Michigan Law Review

Volume 2 Issue 4

1904

Negotiable Instruments Law Its History and Its Practical

Operation
Amasa M. Eaton

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Recommended Citation
Amasa M. Eaton, Negotiable Instruments Law Its History and Its Practical Operation, 2 MICH. L. REV. 260
(1904).
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THE NEGOTIABLE INSTRUMENTS LAW: ITS HISTORY
AND ITS PRACTICAL OPERATION
July, 11878. several leading lawyers in different states, public
spirited men, issued a call for a meeting, to form an American Bar
Association. Pursuant to this call seventy-five prominent members
of the bar and others, interested in the proposal met at Saratoga
Springs, New York, August 21, 1878, and the American Bar Asso-
ciation came into being.
The first object of the Association, as stated in the call for this
meeting, was "to assimilate the laws of the different. states," and
the first article of the Constitution as then adopted and as it still
stands, is as follows r-
"Its object shall be to advance the science of jnrisprudence, promote the
administration of ju~tice and uniformity of legislation tltrouglzout tlze Union,
uphold the honor of the profession of the law and encourage cordial inter-
course among the members of the American Bar."
The first report of any committee to this Association was that of
the Committee on Jurisprudence and Law Reform, made in 1879 at
the secop.d annual meeting 1 in which they recommended co-opera-
tion among the several Local Councils of the Association and this
Committee, to secure uniformity on various subjects referred to
them.
In 18&2 2 this Committee reported on various subjects referred to
them, with forms for statutes to bring about uniformity in legisla-
tion in the different states.
In 1883 3 the same Committee made a further verbal report.
In 1886 4 this Committee made a report on uniformity of proceed-
ings in settlement of estates of decedents leaving property in differ-
ent states.
In 1887 5 this Committee submitted a report on Uniformity of
pleading and practice in the Courts of the United States. At this
meeting 6 the Committee on Commercial Law submitted a report
upon the need for a national bankruptcy act and for national legis-
lation to regulate commercial transactions between citizens of differ-
ent siates. Their fourth conclusion was as follows:-
"That in the e:x:ercise,of the same power" (over interstate commercial
transactions) "Congress should enact a statute defining the law relating to

1 See p. 207 of the Reports for that year.

I I'. 309. I P, 38. ~ P, 294. IP. 327. f P. 332.
 THE NEGOTIABLE INSTRUMENTS LAW 261

bills of exchange and other commercial paper, so far as the same is involved
in interstate commerce. " 1
The Act proposed is given in full in the Reports of the American
Bar Association for 1887.2 It merits study as the precursor of the
Negotiable Instruments Law. It was prepared by a member of the
Committee of the American Bankers' Association and was intro-
~iuced into Congress by the late Judge Poland. The preliminary
· statement would make an appropriate and admirable preliminary
statement to stand at the head of our Negotiable Instruments Law
that should be passed in Congress as a national Act in the exercise
of its power over inter-state commerce. It is as follows:-
' 'Part 1. Preliminary.
Section 1. That to provide for the general welfare of the United States,
and to carry into excution more fully than heretofore the power to regulate
commerce among the several states, and to promote the security and efficiency
of the national banks in their commercial transactions, alt bills of exchange,
promis~ory notes, chet"ks on banks or bankers, and other negotiable instrn-
ments purporting to have been made in one of the United States, or a Terri-
tory thereof, or the District of Columbia, and payable in any other State,
Territory, or country, are hereby declared to be means and instrnments of
commerce among the several states, and all such bills, notes, checks, and
instrnments made or dated on or after the date of fhe approval of this act shall
be governed exclusively by the provisions thereof; and all laws or parts of
laws of the several states in any wise inconsistent with the provisions of this
act are hereby suspended." .
At the annual meeting in 1888 a suggestive paper was read by the
late John Randolph Tucker, of Virginia, on Congressional Power
over Inter-State Commerce. 3 At p. 273 he asks "How far the
power of Congress extends to the regulation of those important
instruments of commerce which pass under the general name of
commercial paper?" and answers:-
"They, when made between parties in different states, are closely related
to inter-state commerce. They are parts of commercial intercourse, as much
so as contracts and communications by telegraph. Indeed, they are more so,
for they are means whereby moneys are withdrawn from one statetosnother.
They are media of exchange; and if exchange or traffic in products consti-
tutes commerce, as is undoubted, are not bills drawn or notes given between
citizens of different states in payment of goods sold by one to the other, as
much a part of int~r-state commerce as is the sale of goods?"
And he stated that when he was a member of Congress and of the
Judiciary Committee of the House, the subject of a system of
international and inter-state commerce law, uniform throughout
the country, was before that Committee.
1 P. 352. 1..Pp. 362 to 395. a "Reports" for that year, p. 247.
262 MICHIGAN LAW REVIEW

Upon motion of Rufus King, of Ohio, so much of this paper as

referred to national legislation relating to commercial paper as an
instrument of commerce was referred to the Committee on Commer-
cial Law. 1
At the annual meeting in 18892 W. A. Collier, of Tennessee,
stated that at a recent meeting of the Bar Association of Tennessee
the president had made some wise suggestions in reference to uni-
formity of laws in his address: and this address had been referred
to a committee which had reported thereon, and in obedience to
their request he now submitted the following resolution:-
"R~cognizing the desirability of u1;1iformity in laws of the several states,
especially those relating to marriage and divorce, descent and distribution of
property, acknowledgment of deeds, execution and probate of wills therefore
be it
Resolved, That the President of this Association appoint a Committee,
consisting of one from each state, who shall meet in convention at a time and
place to be fixed by the President and compare and consider the laws of the
different states relating to these subjects, and preparE" and report to this Asso-
ciation such recommendations and measures as will bring about the desired
result."
The resolution was adopted, the President appointed the Commit-
tee, and the list, consisting of forty-two members, may be found at
p. 96. It has been appointed annually ever since then, the number
of its members increasing as other states have had representatives
added, and at the annual meeting in 1903 it was constituted one of
the Standing Committees, the constitution being changed to bring
this about,.
This Committee (on Uniform State Laws) made its first report
the following year. 8
They reported that the State of New York had passed an act
authorizing the Governor, by and with the consent of the Senate,
to appoint three commissioners for the Promotion of Uniformity of
Legislation in the United States,
"to examine the subjects of marriage and divorce, insolvency, the form of
notarial certificates, and othe1 subjects; to ascertain the best means to effect
an assimilation and uniformitv in the laws of the States, and especially tocon-
siderwhether it would be wise and practicable for the State of New·York to
invite the otl;ier States of the Union to send representatives to a convention
to draft uniform laws to be submitted for the approval and adoption of the
several states, and to devise and recommend such other course of action as
shall best accomplish the purpose of this Act."

1 P.44. s P.SO.
• Reports for 1890, p. 336.
 T-HE NEGOTIABLE INSTRUMENTS LAW 263

The Committee recommended the passage by each state and by

the Congress of the United States for the District of Columbia and
the Territories, of an act similar to the above, inserting further, as
proper subjects requiring uniformity of legislation, "descent and
distribution of property, acknowledgment of deeds, execution and
probate of wills.''
They recommended also that the Secretary be instructed to cause
the report and accompanying resolutions to be printed and to send
copies to the members of the General Council, the Vice-President
and to the members of this Committee in each of the States and
Territories and District of Columbia, with the request that they
unite in preparing, presenting and securing the passage of asimilar
bill in their respective states and territories. The report and reso-
lutions were adopted, Mr. Louis H. Pike, of Ohio, stating that the
same subject bad been considered by the Ohio State Bar Associa- ·
tion and by the National Bar Association; and that some of the
recommendations of the latter in regard to it bad been adopted by
some of the state legislatures and some action bad been taken
upon it.
This committee on Uniform State Laws made its second report in
1891,1 stating that as it had been found impossible for the members
to meet in convention, a circular had been issued by the chairman
and sent to each member requesting answers to inquiries as to what
steps had been taken looking to the formation of a Commission on
Uniformity of Laws in the recipient's state; and in what respect.
greater uniformity in legislation is deemed desirable and practica-
ble, etc.
Answers were received from most of the states, from judges of
the highest courts, and from lawyers who had made a study of
inter-state law. Commissions had been appointed on Uniformity
of Legislation in New York, Pennsylvania, Massachusetts, Michi-
gan,..New Jersey, and Delaware. The Committee found a sub-
stantial agreement of opinion that the desired uniformity could be
best secured by legislative action in the states, a conclusion that
has been verified by the results of subsequent experience.
"There was a substa~tial agreementin the view that the most urgent and
immediate need of uniformity or unification was in the matters affecting
directly the business common to and co-extensive with the whole country,
sr.ch as the enforcement of contracts, the validity, negotiability and construc-
tion of commercial paper and the formalities of all legal instruments and the
1 Reports for 1891, p. 365.
264 MICHIGAN LAW REVIEW·

