Page images

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 princip 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.”

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."

[ocr errors]

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:

[ocr errors]
[ocr errors]

“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 revocation until the time limit for presentment has expired really avert the danger of an abuse or of a crime resulting 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 withdraw 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 safeguard the holder

Mr. Hammerschlag declared that in order to make the check popular the holder must be safeguarded as much as possible; granted, 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.

* Art. 127.

recommended by Mr. Hammerschlag decreases the security of the holder on the one hand in a greater measure than it is increased on the other.

Finally, we are told that there is a contradiction in a provision which grants to the drawer the right to defraud the holder

This is a misunderstanding, 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

WU. S. Senate Doc. 162 (1913). * Sec. 2 (2).

[ocr errors]

have recently changed their commercial law, have not adopted the Spanish Code of Commerce; they have turned rather to "the Uniform Regulation and Convention approved at the Hague in 1912

generally and rightly considered the most complete and perfect embodiment of civil law principles as applied to bills of exchange.

Of course the latter never could displace the Uniform Negotiable Instruments Law, and the hope of uniformity seems to lie in the gradual extension of that most successful achievement in Anglo-American Codification.

[ocr errors]

George J. Edor.

[ocr errors]



Part Two

By HUGH Č. BICKFORD, LL. M., (National University), formerly

Editor of The Review and Associate Tax Counsel of the Firm of
Patterson, Teele and Dennis.


Classes of Income

N the preceding article of this series the general nature

[ocr errors]

teenth Amendment to the Constitution, was considered and an historical outline of the development of constitutional law in America, as it has affected the imposition of Federal taxes on such income, was undertaken. Having, therefore, become familiar with the limitations and restrictions upon the power of Congress to tax gains and profits, it is possible to discuss, in detail, the different classes of income which have been made the express objects of taxation in the modern Revenue Acts. These classes are numerous and vastly different in nature and we shall, therefore, find it convenient to discuss them in the order in which they appear in the present law, the Revenue Act of 1926. Section 213 (a) of this Statute provides :

“The term 'gross income' includes gains, profits, and income derived from salaries, wages, or compensation for personal service (including in the case of the President of the United States, the judges of the Supreme and inferior courts of the United States, and all other officers and employees, whether elected or appointed, of the United States, Alaska, Hawaii, or any political subdivision thereof, or the District of Columbia, the compensation received as such) of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the

« PreviousContinue »