balance the handicap previously imposed upon him. Moreover, if the inconsistency of the abolition of the rule of mututality in the instant case be urged, it would seem that the holding of the Appellate Division leads to greater surprises. For, according to the decision, if the defendant had contested the action of Frost and failed, it would still be permitted to try the issue of Frost's negligence in the instant case, and apparently it could still bring action against Haverhill, who is not allowed the benefit of Frost's judgment Yet if it had been the International Railway Company that had been plaintiff in the original action against Frost, its failure in that suit would prevent its later suing the master.12 Clearly the resultant findings in the litigation between Frost and the traction company are unchanged whether the company is the unsuccessful plaintiff or the unsuccessful defendant. Yet the instant decision apparently varies the effect of that judgment upon the circumstance named.

It may be pointed out that such a course as is here urged is not entirely unprecedented.13 In the case of Atkinson v. White,14 X sold logs to A by mortgage bill of sale, and then to B by absolute bill of sale. A sold a portion to C. B sued C for conversion, and failed, the court holding that A's sale passed title to C. B then sued A, who pleaded the former adjudication against B. Doubtless there was technically a privity between A and C in their successive relationships to the property. The court, however, put the judgment upon the broader ground that "* * * the plaintiff is the same and he has had his day in court. He has had a full hearing upon the law and fact involved in the very question he now proposes to try again in another suit. He has had every privilege which the law allows him

15

It is not denied that there is a certain force in the argument that, simply because the defendant did not think it expedient to go to a jury upon a small claim for personal injury, it should not be held to have admitted its culpability for all purposes, and that if Haverhill had wished the benefit of Frost's judgment he might have consolidated his action with the other one, or have been brought in as a party in interest. But this argument proceeds from the basic hypothesis that a lawsuit is merely a controversy between parties. Arguing from this point of view, even, it seems to the writer, as previously explained, that the doctrine of respondeat superior justifies giving the master the complementary advantage which Haverhill here sought. But, apart from this consideration, the interest of the state in any lawsuit is ground for argument that legal controversies are of a different class, to which arguments of policy more forcibly apply. The result attained in the instant case, which allows the International Railway Company to admit complete liability for the purposes of one action at law and subsequently to deny it for the purposes of another action, the success of which depends upon the results of the first, does not seem socially healthful. Thomas G. Rickert.

12 Supra note 7.

13For a statutory provision related to the problem see Harbig v. Freund & Co., 69 Ga. 180 (1882).

1460 Me. 396 (1872).

15 Supra, note 14. at p. 397.

Negotiable Instruments: Bills and notes: Personal property: Interim certificates held non-negotiable: Made negotiable by statute.The Hofstader Security Receipts Act1 was passed by the New York Legislature, as an addition to the Personal Property Law, to meet the situation which arose in the recent case of The President and Directors of Manhattan Co. v. Morgan et al, 242 N. Y. 38 (1926). In that case, temporary or interim certificates were issued and signed by the defendant bankers, the Morgan Company, stating that the bearer was entitled to receive Belgian bonds "when, as and if delivered" by that government to the defendants. Attached to each certificate was an interest warrant payable to bearer, but subject to the condition that the money for interest be first supplied to said bankers by the Belgian government. Three of these certificates were stolen from the owner, to whom they had been issued by the Morgan Company, and came into the hands of the plaintiff, an innocent purchaser for value. The defendant having refused to deliver the bonds, as called for by said interim certificates, this action was brought to recover the value of said bonds. The court, Cardozo, J., writing the opinion, unanimously held this type of certificate nonnegotiable under the Negotiable Instruments Law, because it did not contain an unconditional promise to pay a sum certain in money,3 and was not payable at a fixed or determinable future time.

The court distinguished the leading English case of Goodwin v. Robarts, which held that "scrip," issued by the Russian government, and signed by the bankers, was negotiable by the custom of merchants, and that the law merchant was a living law. The New York court agreed with the English court that the bankers in that case were merely agents for the Russian government, and that such "scrip" was as much a Russian instrument as the bond itself. In the principal case, however, a temporary bond had been previously issued and was in the hands of the Morgan Company, and the interest warrant was not an obligation of the Belgian government but the executory contract of the bankers. In view of these differences in form and obligation, the instruments involved in these cases stand on an entirely different footing. These fundamental distinctions pointed out by the New York court seem correct.

'Chapter 704 Laws of 1926. Personal Property Law § 260-262. The Act went into effect April 30, 1926.

"If the bonds were negotiable such a holder would be protected. § 57 Uniform N. I. L., (§ 96 New York N. I. L.).

