has given the courts trouble; to wit, Does this warranty or admission by the indorser of the validity of the paper as it stands disqualify Competency of such indorser to give testimony to the invalidity of indorser to the paper in a suit against (not the indorser, but) instrument. some prior party? Such party may of course set up the invalidity of his own contract against a holder having notice; but can he produce the indorser as a witness? In the time of Lord Mansfield the question was answered in the negative; no person, it was held, could be permitted to give testimony to invalidate an instrument to which he had given his signature; having given a credit to it, he could not afterwards discredit it.3

But the rule was not satisfactory to the English courts, and some twelve years later, after narrowing it to negotiable instruments, they overturned it, and held the indorser competent notwithstanding his indorsement. In this country there is a

1 State Bank v. Fearing, 16 Pick. 533; Cases, 91.

2 Erwin v. Downs, 15 N. Y. 575; Cases, 93. See Lennon . Grauer, 159 N. Y. 433. The decision in the two cases would no doubt be the same

under the Statute; the warranty may be used by way of estoppel as well as

a contract.

• Walton v. Shelley, 1 T. R. 296.

• Jordaine v Lashbrooke, 7 T. R. 601.