to the statute a person indorsing in blank before delivery to the payee was prima facie deemed to be a second indorser, and hence not liable to the payee, who was supposed to be the first indorser. Bacon v. Burnham, 37 N. Y. 614; Phelps v. Vischer, 50 N. Y. 69. The same rule prevailed in Pennsylvania. Eilbert v. Finkbeiner, 68 Pa. St. 243; Central Nat. Bank v. Dreydoppel, 134 Pa. St. 499. And in Oregon. Deering v. Creighton, 19 Oregon, 118; Cogswell v. Hayden, 5 Oregon, 22. But as the paper itself furnished only prima facie evidence of this intention, it was competent to rebut the presumption by parol proof that the indorsement was made to give the maker credit with the payee. Coulter v. Richmond, 59 N. Y. 478. As the statute fixes the liability in such cases absolutely, parol evidence would now seem inadmissible. This was held to be the effect of the former statute of Connecticut. (Act of 1884, Gen. Statutes, § 1860) which provided that "Blank indorsements of a negotiable or non-negotiable note, by a person who is neither its maker nor its payee, before or after its indorsement by the payee, shall import the contract of an ordinary indorsement of negotiable paper, as between such indorser and the payee or subsequent holders of such paper." Spencer v. Allerton, 60 Conn. 410. But in Kohn v. Consolidated Butter & Egg Co., 30 Misc. (N. Y.) 725, it was said by McAdam, J. obiter: "The true intention of indorsers, as between themselves, can always be shown by oral evidence. To go further and decide that the statute intended to create an incontestable liability against irregular indorsers would be to impute to the legislative wisdom a design repugnant to every notion of judicial procedure, especially in a provision enacted in the interest of law reform."

ILLUSTRATIONS.

Note made by A payable to order of B, indorsed by C, and afterward delivered to B. C is liable as indorser to B.

Note made by A payable to order of himself, indorsed by B, and afterward delivered to C. B is liable as indorser to C.

Note made by A to order of B, indorsed by C before B, but for accommodation of B, and discounted by Bank of X. C is liable as indorser to Bank of X and not to B.

§ 115. Warranty where negotiation by delivery, et cetera. Every person negotiating an instrument by delivery or by a qualified indorsement, warrants (a):

I. That the instrument is genuine (b) and in all respects what it purports to be (c);

2. That he has a good title to it (d);

3. That all prior parties had capacity to contract (e);

4. That he has no knowledge of any fact which would impair the validity of the instrument or render it valueless (f).

But when the negotiation is by delivery only, the warranty extends in favor of no holder other than the immediate transferee. The provisions of subdivision three of this section do not apply to persons negotiating public or corporate securities, other than bills and notes (g).

(a) This, of course, refers only to the implied warranty. An express warranty may be so framed as to exclude all other warranties which would otherwise be implied by the law. Giffert v. West, 37 Wis. 115.

(b) Littauer v. Goldman, 72 N. Y. 506; Whitney v. National Bank of Potsdam, 45 N. Y. 303; Herrick v. Whitney, 15 Johns. 240; Canal Bank v. Bank of Albany, 1 Hill, 287; Coolidge v. Brigham, 5 Metc. 68. But if at the time of the transfer he expressly decline to warrant the genuineness of the instrument no such warranty will be implied. Bell v. Dagg, 60 N. Y. 528. But a general refusal to guarantee will not of itself exclude the implied warranty of genuineness. (Id.) The sale and transfer, for a full and fair price, of a note past due, indorsed in blank by the person to whose order it is payable, implies a warranty by the vendor that such indorsement is valid. Giffert v. West, 37 Wis. 115. The indorsement of a promissory note is a guaranty by the indorser to the indorsee that the prior indorsements on the note and the signature of the payor are genuine, and made by parties authorized to pass the title. McConeghy v. Kirk, 68 Pa. St. 200; Condon v. Pearce, 43 Md. 83; Lambert v. Pack, 1 Salk. 127; Critchlow v. Parry, 2 Camp. 182; Prescott Bank v. Caverly, 7 Gray, 216, 220. See next section.

(c) By the rule of the common law, both in England and in the United States, the doctrine is universally recognized that where commercial paper is sold without indorsement or without express assumption of liability on the paper itself, the contract of sale and the obligations which arise from it, as between vendor and

vendee, are governed by the common law relating to the sale of goods and chattels; and the rule is that in such a sale the obligation of the vendor is not restricted to the mere question of forgery vel non, but depends upon whether he has delivered that which he contracted to sell, this rule being designated in England as a condition of the principal contract, as to the essence and substance of the thing to be sold, and in this country being generally termed an implied warranty of the identity of the thing sold. Meyer v. Richards, 163 U. S. 385. In this case the decision of the Court of Appeals of New York in Littauer v. Goldman, 72 N. Y. 506, is criticised and disapproved. See also Wood v. Sheldon, 42 N. J. Law, 425. But there is no implied warranty by the vendor of a bill that it was drawn against funds or that it was not accommodation paper. People's Bank v. Bogart, 81 N. Y. 101; In re Hammond, 6 De G. M. & G. 699.

(d) Meriden National Bank v. Gallaudet, 120 N. Y. 298, 303.