§ 1 Uniform N. I. L. (§ 20 New York N. I. L.). An instrument to be negotiable must conform to the following requirements: (1) It must be in writing and signed by the maker or drawer; (2) Must contain an unconditional promise or order to pay a certain sum in money; (3) Must be payable on demand, or at a fixed or determinable future time; (4) Must be payable to order, or to bearer; and (5) Where the instrument is addressed to a drawee, he must be named or otherwise indicated thereon with reasonable certainty.

Accord: Babocck v. National Surety Co., 106 Misc. 149, 175, N. Y. Supp. 432 (Sup. Ct. 1919); Manhattan Bank v. Morgan, 192 N. Y. Supp. 239 (1st Dept. 1922), 210 N. Y. Supp. 460 (1925); Economic Developing Corp v. Gen'l Chinaware Corp., 200 N. Y. Supp. 228 (1st Dept. 1923); Cf: Radke v. Liberty Ins. Co., 37 Idaho 436, 216 Pac. 1040 (1923); Hearne v. Gillette, 151 La. 79, 91 So. 634 (1923); Bowie v. Nat. City Bank, 122 Wash. 269, 210 Pac. 498 (1876).

L. R. 10 Ex. 76; L. R. 10 Ex. 337; 1 App. Cas. 476 (1876).

The Court of Appeals in holding that the Negotiable Instruments Law applied to interim certificates, divides negotiable and quasinegotiable instruments in general, into two classes: (1) those which sound in promise, and (2) those which sound in title. It concludes that the interim certificate sounds in promise and that the New York Negotiable Instruments Law is intended to govern such certificates. The failure to conform to the statutory requirements," therefore, made them non-negotiable. This classification seems to be one of the controlling bases of the decision.

Normally, of course, commercial promissory instruments are executory promises relating to the payment of money and enforceable in personam. Examples of this class are bills, notes and checks. Title instruments, on the other hand, represent something in esse, and are enforceable in rem, for instance, bills of lading and warehouse receipts. Having determined the promissory character of the interim certificate, the court then relates it to the normal promissory instrument of commerce by emphasizing that its promises were of a two-fold nature. First, a promise for the payment of money, contained in the interest warrant, and subject to specified conditions, and, second, a promise welded into this, but again subject to a contingency, for the delivery of the bonds. Having once decided that the instrument was promissory in a commercial sense, it was but a step to say that the Negotiable Instruments Law, and especially the New York Negotiable Instruments Law, contemplated inclusion of all promissory instruments sounding in terms of negotiability, and that any such instrument, to be negotiable, must conform to the statutory requirements of an unconditional order or promise in writing, to pay to a named or described person, or to bearer, a sum certain in money. As was pointed out above this certificate failed in several respects to meet these requirements."

By carrying its own principles of classification of negotiable instruments a step further, and recognizing a third or intermediate type of instrument having negotiable or quasi-negotiable qualities,10 the court might have decided the matter de novo and free from the shackles of the Negotiable Instruments Law. As we have seen, the certificate in the instant case was of a dual nature, containing attributes sounding partly in promise and partly in title, though

"Negotiable instrument is merely a name given to certain types of documents as to which it has been determined that certain qualities or attributes exist. Whether a given instrument is of that type depends on a variety of considerations largely historical and practical. New types may from time to time be added. Stock certificates and bills of lading have been called quasi-negotiable to distinguish them from instruments payable in money." R. W. Aigler, Recognition of New Types of Negotiable Instruments, (1924) 24 COL. L. Rev. 563, 585. "Supra note 3. §§ 4, 5 Uniform N. I. L. (§§ 23, 24 N Y. N. I. L.).

"It should be borne in mind throughout that a discussion of the Morgan case involves an interpretation of the N. Y. N. I. L. which differs from the Uniform N. I. L. as pointed out infra.

Supra note 7.

10Professor Aigler's article, supra, note 6, 563 et seq has a discussion of the field. This article was cited in the opinion in the Morgan case, but the court makes no mention of a third type.

the former characteristics no doubt predominated. It may be that here is a hybrid, which strictly speaking, falls in neither of the other two general classes, an instrument which sounds in promise and functions in title. Probably everyone would admit that title documents, like bills of lading, are not within the Negotiable Instruments Law. Logically that could be carried a step further by holding that instruments which are neither wholly promissory, nor wholly titular are outside the Negotiable Instruments Law, and are, therefore, free from statutory regulation and governed by the custom of merchants and bankers as was held in England in Goodwin v. Robarts.11