proofs of their authenticity. It was apprehended ·that sudden, radical and

fundamental changes in the laws of Divorce, Descent and Distribution, how-
ever desirable, would meet with the greatest difficulty, and in most states
changes would be more likely tobeadopted, if at all, after the general advan-
tages of uniformitv in commercial matters had been demonstrated by exper-
ience. "1 .
The Committee on Uniform State Laws has reported from year to
year to the American Bar Association the appointment by state after
state of .Commissioners on Uniformity of Legislation. As these
Commissioners thus appointed by the States met in Conference each
year the same week the American Bar Association met and in the
same· place with them, and does so still, it resulted naturally that
the work on Uniformity of Legislation has been done at the Con-
ferences, and no longer by the Committee on Uniform State Laws
of the American Bar Association.
Turn we now to the annual reports of these Conferences. Many
of the earlier ones are already out of print and it is no longer possi-
ble to supply a complete set. Among the very first of the Uniform
Laws recommended at the Conference in 1892 was one of two short
sections relating to promissorv notes, checks, drafts and bills of
exchange. At this Conference Commissioners appointed for the
Promotion ofUniformitv ofLegislationfrom the states of New York,
Massachusetts, Pennsylvania, New Jersey,Michigan, Delaware and
Georgia were in attendance. The first Conference took place at
Saratoga Springs, New York, on the 24th and 25th days of August
1892, and the second at New York City on the 15th and 16th days of
November 1892. Since then they have been held regularly each year
in connection with the meetings of the American Bar Association,
at the same place and two or three days prior thereto, in order that
the Commissioners may attend the meetings of both bodies.
At the Conference held in Detroit, Michigan, in August 1895,
M'r. Bergen, one of'the Commissioners from New Jersey, offered
resolutions, which were slightly amended in form and-then adopted,
as follows:-
' 'Resolved, That the Committee on Commercial Law be requested to pro-
cure as soon as practicable a draft of a bill relating to commercial paper,
based on the English statute on that subject, and on such other sources of
information as may be deemed proper to consult, and cause said draft and
statute to be printed and sent by mail with a copy of this resolution to every
commissioner on uniform law in office.
"Be it further Resolved, That the comments on said draft be sent to the
chairman of said committee without delay and that said committee meet at a
1 (Paitc 366).
 THE NEGOTIABLE INSTRUi'lfENTS LAW 265

place to be appointed by the chairman at such time or place as the chairman

may fix, to revise said draft and report the same to the next meeting of this
Conference.
"And be it further Resolved, That the said committee be authorized to
expend a sum not to exceed two thousand dollars in the preparation, printing,
and mailing of said draft and bill."
Subsequently the Committee on Commercial Law met and appoint-
ed, a sub-committee of three, to carry out the instructions contained
in the resolution.
In September 1S95 this sub-committee employed John J. Craw-
ford, Esq., of the New York bar, who had made a special study of
th~ law relating to commercial paper, to prepare a draft of a bill as
required by the resolution. Upon its completion in December, it
was carefully revised by the sub-committee, and annotated for con-
venience of study. Copies were sent to all the Commissioners of
other states and comments were invited. The sub-committee con-
sisted of the three very able and efficient commissioners from New
Jersey, J. Franklin Fort, Frank Bergen and J. D. Bedle, and they
submitted their report to the legislature of New Jersey, January 24,
1896, in which they stated that although the act in question should
not be passed at that January session of the Legislature, of New
Jersey, as it was tobe submitted to the Conference of Commission-
ers the next sum:ner, they suggested that the bill be introduced,
printed and distributed among the members of the legislature or
otherwise published. Their recommendation was adopted and the
act was published in pamphlet form with the annotations referred to.
Copies were distributed generally throughout the country, in order
to make the proposed act as well known as possif>le.
At the Sixth Conference held at Saratoga Springs, New York,
August 15, 17, and 18, 1896, the Committee on Commercial Law
presented a copy of this draft of an act on Negotiable Instruments
and reported further that in addition to the examination and criti-
cism of the commissioners, the committee had sought the opinions
of experts and professors in this branch of the law and had been
aided by their suggestions in the final revision of the act as now
presented to the consideration of the Conference.
Mr. Crawford was present throughout the sessions of the Con-
ference, and during the three days the session lasted, the Confer-
ence examined the act, section by section, going through every
section with Mr. Crawford, asking him for explanations, suggesting
amendments that sometimes were adopted, but onlvafterfull exam-
ination and patiently hearing the arguments presented on both side$.
266 MICHIGAN LAW REVIEW

So thoroughly satisfied were the Commissioners present with the

draft that on motion of Judge Stiness of the Supreme Court of Rhode
Island, after the act was adopted as a whole, it was resolved that
the Conference express its high appreciation of the work done by
Mr. Crawford in drafting the Negotiable Instruments Act, and that
a record of thanks of the Conference be spread on the minutes.
The following year the Committee on Uniform Laws of the
American Bankers' Association, having been directed by the Exe-
cutive Council to prepare a uniform law for commercial paper, with
such legal assistance as might be desired, reported that the Negoti-
able Instruments Law seemed to be a better law for the purpose
than any they could possibly frame.
This committee submittted a report giving a summary of the
genesis of our law for which the committee acknowledged its
indebtedness to an article by Mr. She11Vood published in the Yale
Law Journal, to which also the writer would here refer, as well as
to this report, published as an introduction to an edition of our act
printed and distributed all over the Country by the American Bank-
ers' Association. This committee·approved our act ("Amore use-
ful or thoroughly_prepared statute on Commercial Law would be
difficult to find") and recommended the Association to urge its
State Associations to present the law to their respective State Leg-
islatures for passage. They recommended further, the appointment
of a committee whose duty it should be to correspond with the sev-
eral State Associations and to look generally after the passage of
the law by the several State legislatures.
This report was adopted and the act was re-published and dis-
tributed throughout the country by this powerful Association. It
has co-operated with the Commissioners on Uniformity of Legisla-
tion since then, in endeavoring to secure its adoption by the Legis-
latures of the various states.
These endeavors have sometimes had a humorous turn even
though they exhibit a lamentable phase of American politics. In
one state, after a full discussion before the Judiciary Committees of
both Houses and a favorable report from both Committees, sundry
members learned that the law had been favorably reported upon by
the Bankers' Association. Thereupon they reasoned that there
must be' 'something in it" for the bloated capitalist owners of banks,
and the act was "held up," to exact payment for its passage. It is
still held up in this state and will remain so, until the members
become convinced by better education that all there is in it is the
 THE NEGOTIABLE INSTRUMENTS LAW 267

public spirited wish of bankers as well as of lawyers to promote the

welfare of their country.
In another state noted for its subservience to a machine and its
boss the act was soon carried through both Houses without a neg-
ative vote. Upon enquiry how this happened, we were told the
boss was assured that the act was a good one, with no politics and
no money in it; that it was intended solely for the public good and
that it ought to be adopted as it would help him with the people of
the state if occasionally he did something for their benefit. Being
broadminded enough to see the reasonableness of this proposition,
he submitted the act to the lawyers of the machine, and the machine
always commands the services of lawyers of high ability. They
agreed with the argument advanced and the law was carried through
at once.
In another state the act has been "held up" for some years now
because the chairman of the Judiciary Committee is opposed to it
and will not allow it to be considered by his Committee.
Year after year, however, one state after another has adopted the
act, after full consideration before the Judiciary Committee of its
legislature of arguments pro and con, until now it is the law of 21
States, 1 District and one '.rerritory. 1
1 New York Laws of 1897 Ch. 612 Beca111e r.aw May 19, 1897.
New York I,aws of 1898 Ch. 336 Bcca111e I.aw April 26, 1898,
Connecticut I,aws of 1897 Ch. 74 Approved April 5, 1897.
Colorado I,aws of 1897 Ch. 64 Approved April 20, 1897.
Florida Laws of 1897 Ch. 4524 Approved J'unel, 1697.
Massachusetts Laws of 1898 Ch. 533 To take effect J'an.1, 1899.
lllassachusetts Laws of 1899 Ch. 130 To take effect Mar. 6, 1899.
Maryland Laws of 1898 Ch. 119 Approv<!d March 29, 1898.
Vir&inia I.aw• of 1897-8 Ch. 866 Approved March 29, 1898.
Rhode Island Laws of 1899 Ch. 674 To take effect J'uly 1, 1899.
Tennessee Laws of 1899 Ch. 94 To take effect May 15, 1899.
North Carolina Laws of 1899 Ch. 733 Went into effect lllarch 28, 1899.
Wisconsin Laws of 1899 Ch. 356. To take effect May 15. 1899.
North Dakota Laws of 1899 Approved March 7, 1899.
Utah Laws of 1699 Ch. 149 To take effect J'uly 1. 1899.
Ore&on Laws of 1899 Sen. Bill 27. Approved Feb. 16, 1899.
Washin&ton Laws of1899 Ch.149 Went into effect March 22. 1899.
Dis. of Colu111bia Laws of 1899 u. S. Stats. Approved J'an. 12, 1899.
Arizona R. S. 1901 Title XI.IX, ii! 3304-3491 To take effect Septe111bcr 1, 1901.
Pennsylvania Laws of 1901 <'h. 162 Approved May 16, 1901.
Ohio Laws of 1902 Sen. Bill 10 To take effect J'an. l. 1903.
Iowa I,aws of 1902 Ch. 130 Approved April 12, 1901.
NewJ'ersey I.awsofl902 Ch.184 ApprovcdApril4, 1902.
Montana Laws of 19C3 Ch. 121 Approved March 7, 1903.
Idaho Laws of 1903 Sen. Bill 86. Approved March 10, 1903.
268 ll1ICHIGAN LAW REVIEW