(e) Littauer v. Goldman, 72 N. Y. 506, 509. One who indorses a promissory note, purporting to be executed by a firm, thereby impliedly contracts that the note was made by the firm in whose name it is executed, and he cannot dispute the fact in an action upon the indorsement. Dalrymple v. Hillenbrand, 62 N. Y. 5. And a second indorser cannot dispute the legal capacity of the payee to indorse on the ground that she was a married woman. Prescott Bank v. Caverly, 7 Gray, 216, 217. So one indorsing the note of a corporation admits its capacity to execute the note. Glidden v. Chamberlin, 167 Mass. 486. But see Southern Loan Co. v. Morris, 2 Pa. St. 175.

(f) Thus, upon the sale of a note there is an implied warranty that it has not been paid. Daskman v. Ullman, 74 Wis. 474. Where an instrument void for usury is transferred without indorsement and without representation as to legality, an action cannot be sustained against the vendor without alleging and proving scienter. Littauer v. Goldman, 72 N. Y. 506. But see Wood v. Sheldon, 42 N. J. Law, 425, and Meyer v. Richards, 163 U. S. 385. And the same rule applies in a case where the principal debtor has become insolvent. Bicknall v. Waterman, 5 R. I. 43; Fenn v. Harrison, 3 T. R. 757; Fydell v. Clark, 1 Esp. 447. An express warranty that proper measures have been taken to charge the indorser, upon the maker's default, is not inconsistent with an implied warranty that the instrument was originally valid. Giffert v. West, 37 Wis. 115.

(g) Otis v. Cullum, 92 U. S. 448. This was an action against

the vendor of municipal bonds payable to bearer, which were afterward declared void because the legislature had no power to pass the acts under which they were issued. It was held that no recovery could be had in the absence of an express warranty. The application of the rule of commercial paper in such cases would work great hardship and much public inconvenience.

§ 116. Liability of general indorser.-Every indorser who indorses without qualification, warrants to all subsequent holders in due course:

1. The matter and things mentioned in subdivisions one, two and three of the next preceding section (a); and

2. That the instrument is at the time of his indorsement valid and subsisting (b).

And, in addition, he engages that on due presentment, it shall be accepted or paid, or both, as the case may be, according to its tenor (c), 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 (d).

(a) This section makes an important change in the law. In National Park Bank v. Seaboard National Bank, 114 N. Y. 28, the Court of Appeals of New York held that where a bank, which had acted merely as a collecting agent, had paid the proceeds of a check over to its principal, the bank making the payment could not recover from the collecting bank upon subsequently discovering that the check had been raised. In this case the check was presented by the Seaboard Bank to the drawee bank through the clearing-house, and hence there was no question as to liability of the Seaboard Bank as an indorser to an indorsee. But in the case of United States v. American Exchange National Bank, 70 Fed. Rep. 232, the United States District Court for the Southern District of New York, proceeding upon principles similar to those relied upon in the New York case, held that the indorsement of a bank to which paper has been indorsed for collection does not import a guaranty of the genuineness of all prior indorsements, but only of the agent's relation to the principal as stated upon the face of the paper, and that in such case the collecting bank was not liable after it had paid the proceeds to its principal, though a prior indorsement was

a forgery. But the statute applies to all indorsers who indorse without qualification; and no exception is made of indorsers to whom the instrument has been indorsed restrictively. Hence a bank indorsing paper forwarded for collection is liable in all respects as an indorser, though the prior indorsement was "for collection" or "for deposit," or otherwise restrictive.

(b) Thus, whether a promissory note made on the Lord's Day can be enforced by a payee against the maker is immaterial in a suit by the indorsee against the indorser, as the latter always warrants the existence and legality of the contract which he undertakes to assign. Prescott National Bank v. Butler, 157 Mass. 548. (c) An indorser of a promissory note which contains a stipulation for a reasonable attorney's fee in case of suit is as much liable for the attorney's fee as for the principal of the note. Benn v. Kutzschan, 24 Ore. 28. See sec. 21.

(d) The indorser has no right to require the holder to sue the maker or drawer, under the penalty of the indorser being discharged in case of non-compliance; and it is his duty to take up the note. Day v. Ridgway, 17 Pa. St. 303. Nor is the holder bound to anticipate and make provision for a breach of the contract. Bartlett v. Isbell, 31 Conn. 297. Parol evidence of an agreement which would vary the legal liability of the indorser under his indorsement is inadmissible. Smith v. Caro, 9 Ore. 278; Eaton v. McMahon, 42 Wis. 484. And while there has been some conflict in the decisions, the sounder doctrine puts all indorsements on substantially the same footing. The contract by a blank indorsement is fixed by law, and should not be rendered uncertain by parol, any more than when written out in full. Charles v. Denis, 42 Wis. 56, 58. This is the rule adopted in the statute, which makes the indorser's obligation absolute.

§ 117. Liability of indorser where paper negotiable by delivery.—Where a person places his indorsement on an instrument negotiable by delivery he incurs all the liabilities of an indorser (a).

(a) Cover v. Myers, 75 Md. 406. The holder of paper payable to bearer and indorsed may sue upon it as bearer or indorsee at his election. Daniel on Negotiable Instruments, section 663a; 3 Kent's Comm. 44. In some of the States a note payable to a designated payee or bearer cannot be negotiated except by the indorsement