The court points out that the contention that the Uniform Negotiable Instruments Law was not intended to apply to bonds or instruments other than bills, notes and checks, is inapplicable to the New York situation by virtue of sec. 33212 of the New York Act. This section is believed to be peculiar to this state. In recent years, a controversy has arisen as to whether the American Uniform Negotiable Instruments Act is intended to cover a wider range of instruments than the British Act, which is limited by its very title: "An Act to Codify the Law Relating to Bills of Exchange, Cheques, and Promissory Notes." It may be that it would have been wiser for the drafters of the American Act to have retained the language of the British statute restricting the applicability of its provisions to a definite and specified number of instruments. The English draftsman had the opportunity of extending that Act beyond bills, notes and cheques, as he saw fit, but he wisely refrained from doing so. He says, "The law relating to negotiable securities for money other than bills, notes and cheques is as yet very imperfectly developed and is, therefore, unsuited for presentation in a codified form." Our commissioners did not limit the number of instruments covered, but instead, drafted an act which begins with the definition that "An instrument to be negotiable must conform to the following requirements," regarding the nature of the promise or order, certainty of time, amount, and person, as specified above. As a New Jersey court said, "Our legislature discarded the title of the English Act and selected in its place one much broader in its scope, viz; a general act relating to negotiable instruments ....". Interpretation of the intent of the American Act would seem to indicate that any instrument other than that already covered by statute, must conform to these requirements to be negotiable. The fact that the commissioners having the Act for a model, expressly veered away from it bears out such a possibility. The court's position in the principal case is also strengthened by the fact that the British Act has no section corre

15

"Supra, note 5.

14

128 332 is entitled: "How Negotiable Bonds are made Non-Negotiable." This section specifies; "The owner or holder . . . of any bond. . . not registered .. may make such bond... non-negotiable. by subscribing his name to a statement endorsed therein.

13CHALMERS, BILLS OF EXCHANGE, (8th ed. 1919) 362.

14 Supra note 3.

15 Montvale v. Peoples Bank, 74 N. J. L. 464, 465, 67 Atl. 67 (1907).

sponding to section 116 of the Negotiable Instruments Law,17 nor does it contain provisions enumerating qualities which make for non-negotiability, as does the American codification. Professor Chafee18 contends that the American Act should be limited to bills, notes and checks. Professor Kidd19 suggested that a statute to make bonds negotiable in California should not be made as an amendment to the Negotiable Instruments Law, but somewhere else, just where he does not specify. That there is real force in these arguments cannot be gainsaid, nor have we any quarrel with them, if one is to be guided solely by the desirability of the result.

As intimated above, however, neither of these arguments is applicable to the New York Negotiable Instruments Law. The provisions of section 332,20 directed as they are to bonds, leave no support for the contention that bonds and other instruments are to be excluded. In this state, there seems to be a clear indication that all instruments purporting to be negotiable, other than title documents, must conform to the Negotiable Instruments Law to be negotiable. On the other hand, it has been suggested that b cause bonds are provided for by the New York Statute, the intent was to exclude other instruments not specifically covered, this, on the rule of thumb, that enumeration is exclusion. Apropos of that suggestion, this may be said; section 332 specifies the manner in which negotiable bonds are made non-negotiable, at the same time assuming, it would seem, an indefinite number of types of instruments, of which bonds are one, as being within the Statute. The decision in the Morgan case, therefore seems to be correct on this point also.

Finally, the court pointed out that section 721 of the New York Negotiable Instruments Act, to the effect that in any case not provided for therein the rules of the law merchant shall govern, was inapplicable to the Morgan case, as was contended, because the act did provide for the type of instrument in question, and expressly prohibited its possessing the attributes of negotiability unless it conformed to the statutory requirements. The proper function of section 7 and the law merchant is to supplement, not contradict, the positive statute. Professor Chafee, as stated above, would have the American Act limited to bills, notes and checks, and leave other instruments free, by virtue of section 7, to be construed by custom and the law merchant as it grew. While not underrating the desirability of leaving our courts free to follow the growth of commercial usage, yet the decision emphasizes that in New York, if not elsewhere, freedom is restricted by the peculiar provisions of its Negotiable Instruments Law.22 "A right conferred by positive

16 Supra note 3; BRANNON, NEGOTIABLE INSTRUMENTS LAW, (4th ed. 1926) 5. "The New York court had even stronger considerations from its own N.I.L. to strengthen this view. See infra.

18 Brannon, op. cit. 16 at 7.

19Professor A. M. Kidd: "Negotiability of Bonds in California," (1918) 6 Cal. L. REV. 444, 448.

20 Supra note 12.

218 196 Uniform N. I. L. corresponds, and specifies: "In any case not provided for in this act, the rules of the law merchant shall govern."

22 Discussed supra. See note 12.