This long and necessarily dry history has been given to show
that the Negotiable Instruments Law is not the product of hasty
immature legislation, but is the slow product of an evolutionary
process that has been going on for the last quarter of a century. It
shows, further, that many editions of the act, have been printed
and distributed generally throughout the country, not only by the
Commissioners, but also by the American Bankers' Association and
by the state legislatures, and articles have been written and pub-
lished in law journals and elsewhere, explaining the act.
In addition to all this, copies were sent to the Commissioners
from each State to distribute in their respective States, the Confer-
ence thus doing all it could to secure knowledge everywhere, of
the measure proposed.
In Rhode Island, the Commissioners'· annual Feport submitted to
the general assembly at its January session 1897, contained the act,
annotated by the Commissioners with all the cases that had been
decided in Rhode Island upon questions covered by the act.
In some inexplicable way, in ~pite of all the efforts of the Com-
missioners and of the Bankers' Association to make the Negotiable
Instruments Law known throughout the country; notwithstanding
the publication of numerous editions of the law and its distribution
everywhere; notwithstanding the introduction of this law year
after year before legislature after legislature, with its reference to
their judiciary committees, public hearings and reports thereon,
followed by public discussion and adoption of the law by fifteen
states and the District of Columbia by an act of Congress, notwith-
standing the efforts naturally . made by the expert authorities on
this branch of the law to follow legislation thereon and the deci -
sions of the courts upon cases arising thereunder, it was not until
years after all this had been going on, apparently not until
1900, that the Negotiable Instruments Law . claimed the
attention of one who is recognized as standing Primus
inter pares in his knowledge of this branch of the law, Professor
Ames, now Dean of the Harvard.Law School.1
His objections were first made known to the Commissioners when
they met in Conference at Saratoga Springs, in August, 1900, four
1 Mr. McKeehan, on p. 82 of his pamphlet, says that Professor Ames saw the act for the
first tii,ne after its adoption by four State legislatures. By the antecedent table (p. 267), it
will be seen that four states had adopted it in 1897. Then Professor Ames first saw the act
some time after 1897, and before it was adopted by the fifth state, which was early in 1898,
But his objections were not made known until August, 1900, at which time fifteen states
and the District of Columbia had adopted the act.
 THE NEGOTIABLE INSTRUMENTS LAW 269

years after they had adopted the act. At this meeting, on motion
of Mr. Saunders, of Virginia, a committee of which the President
of the Conference, Judge Brewster, was chairman, with Messrs.
Withington, of California, Stiness, of Rhode Island, and Smith, of
Illinois, was appointed to meet the Dean, to consider certain sug-
gestions made by him on the subject of the Negotiable Instruments
Law, and to report to the Conference their conclusions. They met
the Dean that evening and went over with him until late that night,
or rather until early the following morning, his objections, and
their replies thereto. The next morning they made the following
report to the Conference:-
"The committee appointed to consider the criticism suggested by Pro-
fessor J. B.Ames npon the Negotiable Instruments Law, respectfully report
that they met with Professor Ames, and have carefully gone over the points
suggested, and are of the opinion that no changes or amendments are neces-
sary or desirable."
This report was received, and after full explanation by the com -
mittee, it was voted to approve the repo1 t and to adopt its con -
clusions.
Professor Ames then published an article entitled: "The Negoti-
able Instruments Law," 1 in which, while awarding a generous
recognition and praise of many merits to the law, he nevertheless
pointed out what he alleged were defects that should be amended.
To this Judge Brewster, President of the Conference, published a
reply2 entitled: "A Defense· of the Negotiable Instruments Act."
Professor Ames replied in an article3 entitled: "The Negotiable
Instruments Law. A Word More.''
Judge Brewster again replied in an article4 entitled: "The
Negotiable Instruments Law. A Rejoinder to Dean Ames."
1902 the Harvard Law Review Publishing Association published
a pamphlet containing the Negotiable Instruments Law, all the
above articles, together with a supplementary note by Dean Ames,
and a reply thereto by Judge Brewster, hereinafter cited from as
"the pamphlet" for the sake of brevity. 5
John Lawrence Farrell, of the New York Bar, also wrote an
article entitled, "The Negotiable Instruments Law, a Reply to the
1 14 Harv. I,aw. Rev. p. 241, for December. 1900.
• JO Yale I,aw J'ournal, p. 84. in J'anuazy, 1901.
a 14 Harv. I,aw Rev. p. 442, for Februazy, 1901.
4 15 Harv. I.aw Rev. p. 26, for May, 1901.
s Coples of this pamphlet may be procured of the Harvard I,aw Review, Cambridite,
Mass.
270 MICHIGAN LAW REVIEW

Criticisms of Jam.es Barr Ames,' ' 1 subsequently reprinted in

pamphlet form.
Charles L. McKeehan of the Philadelphia Bar, also wrote an
article entitled, ''The Negotiable Instruments Law, a Review of
the Ames-Brewster Controversy," 2 subsequently reprinted in
pamphlet form. These are the articles hereinafter referred to.
And finally Professor Ames published another article3 entitled,
''The Negotiable Instruments Law, Necessaty Amendments,''
renewing his criticisms.
The following section of this paper is devoted principally to an
examination of these criticisms, for the friends of the law fear that
were no answer made, it might be thought that the criticisms so
ably presented by such an eminent authority on this branch of the
law, are unanswerable.
Section 9-3,4 is as fo~lows:-
"The instrument is payable to bearer--. (3) When it is payable to the
order of a fictitious'person, and such fact was known to the person making it
so payable.''
The learned Dean thinks the provision_ should be:-
•'If a bill be drawn, or a note made, payable to the order of a person
known by the drawer or maker to be fictitious or non-existent, or of a living
person, not intended to have any interest in the instrument, and if such bill
or note be iudorsed by the drawer or maker in the name of the nominal
payee, the instrument will have the same effect as a bill or note payable to
the order of, and indorsed by, the drawer or maker respectfully.''
He objects to treating such an instrument as being payable to
bearer.
To this Mr. McKeehan replies:-5
"As a matter of fact, however, the act, on this point, merely codifies that
which has been the settled law of England and America for more than a
century. The arguments in support of Professor Ames' view were fully pre-
sen1ed, both to the Court of King's Bench and to the House of Lords, in the
leading case of Minet v. Gibson (1 H. Bl. 569), decided in 1791. Both courts
repudiated them, and held that the holder, in due course of a bill payable to
the order of a fictitious person, could, as against the drawee who accepted,
knowing that no such person existed, declare on the bill as payable to bearer,
and recover."

1 "The Brief of Phi Delta Phi," Vol. m,, No. 2. First Quarter, 1901.
• American I.aw Re~ster, Vol. 41 N. s., Nos. 8, 9, and 10, Auzust, September, and
October. 1902.
a XVI. Harv. I.aw Rev. p. 255, for February, 1903.
• Crawford, Ann. N. I. L. sec. 28.
' P. 12 of hilt pamphleL
 THE NEGOTIABLE INSTRUMENTS LAW 2~1

As the Dean says nothing in his concluding article1 about this

section, it is presumed he no longer insists on his objection.
Whether such an instrument must be indorsed before it can be
negotiated, has not been decided, but as. a matter of fact, perhaps
out of abundance of caution only, a bank will insist upon the name
of the payee being indorsed before it will accept such an instrument.
'J'his was pointed out bv Mr. Farrell on page 157 of his pamphlet.
Sec. 9-1-5, 2 is as follows:-
"The instrument is made payable to bearer:
(1.) When it is expressed to be so payable: o r - -
(5.) When the last or only indorsement is an indorsement in blank."
The Dean finds this language, borrowed from 8 (3) of the Eng-
lish act, not well chosen, because a note made payable by A, to the
order of B, bearing the anomalous blank indorsement of C, would be
payable to bearer, as the only indorsement is an indorsement in
blank.
Mr..Farrell answered :-3
"This conclusion is unfair, and is the result of an unreasonable interpre-
tation of the sub-section. Aside from that, it is, as a matter of fact, inaccur-
ate. The language of the sub-section shows clearly that reference is made to
an indorsement in the ordinary and regular course. 'l'he instrument is paJ'•
able to bearer only when the indorsement is made in blank. How could this
include or refer to an anomalous indorsement, which is always in blank?"
It is not necessary to examine the Dean's further exceptions·,
Judge Brewster'sreply,4 the Dean's reply tothis, 6 and the Judge's
concluding reply, 6 for as the Dean does not refer to this subject in
his last article, 7 it is presumed he no longer insists on his objec-
tions.
This last article is in the nature of a judicial summing up, at ~e
end of a learned controversy over abstruse propositions of law by
an acknowledge.l authority, and therefore calls for the most careful
examination. The learned Dean,8 "retains his conviction that it is .
wiser to have no code at all than to adopt the Negotiable Instru-
ments Law in its present form.'' This is a serious indictment, not
only of the drafter of the act and o_f the commissioners, all lawyers,
coming from all over the United States, but equally of the judiciary
committees of the legislatures of the twenty-three jurisdictions

