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§ 36.

Bill known

to be dishonoured.

Negotiation of bill to

liable thereon.

sumption, and make it a question for the jury whether the bill was negotiated before or after maturity.1

(5) Where a bill which is not overdue has been dishonoured, any person who takes it with notice of the dishonour takes it subject to any defect of title attaching thereto at the time of dishonour, but nothing in this sub-section shall affect the rights of a holder in due course.

ILLUSTRATION.

A bill is dishonoured by non-acceptance, and afterwards indorsed to the plaintiff, who knows that it has been so dishonoured. The plaintiff, who is the third indorsee, takes the bill subject to any agreement between the first and second indorsers as to the discharge of the former.2

This sub-section settles a disputed point, by putting a bill known to be dishonoured on the same footing as an overdue bill.3 See sect. 29, defining "holder in due course;" and sect. 43, as to dishonour by non-acceptance. In America the decisions are conflicting. As to negotiating a bill after action brought, see note to sub-sect. (1).

37. Where a bill is negotiated back to the party already drawer, or to a prior indorser, or to the acceptor,5 such party may, subject to the provisions. of this Act, re-issue and further negotiate the bill, but he is not entitled to enforce payment of the bill against any intervening party to whom he was previously liable.

1 Bounsall v. Harrison (1836), 1 M. & W. 611.

2 Crossley v. Ham (1811), 13 East, 498; cf. Whitehead v. Walker (1842), 10 M. & W. 696, where the bill was dishonoured by non-acceptance, though it is spoken of as overdue.

3 Affirms Crossley ▼. Ham (1811), 13 East, 498; and quoad hoc overrides Goodman v. Harvey (1836), 6 Nev. & Man. 372.

4 Cf. sect. 59 (2), post, p. 203.

5 See note to sect. 59 (1), post, p. 200, and sect. 61, post, p. 211.

6 See sects. 59-64, as to discharges; and especially sect. 59 (2) as to taking up bills, and sect. 61, as to coincidence of right and liability.

ILLUSTRATIONS.

§ 37.

1. Bill payable three months after date is indorsed by the holder to the acceptor. At any time before maturity the acceptor may re-issue the bill and indorse it away.1

2. The drawer of a bill payable to drawer's order indorses it to C., who indorses it to D., who indorses it back to the drawer. The drawer, either before or after its maturity, may re-issue the bill and indorse it to E.

3. The drawer of a bill payable to drawer's order indorses it for value to C., who indorses it to D., who indorses it back to the drawer. The drawer cannot recover from C. or D., for they in turn could recover from him as drawer.3

4. The payee of a bill indorses it "without recourse " to D., who indorses it to E., who indorses it back to the payee. The payee, in his character of third indorsee, can sue D. and E., for they have no claim against him as a prior indorser.

5. The drawer of a bill indorses it to C., who has previously undertaken to be responsible for the price of goods supplied to the acceptor. C. indorses the bill back to the drawer. The drawer, in his character of indorsee, can sue C., for C. has no remedy over against him.5

By sect. 36 (1), a bill is negotiable until it is restrictively indorsed or discharged. As to discharges, see sects. 5964, post, pp. 199-225, and note that an accommodation bill is discharged when paid at maturity by the person accommodated, and that any bill is discharged when the acceptor is, or becomes the holder of it at or after maturity. The rule in the present section is a rule against circuity of action."

38. The rights and powers of the holder of a Rights of the bill are as follows:

(1) He may sue on the bill in his own name :7 (2) Where he is a holder in due course, he

holds the bill free from any defect of title of

1 Attenborough v. Mackenzie (1856), 25 L. J. Ex. 244.

2 Cf. Hubbard v. Jackson (1827), 4 Bing. 390; Jones v. Broadhurst (1850), 9 C. B. 173. This is subject to sect. 59 (2), (3).

3 Cf. Bishop v.

Hayward (1791), 4 T. R. 470; Wilders v. Stevens (1846), 15 M. & W. at p. 212.

4 Cf. Morris v. Walker (1850), 15 Q. B. at p. 594. There is here no circuity of action.

5 Wilkinson v. Unwin (1881), 7 Q. B. D. 636, C. A.

Holmes v. Durkee (1883), 1 C. & E. 23.

7 Cf. Crouch v. Crédit Foncier (1873), L. R. 8 Q. B. at pp. 380-382.

holder.

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prior parties, as well as from mere personal defences available to prior parties among themselves, and may enforce payment against all parties liable on the bill:'

(3) Where his title is defective (a) if he negotiates the bill to a holder in due course, that holder obtains a good and complete title to the bill, and (b) if he obtains payment of the bill the person who pays him in due course gets a valid discharge for the bill.2

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This section deals with the rights acquired by negotiation, that is, by transfer according to the form required by the law merchant: see sect. 31, ante, p. 102. See "holder defined by sect. 2, ante, p. 5; "holder for value" defined by sect. 27 (2), (3), ante, pp. 83-85; and "holder in due course defined by sect. 29, ante, p. 88. As to " defects of title," see sect. 29 (2), ante, p. 92, and as to "payment in due course," see sect. 59, post, p. 199. It is to be noted that the Larceny Act, 1861 (24 & 25 Vict. c. 96), s. 100, which provides for the revesting of stolen property in the true owner when the thief is convicted, does not apply to negotiable instruments. A defective title must be distinguished from entire absence of title. A person who claims under a forgery has no title, and can give none. He is not the "holder" of the instrument.

