This distinction runs through various phases of the Civil Law. Ordinary transactions are governed by the Civil Code. But the Code of Commerce is for mercantile transactions." Often, however, the line of distinction becomes faint, and it is not uncommon for courts of last resort to divide on the question, whether a particular transaction is mercantile or civil."

Mr. P. J. Eder, in his monograph, says that the Spanish Code of Commerce

"discards the necessity of the parties being merchants in order to give the bill the character of commercial paper."

99 49

But that is not the way the Code operates in Cuba. The practitioner already quoted observes:

"The Supreme Court, by decisions of December 12, 1903, August 5, 1904, May 7, 1907, November 11, 1914 and many others, has held that a promissory note given, or received, by a person not a merchant, or one issued as a result of a transaction not commercial, shall not be considered a negotiable instrument under the Code of Commerce, and therefore may not be utilized as the basis of an execution on promissory notes, even in instances in which the note stated on its face that the person obligating himself to the payment thereof, had received the money in a commercial transaction and would use it exclusively in commercial operations; and have allowed defendant to allege and prove that the operation was civil and not commercial." "

50

The Uniform Negotiable Instruments Law knows nothing of this artificial distinction, and the adoption of that law would thus remove a fruitful source of uncertainty in business and litigation.

47 Code of Commerce, Art. 2.

45 Three differing opinions on this question were expressed in Compania Agricola v. Reyes, 4 Philippine, 2. See also Banco Espanol v. Fan Tongco, 13 Philippine, 629.

49 Uniformity of Laws of Bills of Exchange, 7.

50 Dr. A. W. Kent, American Chamber of Commerce Bulletin IV, No. 7, p. 15.

2. Negotiability. "Of the innate characteristics of the bill of exchange," writes Mr. George J. Eder, "perhaps the most important is its negotiability, and it is precisely in this connection that the Anglo-American and Latin codes are most at variance. Under the latter as under the Hague Regulation, the possessor of a bill of exchange is deemed the rightful owner if he can show title thereto by an uninterrupted series of endorsements, even though one or more of them be proved forged or otherwise defective, and he can be compelled to surrender the draft to the rightful owner only if it be established that he obtained it in bad faith or under circumstances showing gross negligence. Under Anglo-American law, similar provisions obtain with regard to instruments to bearer, bank notes, etc.; but a bill drawn to the order of a designated person is transferable solely by endorsement, and inasmuch as a forged or unauthorized signature is deemed wholly inoperative no title can be conveyed thereby. The currency of a negotiable instrument under this doctrine derives from the fact that each subscriber thereto warrants unconditionally the genuineness and validity of the instrument, and of all signatures appearing thereon. It is widely held by legislators in other countries that this guaranty imposes upon the endorser or payer of a draft the impossible obligation of examining and verifying the whole history of every bill of exchange which may be received in the course of business, and that this would be in effect an insuperable obstacle to the free negotiation and currency of such instruments. The fallacy of this argument is apparent. If a bill of exchange be lost or stolen, and the endorsement forged, it is clear that one or two innocent parties must suffer for the guilt of a third, either the person losing the bill or a subsequent holder in good faith and for value.

Now it is obvious that a draft may be lost in the mails or under other circumstances where the owner is powerless to prevent its loss, or it may be stolen and the endorsement forged, or the endorsement may be obtained through duress, and it would seem unjust, and abortive to commerce, to expect the owner to assume liability thereby.

On the other hand, it works no hardship to insist that a person who parts with a valuable consideration in exchange

for a draft or note, without fully assuring himself of the responsibility of the person negotiating the instrument, does so at his peril. It is not required that he examine further into the history of the draft, nor that he be familiar with the signature of all prior parties to the instrument; the preceding endorser vouches unqualifiedly for the bill in every respect. A person negotiating a draft for a stranger or person of dubious responsibility is guilty of the grossest negligence, and if the bill or an endorsement thereon, be forged, he cannot be considered a holder in due course notwithstanding that he took the bill in good faith, before maturity, and for a valuable consideration. This principle of absolute warranty and liability is logical, equitable and practical. Far from restricting the free circulation of bills of exchange, it provides an incentive for their use. The person drawing or endorsing a draft to the order of a particular person has a positive guaranty that only that person, or someone designated by him, can obtain payment. Accounts may be settled by check in any state of the Union without fear of loss or theft in the mails or otherwise, and a possibility of being forced to make a second disbursement to the rightful creditor. It is impossible that any large use be made of the facilities and conveniences offered by drafts, notes, checks and certified checks so long as the legitimate parties to the instrument are afforded no protection by law, and so long as a thief can convey as incontestable a title as could a rightful owner. If Cuba is to have the modern legislation which her high rank in the commercial world so truly merits, this principle of the common law must be incorporated into her code."