1 XVI.Harv. I.aw Rev. 255. s Crawford, sec. 28-l•S.

• P. 137 of his article. i P. 52 of the pamphlet.
6 P.63do. IP. 74 do.
r Harv. I.aw Rev. February.1903. a Op. 261.
 272 MICHIGAN LAW REVIEW

within the Union, that have recommended the adoption of this law,
It includes the judiciary committees of both Houses of Congress. Is
the indictment warranted?
Our formidable accuser thinks1 that sections 20, 40, 65-4, 130-3,
120-5, 120-6, and 137, "would be wisely amended by making
them uniform with the English Act,'' and that sections 124 and 186
"not only change well established American law, but also threaten
·serious injustice.''
We will examine these objections seriatim. Section 202 is as
follows:-
''Where the instrument contains, or a person adds to his signature words
. indicating that he signs for on behalf of a prinripal, or in a representative
capacity, he is not liable on the instrument if he was duly authorized, but the
mere addition of words describing him as an agent, or as filling a represen-
tative character, without disclosing his principal, does not exempt him from
personal liability.''
· This section is similar to Art. 95 of the German Exchange Act,
and was deliberately adopted after mature consideration by the
Commissioners at their Conference in 1897, when they spent three
days examining the law, section by section. They changed the section
as drawn by Mr. Crawford, in order to.do away with the unjust
principle of law that courts have felt bound to follow, even when
condemning it, that one who signs an instrument in a representative
capacity, even though duly authorized by his principal, is individu-
ally bound, unless he adds to his signature the explicit statement
that he is not _signing in his individual capacity. It was admitted
by the Commissioners that the agent signing in his representative
capacity should be personally liable if he have no authority so to
sign. If A, mistakenly believing he is authorized, signs a negoti-
able promissory note "A, agent for B," and delivers it to C, the
payee, why should not A be liable individually for the whole
amount of the note? Should not A have ascertained what his
authority was before signing such a note? Why should his liability
be limited, if B afterward becomes bankrupt? Does it not add to
the negotiability of the instrument and to the simplicity of the
transaction, to lay down a rule under which all may know in
advance _that in such a case A is answerable for the full amount
of the note, instead of being answerable for the uncertain amount,
that perhaps ·cannot be reduced to certainty until long afterward
-when it is ascertained through the slow process of proceedings in
1 P.256. • Crawford, Ann, N. I. I,, sec:. 39,
 THE NEGOTIABLE INSTRUMEN1S LAW 273

bankruptcy, how much B's assigned estate will divide among his
creditors? ·
Nor is it a valid objection as urged by the Dean that "this is a
departure from theEnglish act and from the almost universal cur-
rent of judicial decisions.' ' 1 A code is not formulated to follow
the current of decisions when the current is wrong, and the law
ought to be changed. At the Conference in 1896, when the
Negotiable Instruments Law was considered in detail by the Com-
missioners, and this was changed from the form proposed by Mr.
Crawford, the draftsman of the act, the Commissioners present from
Rhode Island were insistent upon the change to the form adopted,
having in mind, and callingto the attention of their co-commission-
ers, the Rhode Island case of Roger Williams Nat. Bank v. GrotO#
Mfg. Co., 2 in which the defendants who indorsed "Trustees of
Estate of Amos D. Smith,'' with authority to do so, were neverthe-
less held personally liable, although such was not the understand-
ing of any of the parties to the transaction, because they had not
added to their indorsement anything clearly restricting by the use of
apt words their liability to theirrepresentative capacity. The deci-
sion was good law, yet a shock to the conscience, and it was felt by
the Commissioners that such should no longer be the law under the
Negotiable Instruments Law.
Mr. McKeehan f?ums the matter up well, p. 31 of his pamphlet,
when he says that the rule the Commissioners adopted is supported
by the authority of several states, by the German code, by some of
the best expert opinion of England, tends to increase the negotia-
bility of the instrument, and enables a plaintiff to know and prove
with ease and certainty the amount to be recovered.
Nor can it be said that the rule imposes upon the parties a con-
tract not in the contemplation of any one, when they enter into such
a contract with an explicit statute in force before they enter into it,
that specifies that this is what such a contract means. They have
implied knowledge, if not actual knowledge, of the law. It is
negligence for A to make such a contract without ascertaining
what the law is.
"The agent should not be allowed to take refuge behind the statement
that he supposed be had authority. Where he has signed the instrument
with full knowledge that he did not have authority, there should certainly be
no question as to his liability. "3 *
1 Pamphlet, p. 36. ~16 R, I. 504. a P. ,39 of Mr. Farrell's article.
* The learned Dean thinks that an innocent but mistaken agent should not be cbarzed
with ~eater damaze than he caused. The answer is that if he does not disc:lose his prlnci-
i74 MICHIGAN LAW REVIEW

The next objection of the learned Dean is to 40 :-1

"Where an instrument payable to bearer is indorsed 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. ''
The Dean objects to this section as inconsistent with sections
9-1 and 9-5:-2 ·
"The instrument is payable to bearer: (1.) When it is ~ressed to be so
payable. • • (5.) When the only or last indorsement is an indorsement in
blank."
There are two ways in which this can be construed. One is the
way proposed by the Dean, that it includes instruments originally
made payable to bearer and also instruments subsequently indorsed
specially, thus reviving the objectionable doctrine of Smitlt v.
Clarke, Peake 225, in which Lord Kenyon failed to follow the
custom of merchants, as he should have done. The other way is to
construe this section as applicable only to instruments originally
made payable to bearer, a construction vigorously upheld by both
Mr. Farrell and Mr. Mc Keehan, by convincing arguments to which
the reader is referred. This view is further sustained by the fact
that such was the custom of merchants before Lord Kenyon
changed the law.
Upon the familiar principle that a document or statute is to be so
construed as to give effect to all its provisions, if possible, it follows
that a court of justice would not adopt a construction that would
negative one section of this law, wh:en it has before it another con-
struction that would give effect to.both sections, a construction, too,
that has in its favor other strong reasons, as above shown. It is
possible that the learned Dean is under some misapprehension
caused by overlooking Sec. 9-5: "The instrument is payable to
bearer:-(5.) When the only or last indorsement is an indorsement
in blank."
The learned Dean's conclusion that section 40 should be
expunged is therefore unwarrantable.
The learned Dean objects to section 65-4:-8
"Every person negotiating an instrum.ent by delivery or by a qualified
indorsement warrants. * * * (4.) That he has no knowledge of any fact

pal. credit is given to him, not to the principal. Therefore he should be liable for the whole
amount. leavin2: him to his remedy over, if any there be, a2:ainst his undisclosed principal,
and thus the instrument is rendered more negotiable.
1 Crawford, 70. s Crawford, 28-1 and 28-5. a Crawford, 115-4.
 THE NEGOTIABLE INSTRUMENTS LAW 275

which would impair the validity of the instrument or render it valueless. But
when the negotiation is by delivery only, the warranty extends in favor ofno
holder other than the immediate transferee."
His first objection is that it
"Introduces the novel distinction that a transferor by delivery is a war-
rantor of title and genuineness only to his immediate transferee while the
similar warranty of the indorser without recourse runs to all subsequent
holders. There is no authority for this arbitrary distinction. The only
decision on the point is against this distinction."
Citing Watson v. Clzesire, 1 good authority on the point that
every one admits, that an indorser without recourse cannot be charged
on his indorsement.
Here, as elsewhere, it would seem that the Dean has a different
conception from that of the Commissioners as to the requirements
of a code. It is not a question of following authority. The courts
follow the authority of precedents. Codifiers are not obliged to,
unless the reasoning of the precedents and the good results derived
from following them are convincing to their minds. Codifiers may
make a distinction-even what the learned critic calls an arbitrary
distinction-if they see good reason for it. This question is not
whether it is an arbitrarv one, nor whether there is authority for it
-the question is whether the distinction is one that should be
made.
There is a plain, common sense reason for the distinction. One
selling a note verbally and giving title by delivery only, should be
bound to his immediate vendee only, for he has made no repres~n-
~tion to anyone but to that veno.ee. If he sells and delivers a
horse, verbally warranting him to be sound, his verbal warranty
does not run to any third person to whom his vendee ~ay sell the
horse. But when a vendor of a promissory note indorses it, even
though he add ''without recourse,'' he holds the note out as
genuine to anyone into whose hands it may come.
A note passing by manual delivery, is like a bank note. One
who has had a counterfeit bank note in bis possession, is liable to
the person to whom he passes it, but is not liable to a third person
to whom it afterwards is passed by the person to whom he passed it.
Further, one taking title bv delivery only is properly presumed
to have only such knowledge of antecedent facts as are disclosed by
the instrument. An indorsement, even when made ''without
recourse,'' carries with the instrument itself, knowledge to all
1 18 Iowa, 202.
276 MICHIGAN LAW REVIEW

subsequent holders that a delivery without any indorsement ·does

not carry.
The Dean objects further that 1
"Another new and unfortunate distinction is introduced by sub-section 4
by which the transferor of an instrument void for usury is not liable as a war-
rantor, unless he was aware of the usury, whereas the transferor of an instm-
ment void for coverture or voidable for infancy is liable as a warrantor,
although he is ignorant of the coverture or infancy."
The reason for the distinction is obvious. Usury is the result of
conduct between1 the parties of which an indorsei is not presumed
to have knowledge. Coverture, infancy or other disability affect
the competency of the parties to make any contract. An indorser
is presumed to warrant the genuineness and competent character of
previous parties, but not the result of their conduct unless he is
aware of it and it was illegal.
The details of the interesting discussion between the Dean and
Judge Brewster on this point may be found on pages 39, 55 and 65
of the pamphlet above cited. Suffice it to say that the Dean there
proposed an amendment, subseq~ently more fully elaborated, 2
· and that the Judge made merry with his critic, the Dean, for
objecting to what in earlier days the Dean had himself suggested,
i.e. that an indorser without recourse is responsible as a warrantor
to the indorsee and subsequent holders. At page 65 of the
pamphlet the Dean frankly confessed that a youthful indiscretion,
committed so long ago that it had passed from his memory, made
him fair game for the alert sportsman, thus adding a touch of humor
to this learned, recondite controversy.
Sec. 119-43 is as follows:-
" A negotiable instmmen tis discharged. (1.) By paymentin due course by
or on behalf of the principal debtor. * * * (4.) By any other act which
0

will discharge a simple contract for the payment of money."