The power to negotiate a bill must be distinguished from the right to negotiate it. The right to negotiate is an incident of ownership; the power to negotiate is an incident of apparent ownership. Again, the right to sue must be distinguished from the right to recover, which depends on the further question whether the holder is a holder for value, and in some cases whether he is a holder for value without notice. The law as to the holders' rights of action and proof may perhaps be stated in the following rules:

1 Cf. Crouch v. Crédit Foncier (1873), L. R. 8 Q. B. at pp. 380-382; and see note to sect. 31 (3), ante, p. 102.

2 Marston v. Allen (1841), 8 M. & W. at p. 504, per Alderson, B., stating the principle.

Rights of Action and Proof.

§ 38.

action.

Rule 1. The holder of a bill is entitled to maintain an Holder's action thereon in his own name against all or any of the right of parties liable thereon,' unless it is shown that he holds the bill adversely to the true owner.2

It is immaterial that the holder never had any interest in the bill, or that he has parted with his interest therein.*

When the holder of a bill sues as agent for another Suing as person, or when he sues wholly or in part for the benefit agent or of another person, any defence or set-off available against that person is available pro tanto against the holder."

ILLUSTRATIONS.

1. C., the holder of a bill, indorses it to D. for collection. D. can sue on it, but any defence available against C. is available against D."

2. D. is the holder of a dishonoured bill for 1007. indorsed by C. C. pays D. 601. D. sues the acceptor. As to 607. D. sues as trustee for C., and only as to 401. on his own account. As regards 60l. any set-off which the acceptor may have against C. is equally available against D.'

Where a person holds a bill as agent or trustee for another, he cannot use it as a set-off against a claim made against him individually.8

Rule 2. Subject to the rules as to transmission by act of law, when a bill is payable to a particular person or persons, or to his or their order, an action thereon must be brought in the name of such person or persons.

1 See R. S. C. Ord. XVI. rule 5; and as to inferior courts, 18 & 19 Vict. c. 67, s. 6.

2 Jones v. Broadhurst (1850), 9 C. B. 173; Agra Bank v. Leighton (1866), L. R. 2 Ex. at pp. 63-65. See holder defined by sect. 2.

3 Law v. Parnell (1859), 7 C. B. N. S. 282; 29 L. J. C. P. 17.

4 Williams v. James (1850), 15 Q. B. 498: Poirier v. Morris (1853), 2

E. & B. 89. Cf. Megrath v. Gray (1874), L. R. 9 C. P. 216.

5 Lee v. Zagury (1817), 8 Taunt. 114; Royce v. Barnes (1846), 52 Massachus. 276; Agra Bank v. Leighton (1866), L. R. 2 Ex. 56; Re AngloGreek Navigation Co. (1869), L. R. 4 Ch. 174; Pothier, No. 41; cf. Bechervaise v. Lewis (1872), L. R. 7 C. P. 372.

6 De la Chaumette v. Bank of England (1829), 9 B. & C. 208, as explained by Currie v. Misa (1875), L. R. 10 Ex. at p. 164, Ex. Ch.

7 Thornton v. Maynard (1875), L. R. 10 C. P. 695.

8 London & Bombay Bank v. Narraway (1872), L. R. 15 Eq. 93.

9 Attwood v. Rattenbury (1822), 6 Moore, at p. 583; Pease v. Hirst (1829), 10 B. & C. 122.

trustee.

Action on specially. bill payable

§ 38.

Action on bill payable to bearer.

ILLUSTRATIONS.

1. A bill is specially indorsed to the firm of "D. & Co." An action on it must be brought in the name of the firm. The managing partner cannot sue on it in his own name.

2. A bill is specially indorsed to D., a partner in the firm of X. & Co., in payment of a debt due to the firm. An action on it must be brought in D.'s name, and not in the name of the firm.1

In the case given in Illust. 1, the managing partner might indorse the bill in the firm's name to himself and then sue.

Rule 3. Subject to Rule 1, when a rule is payable to bearer an action thereon may be brought in the name of any person who has either the actual or the constructive possession thereof; and constructive possession, jointly with others, is sufficient to entitle the possessor to sue alone.

ILLUSTRATIONS.

1. C., the holder of a bill, indorses it in blank to D. to collect it for him. Either C. or D. may sue the acceptor.

2. A bill accepted by B. is indorsed in blank by C. D., E. and F. bring an action on the bill against B. They can recover, although there is no evidence to show that they are partners, or what the nature of their joint interest is.3

3. A bill is indorsed in blank to a firm. Any one of the partners may bring an action on it in his own name."

4. A bill indorsed in blank is handed to the manager of a company in payment of a debt due to the company. The manager may sue on it in his own name."

5. A bill indorsed in blank is given to D.'s attorney, who commences an action on it against the acceptor in D.'s name. D. knows nothing of the matter, but after the action has proceeded some way he is told of it, and then gives his consent. D. can maintain the action."

6. D., the holder of a bill indorsed in blank, does not wish to sue on it in his own name. He accordingly asks E. to sue on it. E. consents. E. gets a copy of the bill, and it is agreed that he shall

1 Bawden v. Howell (1841), 3 M. & Gr. 638.

2 Clark v. Pigot (1699), 12 Mod. 193; cf. Stones v. Butt (1834), 2 Cr. & M. 416.

3 Ord v. Portal (1812), Camp. 239; cf. Rordasnz v. Leach (1816), 1 Stark. 446; Low v. Copestake (1828), 3 C. & P. 300.

Lindley, 3rd ed. p. 485; Attwood v. Rattenbury (1822), 6 Moore, 579; Wood v. Connop (1843), 5 Q. B. 292, as to joint holders; Conover v. Earl (1868), 26 Iowa R. 168, as to holders in common.

5 Law v. Parnell (1859), 7 C. B. N. S. 282.

6 Ancona v. Marks (1862), 31 L. J. Ex. 163.

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