3. Effect of Execution. Is the bill or check an equitable assignment of the drawer's funds which binds the drawee? Or is the drawer entitled to revoke it before payment? The Spanish law answers that

"the check must be considered as an instrument to bearer, who is not obliged to prove the legality of this title or of its acquisition. The drawer is obliged to guaranty payment of its value, and, consequently, if, after drawing it, he revokes the order of payment to the person to whom he delivered it, he must repay the

value thereof to whomsoever may hold it in good faith." "

51

But the Uniform Negotiable Instruments Law, settling a controversy among American jurisdiction, declares:

"A bill of itself does not operate as an assignment of the funds in the hands of the drawee available for the payment thereof, and the drawee is not liable on the bill unless and until he accepts the same." "

In defending this position at the Hague Conference of 1912, Dr. Sichermann, an Hungarian delegate, replying to the Austrian technical delegate, Dr. Hammerschlag, said, in part:

"in practice no danger results from the revocation.
But
let us suppose that the danger really
exists. Would the delaying of the effect of the revo-
cation until the time limit for presentment has expired
really avert the danger of an abuse or of a crime re-
sulting from the withdrawal of the cover? Not at all,
because even if the dishonest drawer had provided
sufficient cover when the check was drawn he can with-
draw it before the holder can, by means of another
check,
or by telegraph or telephone
therefore if the drawer wishes to act dishonestly, the
delaying of the effect of the revocation would not safe-
guard the holder
Mr. Hammerschlag de-
clared that in order to make the check popular the
holder must be safeguarded as much as possible; grant-
ed, but
to decide that the revocation shall not
be at once effective is a mistake. We would safeguard
the holder against an imaginary danger while exposing
him to a very real one-because the loss, the theft, etc.,
of the check occurs every day; therefore the provision

Walton, Leyes Comerciales y Maritimas de la America Latina, II, 839 translation by Eder, who adds: "This question is left entirely outside the scope of the Hague Regulations in accordance with Art. 14 of the Convention.

52 Art. 127.

recommended by Mr. Hammerschlag decreases the se-
curity of the holder on the one hand in a greater meas-
ure than it is increased on the other.
Fin-
ally, we are told that there is a contradiction in a pro-
vision which grants to the drawer the right to de-
fraud the holder
This is a misunderstand-
ing, because our proposition does not grant a right to
the drawer; it only gives him permission to make use
of the revocation, and this is very different. If the
law gave a right to the drawer, then he would not be
responsible for having used that right, but when it
is a question of a permission, a possibility, then he
must show that he made proper use of that power, if
thereby he jeopardizes a party interested. There are
provisions quite similar in the German Civil Code, Art.
790, in the Swiss Code, Art. 470; and nobody considers
these provisions as a blow at honesty.""

4. Terms of Payment. The Uniform Negotiable Instruments Law, in defining the degree of certainty required as to time of payment, permits the sum to be made payable "by stated installments."" This fits in well with the proposed measure providing for conditional sales and would enable the vendee to give such a check making the installments to correspond with the sales contract. Such an arrangement would be impossible under the inflexible Code of Commerce.

The foregoing will indicate some of the more important advantages which would accrue by the adoption of the Uniform Negotiable Instruments Law.

And it would seem that any successful efforts toward uniformity must follow along the lines of that law. For, not only are the present Codes of Commerce hopelessly in conflict with each other, but the whole tendency of new American legislation is away from those Codes. We have seen how several Spanish-American countries have already adopted the Uniform Negotiable Instruments Law. And it is significant that other Spanish-American countries which

U. S. Senate Doc. 162 (1913). "Sec. 2 (2).