The De~n says:-
"The acceptance of a chattel in satisfaction of an unmatured simple con-
tract claim discharges it. Therefore, such a provision discharges the note."
The explanation given by Judge Brewster in his first reply to the
Dean• has not yet been met. The section evidently relates to
acts between the parties. Otherwise the section would r~verse
established law as to a note in the hands of an innocent purchaser.
No one contends the negotiable instruments law has done this, and

1 P. 257. 2 Harv. Law Rev. for Feb., 1S03.

I Crawford. Ann. N. I. L. 200-4- • Pamphlet. p. 57.

 7 HE NEGOTIABLE INSTRUMENTS LAW 277

therefore, this section must be construed in such a way as to make

it consistent with the rest of the act. Sec. 57 clearly shows that a
holder in due course holds the instrument free from any defect of
title of prior parties etc., and requ~res Sec. 119-4. A forced con-
struction that would be "revolutionary, unjust and absurd," to use
Mr. McKeehan's words, (p. 63 of his pamphlet) is not to be
expected of any court taking a broad view 9£ the whole act and
especially of Sec. 57.
This count in the indictment fails also, even if we admit it would
have been well in matter of form, had the section contained the
explicit statement that it relates to acts between the parties.
Another answer, suggested by Mr. Farrell, is as follows:-
"As anything is a payment which a creditor a:cepts as payment or for the
purpose of extinguishing the debt d,ue him, the acceptance of a·chattel in
satisfaction of a note, would discharge it. But discharge by payment is
covered by sub-sections one and two, and as the acceptance of a chattel
before the maturity of the debt, is not a payment in dne course, or at
maturity, as required by the ·sub-section covering discharge bv payment, the
attempt to discredit sub-section 4 fails."
The next objection of the Dean is to Sec. 120-3. (Crawford,
Sec. 201-3.) ·
"A person secondarily liable on the instrument is discharged:- 3. By the
discharge of a prior party."
These words: "discharge of a prior party," must be construed
in connection with the context. In all the other ;;ubdivisions of
the section, some act of the parties is expresslv mentioned, as "in-
tentional cancellation." "valid tender," "release" and "agree-
ment." So in the section immediately preceding, only acts of the
party are referred to. Why then should it be supposed that in
subdivision 3, the word "discharg-e" is used in a different sense,
and is intended to include discharges by operation of law? It is
only by wresting the words from the context that any ambiguity is
created. As to .the bar of the statute of limitations, the delay
that permits the statute to run is the act of the parties, and is not
by operation of law.
How can there be any dottbt that this, too, relates to acts between
the parties? The learned Dean has not met the answer by Judge
Brewster at page 57 of the pamphlet.
"The law has long been settled thatthe discharge of the liability of a bank-
rupt maker of a note does not affect the liability of the other parties on the
note. It is generally held that the statute of limitations against an indorser
rnns, not necessarily from the date of the note, bnt from the time when the
278 MICHIGAN LAW REVIEW

indorser's liability accrues. When, therefore, the language of sub-section 3

is used {exactly as given in a number of the text-books) it, of course, refers
to a discharge by the holder and not a discharge by act of the law, as the
whole context, referring to acts of parties and not any acts of the law, clearly
indicates. Thus Randolph, second edition, page 769, says the release of a
prior indorsement discharges subsequent indorsers, assuming, of course, their
release by the holder. That this is the natural meaning and interpretation of
sub-section 3, Sec. 120, is fairly inferable from this fact. Ten books on com-
mercial paper have been published since the Negotiable Instruments Law was
legislatively adopted. All of them treat more or less fully of that law; Huff-
cut, Randolph, Bigelow, Norton, generally, andSeloverand Crawford and the
special books on the New York and Colorado acts, treating of that act alone.
Not one of these ten authors intimates that sub-section 3 has changed the
law in the slightest degree. In all the reports of the various commissioners to
their respective States, elaborately stating every change of the law made by
the Negotiable Instruments Law, no allusion is made to sub-section 3.
It is not necessary to invoke the aid of the rule of law in Sutherland on
Statutory Construction,· Sec. 156, that codes that condense and reaffirm in
general, the rules of the common law, do not repeal the exceptions to these
niles which they reaffirm ;or the similar doctrine of Endlich on Statutes, Secs.
127-205, that in statutes or revision condensing or in general re-stating the
common law, no change is presumed except by the clearest and most impera-
tive implication. How far this doctrine is carried in England, in regard to
.the Bills of Exchange Act, is shown in the case of the Bank of England v.
Vagliano, I,. R. 1891, Appeal Cases, page 144. But were this doctrine
invoked, the simplest application of the rule or of Sec. 196 .would at once
relieve the sub-section in question of the misrepresentation put upon it bythe
Dean. Nevertheless, our critic, whose adjectives here and there are surpris-
ingly vigorous, describes this aphorism of the law merchant as 'the most
mischievously revolutionary provision of the new code.' "
The very vigorous defense of this section by Mr. Farrell, pages
154-155 of his pamphlet, should also be read in this connection.
Can the Dean believe that the courts ~ould adopt a conclusion
that would constitute, in his words, "a legal inonstrosity?" 1 a
conclusion, that, also in his words would be ''the- most mischiev-
ously revolutionary provision in the new code?" 2
Mr. McKeehan, p. 69 of his article, sums up well Judge
Brewster's reply, but he concludes, p. 70:-
"It is to be earnestly hoped that the courts will adopt Judge Brewster's
interpretation (construction.) It is to be as earnestly regretted that the com-
missioners did not express themselves unmistakably on so important a point."
The express statement might have been added that' this section
also relates to acts between the parties. Undoubtedly it will be so
construed by the courts.
l P. 259 HKrV. I.aw Rev•• Feb•• 1903.
s P. 42 of the H. I,. R. pamphleL
 THE NEGOTIABLE INSTRUMENTS LAW 279

Mr. Farrell contends that this section means that if the holder, by
acts either of omission or commission, shall impair or destroy the
rights of prior parties to indemnity, from one liable over to them,
the latter are discharged. The learned Dean reads into this sec-
tion the words, ''by operation of law,'' but he does not convince us
that he does so with sufficient cause. He then reasons:-
, "One secondarily liable would ~e discharged, therefore, if any prior party
should be discharged by the Statute of Limitations, or if any prior indorser
should be discharged by the holder's failure to give him due notice of dis-
honor, and, in jurisdictions where joint obligations are not made joint and
several by statute, the death of a surety co-maker, would discharge all sub-
sequent parties."
Mr. Farrell continues:-
"If a holder should allow the debt to drag along for years, until, by
force of the Statute of Limitations, the debtor is discharged, upon what
theory, either of human law or of abstract justice, he is entitled to protection?
Why should the law go to unreasonable extremes to guard the interests
of one who is himself negligent in not suing within the statutory period?
In addition it would be an injustice to an intermediate indorser.
Mr. Farrell says also, (p. 155) : -
"According to Professor Ames's literal interpretation, if an intermediate
indorser should, upon receiving notice, do absolutely nothing, instead of giv-
ing notice to the person liable over to him, thereby taking advantage of his
knowledge that the holder had not sent notice to the first indorser, whom •the
holder probably knew nothing about, such intermediate in<lorser would him-
self be discharged. But the law does not contemplate that a man shall, by
pursuing a policy of masterly inactivity or worshiping the god of silence, re-:
lieve himself from his obligations. Professor Ames understands all this and
knows that no other construction would or reasonably could be put upon the
language by the courts."
The Dean's ~al objection to this sub-section is:-
"If the holder ~ppoint an indorser his executor, the law, regardless of
the intention of the parties, discharges all subsequent indorsers. Is this a
discharge by operation of law or by the act of the parties?"
Notwithstanding the positive statement by so eminent an author-
ity, it is submitted that there is no discharge in such a case. The
executor-indorser and subsequent indorsers remain liable, and the
former •is regarded as holding the debt in trust for the creditors and
legatees. The common law rule has been changed by statute.
And even if it were still in force, it would be a discharge by opera-
tion of law and not "by an act between tlze parties," as the Dean
would have us believe.
280 .MICHIGAN LAW REil'IEW

Secs. 120-5 and 120-6( Crawford, secs. 201-5.and 6 are as follows:

"A person secondarily liable on an instrument is discharged-
(5.) By release of the principal debtor, unless the holder's right of recourse
against the party secondarily liable is expressly reserved;
(6.) By an agreement binding upon the holder to extend the time of pay-
mentor to postpone the holder's right to enforce the instrument, unlessmade
with the assent of the party secondarily liable, or unless the right of recourae
against such party is expressly reserved."
The learned Dean says ''No elasticity of interpretation can correct
the errors of these sub-sections." But are they errors? Not
according to Daniels. 1
As Mr. .Farrell points out, the "party primarily liable" is the
person, who, by the terms of the instrument, is absolutely required
to pay the same, while the "principal debtor" may be the party
who appears on the face of the instrument to be secondarily
liable.:a
In the opinion of the drafter of the· act and of the Commissioners
it was deemed right that this should be the law, irrespective of con-
flicting decisions, and theref~re they adopted this section. If by
"the errors of these sub-sections'' the learned Dean means that the
Commissioners did not follow the particular line of precedents that
he considers the best as authorities, there is room for difference of
opinion. All that need be said further is that the Commissioners
and the Dean are of diffei:ent opinions and we must trust to future
decisions to decide which was right.
Sec. 137 ( Crawford, sec. 225), is as follows:-
"Where a drawee to whoµi a bill is delivered for acceptance destroys the
same, or refuses within twenty-four hours after such delivery, or within such
other period as the holder may allow, to return the bill accepted or non-
accepted to the holder, he will be deemed to have accepted the same."
The Dean says in his first article commenting on this section:
"A refusal to accept is an acceptance. " 3 Judge Brewster replied'
pointing out that it is not a refusal to accept that is to be deemed
an acceptance, but the refusal to return-a very different thing.
The Judge also pointed out 5 that the provision making the destruc-
tion of a bill to b~ an acceptance was taken from the statutes of
eight states, New York, Alabama, Arkansas, Idaho, Kansas,
Nevada, Washington, and California, that the bankers regarded it
1 Neg. Ints. 5th Ed. 1903, i! i! 1326-1388a. ' Sec p. 157 of his pamphlet.
a P.134, "P, 51. • P. 72.
 THE NEGOTIABLE INSTRUMENTS LAW 281

as a simple practical, definite working rule, and that none of the

twelve commentators on the N. I. L. had suggested the least objec-
tion to it.
In his latest article the critic finds this additional objectioµ: ''if
the drawee should throw the bill in the fire, the payee would have
no remedy until after dishonor for non-payment."
, "True. But even if the drawee should accept and then riot pay
at maturity, the payee would hav,e nQ remedy until after dishonor for
non-payment. How is he prejudiced? And supposing the payee
had taken the bill that the drawee refused to return, in absolute
payment of a claim against the drawer, is not his position simplified
and bettered by being thus ~nabled to sue the. drawer on his
acceptance?"
If he had not thought it would be bettereq, he WQuld not have SQ.
chosen.
Sec. 124 ( Crawford, sec. 205), is as follows: -
' 'Where a negotiable instrument is materially altered without the assent
of all parties liable thereon, it is avoided, except as againi;t a party who-
has himself made, a11thorized or assented to the aJ,teration, and subsequent
indorsers "
In the learned critic's first artitle 1 he said that this section, under
which the holder in due course mav e~force payment of an
altered instrument according to its original tent>r, is one of the
"judicious changes for the better" made by the American law. But
in his "Supplementary Note" 2 after the decision in Jefjrey v.
Rosenfeld 3 he holds that an innocent payee should be protected, as
well as a holder in due course. As Mr. McKeehan well says, 4
"How one can see any ambiguity in Section 124 is a mystecy."
"The only person who has ever suggested a doubt as to the meaning of this
section is Mr. Justice Morton, who wrote the opinion in Jeffrey v. Rosenfeld,
supra. In that case a note secured by a mortgage was altered, though by
whom did not appear, On a bill in equity to restrain the foreclosure of the
mortgage the court sustained the holder's right to foreclose without inter-
preting Section 124 of the code, though Justice Morton, in an obiter dictum
of some length, remarked that the question of interpretation WllS one that
deserved serious consideration. After referring to the authorities in thjs.
country that decided that a material alteration made by a stranger will not.
avoid the instrnment, he adds, 'It would seem not unreasonable to suppose it
was the intention of the framers of the American act that Section 124 should
be construed according to the law of this country, rather than that of Eng-
land.' As a generality, th.at remark is profoundly true, and applies to all the

1 (P. 32 of the pamphlet). s (P. 83, pamphlet.)

a 61 N. :S. R.49. • (P. 74 of his pamphlet).
28Z MICHIGAN LAW REVIEW

1ections of the new act. They should be construed according to American

law rather than English law. As applicable tothe particalar point'llilderdis-
cussion, however, the remark is of small value. If the language of 124 is
clear and unmistakable, it should be given its plain meaning. To construe it
according to the American law does not mean to knock it down simply because
it changes American law somewhat. The learnedJudgepoints out no ambig-
uity in the language of this section. His sole reason for doubting its very
plain meaning is that it changes the law. As a matter of fact, we learn from
.Judge Brewster that it was intended to change the law; that Mr. Crawford
reported to the Conference in 1896 in favor of adopting the common law rule
as to alterations by a stranger, in order that the law of the two countries might
be uniform on this important point, and in order that the benefit of written
evidence might be preserved. This view was approved by the Conference,
and section lZ4 was inserted to restore the English rule.
Professor Ames thinks that the change is for the worse, though he vouch-
safes no reasons. Under such circumstances, the profession cannot be blamed
for accepting without question the judgment of the learned and experienced
experts who drafted the new act. But at all events there is· no ambiguity in
thi& section. Its meaning is unmistakable.''
The changes suggested in this section by the learned Dean may
be excellent ones, but they should have been suggested before the
negotiable instruments law was generally adopted and they would
require the same changes in the English act, or there would be lack
of uniformity.
Sec. 186 ( Crawford, sec. 322), is as follows:-
'' A check must be presented for payment within a reasonable time after
its issue or the drawer will be discharged from liability thereon to the extent
of the loss caused by the delay," ·
We must consider Sec. 89 ( Crawford, sec. 160) , with it. It is as
follows:-
"Except as herein otherwise provided, when a negotiable instrument has
been dishonored by non-acceptance or non-payment, notice of dishonor must
be given to the drawer and to each indorser, and any drawer or indorser to
whom such notice is not given is discharged."
The Judge's answer is sound. He says, supposing that the drawer
of a check is discharged by the failure of the holder to give notice
of dishonor, what is the harm? The debt itself is not discharged
and the holder can sue and recover his debt just as he could have
done before the check was given. Sec. 186 is taken from the Eng-
lish act, as also sec. 89. If sec. 186 is, as the D.ean now says,
"opposed to the American andEnglish precedents," then both the
acts change the law, and it is certain that both the English and
American Law did it inadvertently (so the Dean says). But is this
probable?
 THE NEGOTIABLE INSTRUMENTS LAW 283

Mr. McKeehan concludes:-

"Butthe fact that these same provisions have proved satisfactory in the
English Act for twenty years-while not disproving the objection that they
are inaccurate-does indicate that little or no harm will result from that inac-
curacy.''
After a very careful study of Dean Ames' objections, of Judge
Brewster's and of Mr. Farrell's replies (this was before Mr. McKee-
han's article was written) the judiciary committee of the legisla-
ture of Pennsylvania, that state so noted for the sharpness of its
lawyers, thought it inadvisable to change a word of the act, and
passed it accordingly without any change, after a thorough discus-
sion of all the objections raised by Dean Ames, including the case
of Jqfrey v. Rosenfeld. 1
"This concludes the discussion. If it ispennitted to offer a cautious gen-
eralization on thi1 controversy, it is submitted that although Professor Ames
has pointed out two or three actual errors in the new law and has shown that
in still other instances the language might have been improved upon, never-
theless, these errors and imperfections are not sufficiently numerous or impor-
tant to make one seriously doubt the advisability of adopting the Negotiable
Instruments Law in every state in the Union. Itis e~sytoloseone's perspec-
tive and sense of proportion in such a matter. The flaws in the act, few
though they be, when grouped together and considered alone, seem formid-
able. Yet when a survey is made of the entire statute, when· one regards
the many salutary provisions which settle disputed questions or introduce
needed changes, when one studies the admirable simplicity and accuracy of
most of its provisions and considers the comparative unimportance of most of
the flaws which have been discovered, then the shortcomings of the Negoti-
able Instruments Law shrink to their real size and ( though still apparent)
do not seem likely to impair its usefulness. It is unfortunate that the com-
missioners did not have the benefit of l"rofessor Ames' criticisms when they
were revising the original draft of the act. That some of them would have been
adopted ( to the benefit of the act) can scarcely be doubted. But the act
having been started on its course and legislatively adopted in a number of
states before these errors were discovered, it was decided, and no doubt
wisely decided that it was unnecessary and impolitic to start the work of
amendment at that stage in its career. The readiness of several state legisla-
tures to adopt the act in spite of criticisms that have been made upon it and the
very small amount of litigation that has arisen under it in jurisdictions where
it has been in force for several years, have thus far vindicated the soundness
of the Commissioner's decision.
"Undoubtedly, however, Professor Ames has rendered substantial service
to the Negotiable Instruments Law. He has pointed out the difficulties and
possible dangers that lurk in some sections of it, and a careful study of his
criticisms by thosecourts which will becalled upon from time to time to con-
strue these sections, will serve to avoid some confusion and several unfortu-
nate decisions. After all, many, if not most of the flaws in the act can be
overcome by a careful interpretation. " 2
1 61 N. ~. R. 49. s By Mr. Mc:Kechan, at the close of his article.
.284 MICHIGAN LAW REVIEW

