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Thus, where a mortgagee, whose mortgages were past due, threatened to foreclose them, and the debtor transferred to him a negotiable note as further security, upon his general promise “to be more lenient" in respect to such mortgage debt, but without any agreement to forbear the enforcement thereof for any specified time, Held, that the equities of the maker were not cut off by such transfer.
Where an accommodation indorser of a note indorses successive notes in renewal thereof, each as the previous note becomes due, his liability will be regarded as a continuous one without hiatus.
One to whom an accommodation note is transferred in good faith before due as collateral security against his pre-existing liability as indorser of another note, and who in consideration of such transfer definitely extends the duration of his liabilty by indorsing a renewal of such other note, is a bona fide holder of the accommodation note for value before due.
Absence of consideration matter of defense.- Absence or failure of considertion is matter of defense as against any person not a holder in due course; and partial failure of consideration is a defense pro tanto, whether the failure is an ascertained and liquidated amount or otherwise.
Accommodation party defined.-An accommodation party is one who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew him to be only an accommodation party.
NOTE. – Defendant's accommodation note, payable in bank, was by the payee indorsed to his creditor as collateral security, and on presentment at maturity, was paid by the bank at the payee's request, without any notice to defendant. Held, that these facts show a payment of the note to the indorsee with moneys obtained from the bank by the payee, and that the latter alone (and not the defendant) is liable to the bank or its assignees.
Instrument when negotiated. – An instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof. If payable to bearer, it is negotiated by delivery; if payable to order it is negotiated by the indorsement of the holder completed by delivery.
NOTE-DELIVERY. A valid delivery is absolutely necessary even against a holder otherwise in due course.
INDORSEMENT. -A guaranty of payment is not an indorsement, and no demand or notice is necessary to charge the guarantor. Query whether it is a good defense, by the indorser, that it was made on Sunday. It is presumed to have been made at or about the date of the note. When made by the payee and another, the presumption is that the payee indorsed first.
Indorsement, what is.--The indorsement must be written on the instrument itself or upon a paper attached thereto. The signature of the indorser, without additional words, is a sufficient indorsement.
An indorsement or transfer of a promissory note may be on another paper attached to and made part of the note, called an allonge; and it is not essential to a transfer of a note by this method that there should have been a physical impossibility of writing the indorsement or transfer on the note itself, but it may be on another paper attached to the note, whenever necessity or the convenience of the parties required it.
The signature may be either the name of the payee or any mark or designation which is used as a substitute for his name with the intention of being bound or of transferring the paper.
INDORSEMENT WITH GUARANTY. – This amounts to a special indorsement without the right to require presentment, notice or protest. The liability of indorser and guarantor is the same. This is called a facultative indorsement. A guaranty on the note or bill, or on paper attached is, like an indorsement without recourse, a negotiation of the instrument; and this is so even though the guaranty is void under the statute of frauds.
Guaranty by one not a party, is not negotiable, because it is not a contract that the guarantor will pay, but that the maker will, and if he does not, the guarantor will do so.
Indorsement is entire.-The indorsement must be an indorsement of the entire instrument. An indorsement which purports to transfer to the indorsee a part only of the amount payable, or which purports to transfer the instrument to two or more indorsees severally, does not operate as a negotiation of the instrument. But where the instrument has been paid in part, it may be indorsed as to the residue.
NOTE-If notes when taken were voidable for the fraud of the maker, and the assignee in taking them relied upon the credit of the indorsement, that could not operate as a reservation of any legal interest in the assignor, and he could not lawfully do anything to impair their value in the hands of the assignee, as by electing to declare them void.
Special or blank indorsement.-An indorsement may be either special or in blank; and it may also be either restrictive or qualified, or conditional.
What special or blank indorsement.--A special indorsement specifies the person to whom, or to whose order, the instrument is to be payable; and the indorsement of such indorsee is necessary to the further negotiation of the instrument. An indorsement in blank specifies no indorsee, and an instrument so indorsed is payable to bearer, and may be negotiated by delivery.
Note-One who has indorsed a note in blank, without qualification expressed in the writing, cannot show by parol, as against the person to whom he delivered it, a contemporaneous agreement between them that he should not be liable as indorser, where no mistake or fraud in procuring the instrument is alleged.
Though a special indorsement is made after an indorsement in blank, the instrument continues to be negotiable by delivery.
Conversion of blank into special indorsement. - The holder may convert a blank indorsement into a special indorsement by writing over the signature of the indorser in blank any contract consistent with the character of the indorsement.
Note- This applies to an indorsement in blank without recourse. He cannot so write a valid agreement to pay the note jointly with another. This may be done after the indorser's death.