Oµr "work is human and therefore it has &.ws, as all human work
has, even the work of our eminent critic. It would be impossible
to draw an act that would not show some deficiencies when sub-
jected to the minute analysis ·our law has been subjected to. It is
confidently submitted however that it contains no "startling innt>-
-ration," "legal 1nonstrosity" nor "mischievous uncertainty;" that
there is .notliing "mischievous" abotit it and that it shows no
"return to archaic forinalistn." nor "inadvertence of the American
and English codifiers;" and that it cannot be said that "no elastic-
ity of interpretation can correct the errors of this sub~section."
Our critic finds all these evils in it, and in speaking of section 137
SQYs in his last article it is "worse than the writer first sup-
posed.'' ·
The very violence of the language used by a critic who increases
'i:n vehemence
I
every time he returns to the attack, aefeats the end
sought by him, as no one will expect the courts of this country to
adopt constructions of the Negotiable Instruments Law that will
bring about the awful results the_ learned Dean says are the neces-
sary consequences of our poor work.
It is remarkable how few cases have arisen under this law in the
many states that have adopted it. I have found only forty-two, and
of ,these, sixteen have arisen in New York, the great financial center
-of the country. The following is a snmtnary of these cases, in so far
as questions under the Negotiable Instruments Law are concerned,
following the order of its sections.
Louisville Coal Mining Co. v. Int. Tr, Co. 71 Pac. Rep. _898.
Col. Ct. of Apps. 1903.
Under Sess. Laws Col. 1897 s. 30 (Crawford Ann. N. I. L. s. 2
''Indorsement, '' means an indorsement completed by delivery. See
.tso s. -60) an allegation that the payee "indorsed and transferred"
is enough, confirming antecedent cases. Under the N. I. L. an
allegation that the payee indorsed the note to the plaintiff would
have been enough.
N. R. Mfg. Co. -v. N. H., P. & B. Co., 55 At. Rep. 604
{Conn.) 1903. •
The _plaintiff endorsed a negotiable promissory note to a bank,
for collection, before maturity. It was protested and returned to
the plaintiff and was produced at the trial with the endorsement
C!atlcttled.
Ht?IJ, the 'Ptkin'tilf bt!cl\me An ettdorsee in t,ossesslott, t1l'bn ~
return of the protested instrument, and invested with the rights ol
 THE NEGOTIABLE INSTRUMENTS LAW 285

all holders of commercial paper. See Gen. St. 1902, Chap. 234., s.
4170 (Crawford, Ann. N. I. L. s. 2.)
Such an indorsee in possession may cancel the indorsement it had
made. See do. s. 4218 (Crawford do. s. 78.)
Its mere possession of the note was sufficient to maintain suit.
See do. 4221, ( Crawford do. s. 90.)
, Merritt v. Jackson, 181 Mass. 69, 1902.
In an action against the indorser of a negotiable promissory note
payable on demand, demand made three months after the date of the
note.is not made within a reasonable time, under the Mass. N. I.
L. St. 1898, c. 533, s. 193 ands. 71 (Crawford, Ann. N. I. L., s. 4
and s. 131), and under the law merchant in Mass.
Zander v. N. Y Security & Trust Co., 78 N. Y. Supp.
900-190t.
A certificate of deposit issued by a trust company, payable to the
person named therein or his assigns, is not a negotiable instrument
under the N. I. L. (Laws of 1897, c. 612, s. 20,) nor under the
law mercl:ant. Affirmed by the Supreme Court, Appellate Division,
March 6, 1903. See 81 N. Y. Supp. 1151.
Nat. Sav. Bk. v. Cable, 48 At. Rep. 428-Conn. 1901.
An order, payable to A or order out of a fund of $300.00 "or
what may be due on my deposit book,•' is conditional, and there·
fore is not a negotiable instrument and does not import a considera-
tion under the N. I. L. of Conn. (Pub. Acts, 1897, c. 74, s. 1-2
( Crawford, Ann. N. I. L., s. 20), confirming the law merchant.
Slzepartl v. Abbott, 60 N. E. Rep. 782-Mass. 1901.
A direction to charge payment to a certain fund does not render
a bill non-negotiable, when the order states when the payment is to
be made. It is not conditional upon the coming due of that
particularpayment. See Crawford, Ann. N_. I. L., s. 20. The N.
I. L. is not cited, however, although adopted in Mass. in 1898·
Although the order was made payable on or before Nov. 1; 1899,
it may have been given before the N. I. L, was adopted.
Wis. Meeting of Baptists v. B®/ey, 91 N. W. Rep. 678, 1902.
Laws 1899, c. 356, s. 1675-5 subd. -2 (Crawford, Ann. N. I. I,. s.
24-2) provides that the character of an instrument otherwise
negotiable is not affected by a provision which authorizes a con-
fession of judgment if the instrument is not paid at maturity,
Held, that a note containing a power of attorney to enter judg-
ment upon it at any timcafteritsdate, "whether dueornot,3' is 11ot
a negotiable ill6tnnnent, following an~ent cases.
286 · MICHIGAN LAW REVIEW

McLeod v. Hunter, 29 N. Y. Misc. Rep. 558-1899.

"I pr~mise to pay to the order of A. $2,000.00 at his office, New
York City," is a note payable on demand under the N. I. L.
(Laws, 1897, c. 612, s. 26) confirming the law merchant.
In this respect it cannot be varied by oral evidence.
The omission of the words "for value received" does not im-
pair the note, affect its- legal import, or weaken the presumption
that it was given for value.
Guerrant v. Guerrant, 7 Va. L. Reg. 639-1902.
Under the N I. L. of Va. c. 866, Laws of 1897-8, s. 8 and 14
(Crawford, Ann. N. I. L, s. 27 ands. 33) one taking a negotiable
instrument before a blank in it is filled, is put upon notice, and
must ascertain the real authority of the person intrusted with the
incomplete instrument, reversing the previous rule. as in 33 Gratt.
377 established.
Boston Steel & Iron Co. v. Stener, 66 N. E. Rep. 646. Mass.
1903.
A check payable to the plaintiff_ was handed by defendant drawer
to her husband, to be delivered to the plaintiff, to pay a debt to
become due from her to the plaintiff, was fraudulently handed bv the
husband to the plaintiff in payment of a debt he owed the plain-
tiff and was accepted by the plaintiff in settlement thereof in good
faith. Held, the plaintiff is a bona fide purchaser for value with-
out notice, under St. 1898, c. 533 s. 69 and s. 4 ( Crawford Ann.
N. I. L. s. 91 ands. 51) affirming antecedent cases.
A check payable to the plaintiff was handed by defendant drawer
to her husband, to be delivered to the plaintiff in payment of her
debt to him, the amount being left blank and being filled in by the
plaintiff's manager ~th the husband's consent, and was applied
towards payment of his indebtedness to the plaintiff. Held, under
St. 1898 c. 533, s. 14 or 31 (Crawford, Ann. N. I. L. s. 33)
evidence was admissible to show the authority given to the husband
and the purpose for which it was given.
Greeser v. Sugarman, 37 Misc. Rep. N. Y. 799-1902.
One is a holder in due course who takes a note, even from a
thief, in good faith, for value, before maturity, without notice of
any defect, under the N. I. L. (Laws of 1897, c.612,ss.35, 91, 96)
affirming the law merchant.
Megowan v. Peterson, 65 N. E. Rep. 738, N. Y. 1902.
Under the N. I. L. (Laws of 1897, c. 612, s. 39) where, in an
action against defendant personally upon a negotiable promissory
 THE NEGO'IIABLE INSTRUMENTS LAW 287

note signed by him as "trustee," the evidence is conflicting as to

whether the property bought for which the note was given was for
the assigned estate or otherwise, and whether the payee agreed to
accept the note in the maker• s representative capacity, the jury must
pass upon the question in dispute.
Tolman v. Am. Nat. Bank, 22 R. I. 462, 1901.
, Under P. L. R. I. c. 674, s. 31. (Crawford, Ann. N. I. L. s.
42), where one procures a check by falsely pretending he is another
person (the maker knowing there is such a person) and indorses it
in the name of such payee, the indorsement conveys no title.
Before the N. I. L. the cases were contradictory on this point
and this case and other provisions of the act have given rise to much
controversy. See the articles in the pamphlets, etc., already
cited.
It is confidently submitted that the decision is correct. Suppose
A calls at my office and presents to me a bill of Smith against me
that he has picked up in the street, falsely representing himself to
me as being Smith. I do not know the man, but I know there is
such a man as Smith and that I owe him the bill in question.
Therefore I give A a check to the order of Smith, relying upon the
bank not to pay the check unless Smith's iridorsement is identified.
A fraudulently indorses the name of· Smith on the check, and the
bank pays the ch~ck without taking pains to identify the indorse-
ment. I see no ground for holding the bank can charge the amount
of thatcheckto my account. In fact, one ofthereasons whywe deposit
-our money in bank and pay our bills by check is that we may be
protected from such losses. The bank would be negligent in not
requiring identification of Smith's indorsement. This is a duty
assumed by a bank when it receives money to be paid out upon
the depositor's orders.
''The fact that the plaintiff has been imposed upon did not
relieve the bank from its duty to see that the money was paid accord-
ing to order" by Stiness, C. J., at p. 467.
The only argument to the contrary that occurs to me is the con-
tention that the question should be left to the jury, upon all the
evidence, to decide what was the intention of the drawer of the
check when he del_ivered it, and whether the bank was negligent.
Did the drawer intend the money should be paid to the man who
was actually before him, or did he intend it should be paid to the
man that man told him was before him, and whom he was mislead
into thinking was before him? There was no element of estoppel
 288 MICHIGAN LAW REVIE-W

in the case, for the bank had no knowledge of the false impersona-
tion of the fraudulent indorser until after it had paid-the check.
Further, the 24th section of_ the English Bills of Exchange Act
begins with the words ''subject to the provisions of this act.'' It
is therefore subject to the 60th section, and the bank would con-
seque_ntly be. protected according to the English law. The 23rd
section o"f the American act (Crawford, Ann. N. I. L. s.42) con-
tains no such introducing words and has no section corresponding
to the 60th section. The question is therefore what is the effect of
. the 23rd section; or·what was the English law independently ·of a
statutory provision similar to that contained in the 60th section of
the English act. This point seems to have been decided by Mead
v. Y~g. ·4 Tenn. Rep. p, 28, which was followed in Gra'lles v.
American Bank, 17 New York Reports, 205. According to these
cases, the bank would not be protected and could not debit the
customer's account with the money paid.
The N. I. L. states imperatively that where a signature is made
without authority of the person whose signature it purports to be,
it is wholly inoperative, and the decision follows the law, whatever
may be said of antecedent cases, whether in England or in the
United States.
Contra see Hof/man v. Am. Ex. Nat. Bk. 96 N. W. 112.
Sup. Ct. Neb. 1901.
B, an imposter, representing himself to be B', another person of
the same name, induced A to believe he was B'. Acting on such
belief A procured a draft to his own order, indorsed it to the order
of Peter W. Brubaker, the name common to B & B', and delivered
the draft to B supposing him to be B'. B indorsed the draft, was
identified as Peter W. Brubaker at defendant's bank on which the
draft was drawn and received the amount thereof.
Upon suit by A against the payee bank it was held that A can-
not recover.
There are two important facts, as I understand this case, that
distinguish it from the case of Tolman v. Bank.
( 1.) The two persons, the imposter and the person for whom the
draft was-intended. bore.the same name, Pete~W. Brubaker. There-
fore B did not commit forgery when he signed in that name, unless-
he imitated the signature of B', but he only obtained money under
false pretenses.
In .Tttltmm v. Batik the two persons bore different names au4
~efore the payee forged th-e other person's signature· when he
riod sendthe check.
 THE NEGOTIABLE INSTRUMENTS LAW 289