Restrictive indorsement.-An indorsement is restrictive which either;
1. Prohibits the further negotiation of the instrument; or
2. Constitutes the indorsee the agent of the indorser;
3. Vest the title in the indorsee in trust for or to the use of some other person. But the mere absence of words implying power to negotiate does not make an indorsement restrictive.
A restrictive indorsement confers upon the indorsee the right:
1. To receive payment of the instrument;
2. To bring any action thereon that the indorser could bring;
3. To transfer his rights as such indorsee, where the form of the indorsement authorizes him to do so.
But all subsequent indorsees acquire only the title of the first indorsee under the restrictive indorsement.
Qualified indorsement.--A qualified indorsement constitutes the indorser a mere assignor of the title to the in
strument. It may be made by adding to the indorser's signature the words "without recourse” or any words of similar import. Such an indorsement does not impair the negotiable character of the instrument.
Conditional indorsement.-Where an indorsement is conditional, a party required to pay the instrument may disregard the condition, and make payment to the indorsee or the transferee whether the condition has been fulfilled or not. But any person to whom an instrument so endorsed is negotiated, will hold the same, or the proceeds thereof, subject to the rights of the persons indorsing conditionally.
Indorsements of instruments payable to bearer.Where an instrument, payable to bearer, is endorsed specially, it may nevertheless be further negotiated by delivery; but the person indorsing specially is liable as indorser to only such holders as make title through his indorsement.
Instruments payable to two or more persons.--Where an instrument is payable to the order of two or more payees or joint indorsees who are not partners, all must indorse,unless the one indorsing has authority to indorse for the others.
When drawn to fiscal officer.-Where an instrument is drawn or indorsed to a person as “cashier" or other fiscal officer of a bank or other corporation, it is deemed prima facie to be payable to the bank or corporation of which he is such officer; and may be negotiated by either the indorsement of the bank or corporation, or the indorsement of the officer.
NOTE---An indorsement of a promissory note payable to a bank, made by its president as follows: "Pay to the order of A. J. A.; Marine Bank by J. S. H., Pres't,” is binding on the bank.
The words "A. B. Cas." indorsed upon a note, held sufficient in form to bind the bank of which A. B. was cashier.
Such indorsement, although made upon a note not belonging to the bank, and merely for the accommodation of the payee or prior endorser, will bind the bank as against a purchaser in good faith, for value, before maturity.
Representations by a bank cashier need not be made at the counter or office of the bank in order to bind it.
The fact that a note purporting to have been made in Michigan and endorsed by a bank in Elkhorn, in this state, was offered to the plaintiff at Milwaukee a day or two after its date, was not notice that it could not have passed through said bank in the regular course of business, so as to prevent plaintiffs from being innocent purchasers, especially when they inquired of the cashier before purchasing and were told that it was "all right."
Misspelled names.-Where the name of a payee or indorsee is wrongly designated or misspelled, he may indorse the instrument as therein described, adding, if he thinks fit, his proper signature.
Negative personal liability.--Where any person is under obligation to indorse in a representative capacity, he may indorse in such terms as to negative personal liability.
Prima facie evidence of negotiation.-Except where an indorsement bears date after the maturity of the instrument, every negotiation is deemed prima facie to have been effected before the instrument was overdue.
Presumption.-Except where the contrary appears every indorsement is presumed prima facie to have been made at the place where the instrument is dated.
Length of negotiability.--An instrument negotiable in its origin continues to be negotiable until it has been restrictively indorsed or discharged by payment or otherwise.
Erasing indorsements.--The holder may at any time strike out any indorsement which is not necessary to his title. The indorser whose indorsement is struck out, and all indorsers subsequent to him are thereby relieved from liability on the instrument.
Transfer without indorsement.-Where the holder of an instrument payable to his order transfers it for value without indorsing it, the transfer vests in the transferee such title as the transferer had therein, and the transferee acquires, in addition, the right to have the indorsement of the transferer. But for the purpose of determining whether the transferee is a holder in due course, negotiation takes effect as of the time when the indorsement is actually made. When the indorsement was omitted by mistake, or there was an agreement to endorse made at the time of the transfer, the the endorsement, when made, relates back to the time of transfer.
NOTE-ASSIGNMENT WITHOUT INDORSEMENT. Does not cut off equities.
In case of a note payable to order, indorsement, as well as delivery before maturity, is necessary to cut off equities existing between the maker and payee before the delivery.
But the bona fide holder of such note by delivery only is protected against everything subsequent to such delivery, especially if the note be afterward endorsed to him, such endorsement being held to relate back to the time of delivery, as to any equity outside of the note itself.