(2.) '!'he bank required identification and obtained it, through ~

notary who accompanied Peter W. Brubaker (B) to the bank
and introduced him there. '!'he element of estoppel, or conduct of
the plaintiff that "preclttded him from setting up the forgery or
want of authority'' was therefore present in this case. '!'here was
nothing to indicate it was Peter W. Bmbaker of Indiana and not
Peter W. Brubaker of Nebraska tha~ A intended the draft for.
It is submitted that where one sends a check or draft to the order
of ''B ot Indiana,'' a defendant bank is not protected if it pays it to
B of Nebraska. But that was not this case, as no restrictive words
were added. What distinguishes the case of Tolman v. Bank was
that the bank did not require identification and was therefore neg-
ligent. '!'here was no conduct on the part of A on which the
defendant bank relied, nothing that precluded the plaintiff from set-
ting up the forgery.
'!'he head note in the case of Hoffman v. Bank is misleading,
indeed it is not easy to tell even from the decisions themselves
whethe-r B & B' bore the same name. The opinion by the first
commissioner gives this impression, while the-opinion by the second
commissioner leaves it in doubt.
'!'he N. I. L. is not in force in Nebraska, but it is cited, and the
case of Tolman v. Bank is·also cited, but not followed. '!'he opin-
ion of Hastings, Commissioner, affirmed by th~ Supreme Court,
rests on estoppel, or in the language·of the N. I. L., the plaintiff
is "precluded from setting up the forgery or want of authority."
'!'here was reason for this in this particttlar case, as the defendant
bank exacted identification of Peter W. Brubaker, but in the case
of Tolman v. Bank, where the defendant bank did not exact iden-
ti_fication, this would be to create a new meaning for estoppel and to
make it include what it never yet b,as included, for how can there be
estoppel or conduct on which the defendant bank relied, of which
it had no knowledge when it acted?
'!'he case of .First Nat. Bankv. Am. Ex. Nat. Bank 49 N.Y. App.
Div. 349 ( 1900) does not seem to have arisen under the N. I. L.
For an interesting examination ·of this -question and citation of
cases pro and con, see the Banking Joqmal for May and June,
1901, and August, 1902.
Pettyjokn v. Nat. Ex, Bank 43 S. E. Rep. 203, Va. 1903.
Under N. I. L. of Vitginia, Art. 1, s. 23, c. 866, Laws of 1897-8
(Crawford, Ann. N. I. L. s.4zt action will not lie agaiMt a metn-
ber of a firm whose name has been ftaudulently written ~ ittdorser
"'290 MICH/GAN LAW REVIEW

·on a negotiable promissory note of the firm of which he was a mem-

·ber, but which firm was dissolved at the time the note was delivered,
•of which fact the taker was ignorant, affirming antecedent cases.
Bank of Monticellov.Dooly, 113 Wis. 590, 1902.
Upon examination of its assets, the directors of plaintiff bank
·found a negotiable promissory note signed by its cashier as a joint
maker, who, upon being interrogated, said that the defendantwas to
indorse the note, and went out and brought the defendant in who
i:hereupon indorsed the note. Held, under the N. I. L. (Laws
1899, c.' 356, s.1675-50, Crawford, Ann, N. I. L. s.50) that the fact
"that the defendant received no consideration for his indorsement
would not relieve him from liability on the note.
Deyo v. Thom/JSon, 53 App. Div. N. Y., 9-1900.
A non-negotiable promissory note does not import a consideration,
under the N. I. L. (Laws, 1897, c. 612, s. SO) and the law mer-
-chant, but changing the provisions of Part 2, c." 4-tit. 2-1-R. S. N.
Y. 768.
A subsequent holderfor value, J:>ona fide, can recover, notwith-
:standing the one he takes from may have knowledge of the infirmi-
ties of the instrument. See the N. I. L. Code, Art. 13, s. 77, affirm-
ing 75 Md. 406 at 419 (1892) antecedent to the N. I. L. See also
·Code, Art. 13, s. 43-45 (Crawford, Ann. N. I. L. ss. 50-51-52).
A holder for value from the payee, with the knowledge that the
-payee took it as an accommodation note, may recover of the maker.
Code, Art. 13, s. 48, affirming antecedent case, 40 Md. 562 (Craw..:
ford Ann. N. I. L. s. 55).
The breach of an executory ·agreement forming the consideration
of a negotiable instrument, is not a defense as against an indorsee
who took the note for value before maturity with knowledge of the
agreement, but without knowledge of any breach, before his pur-
chase, ~iting many former decisions.
Bringman etals Adms. v. Glahn, 71 App. Div. N. Y. 537-1902.
An action was brought upon the defendant's negotiable promis-
sory note. The plea was want of consideration. At the trial the
plaintiff read the note in evidence, and rested. In the absence of
evidence of want of consideration, the plaintiff is entitled to recover
under the N. I. _L. (Laws, 1897, c. 612, s. SO) . following a prior
decision in 153 N. Y. 67 and the law merchant.
Brewster v. Schrader, 26 Misc. Rep. N. Y. 480-1899.
The holder of a negotiable promissory note, given as collateral
security for an antecedent debt, is entitled to recover against an
 THE NEGOTIABLE INSTRUMENTS LA if 291_

indorser in fraud of whose rights this note has been diverted from.
the purpose for which it was given, under the N. I. L. (Laws 1897,
c. 612, s. 51) changing the law in New York and overruling the·
leading case of Coddington v. Bay, 20 Johns. 637, decided in 1822·
-and affirming the rule in Railroad Co. v. Nat. Bank, 102 U. S.
14 at 26 decided in 1880.
, The plaintiff is a holder for value whose title to the note is unaf-
fected by any existing equities between antecedent parties.
The rest of the opinion treats of "reasonable diligence" in giving·
notice of the dishonor of the note, holding it was a question of fact.
for the juryupon the evidence put in on both sides.
This opinion merits careful study. ]tis the first one so far exam-
ined in which the provisions of the N. I. L. have changed the ante-
~edent law in New York and it must certainly be admitted that the
rule thus enforced isthecorrect one, as hadalreadybeenheld in the-
Supreme Court of the United States, foritgives increased efficacy to
negotiable instruments in the hands of purchasers for value before--
maturity without notice of any defects.
Roseman v. Maloney, 83 N. Y. Supp. 749, 1903.
Although under the N. I. L. c. 612, Laws 1887, s. 51, "an ante-
cedent orpre-existing debt constitutes value," in an action against.
an accommodation indorser, there must be evidence that the holder
of the instrument gave up an antecedent debt, either wholly or qual-
ifiedly, to constitute consideration. In the absence of such evi-
dence, a just result cannot be permitted to be disturbed by predica-
ting error upon a refusal to charge on an issue not embraced within•.
the evidence.
Paynev. Zell, 98 Va. 294-1900.
Under acts, 1897, 1898, pp. 896, 918, s. 25 (Crawford, Ann. N.
I. L., s. 51), one who takes a negotiable promissory note in good
faith for value, without notice of any defect, for a pre-existing·
debt, is a holder for value and can recover thereon.
Molzlman Co. v. McKane, 60 App. Div. N. Y. 546-1901.
The acceptance of a negotiable promissory note payable at a future
date, for goods sold and delivered to the maker of the note, operates.
as forbearance of the right to sue the purchaser, until the maturity
of the note, and constitutes a consideration for an indorsement of·
the note made for the purpose of procuring its acceptance, under
the N. I. L. (Laws, 1897, c. 612, s. 51) affirming cases antecedent_
to that law as to such indorsement.
292 MICHIGAN LAW REVIEW

When notice of the dishonor is sent by mail to the defendant

indorser, directed to the place where the maker dated the note, the
indorser not having added her address to the indorsement, itis suffi. •
cient notice of dishonor. See Laws, 1897, c. 612, ss. 175, 179, and
also 160
Brooks v. Sullivan, 129 N. C. 190, 1901.
Where a negotiable prdmissory note is transferred before matu-
rity as collateral security for a pre-existing debt, the transferree is
not such a holder for value that he tak-es free from equities of which
he- had no notice.
Semble. This rule is changed by Laws, 1899, c. 733, ss. 25-27
(Crawford, Ann. N. I. L. ss. 51-53).
Nat. City Bk. v. Toplitz, 81, N. Y. Supp. 422, 1903.
The maker of an accommodation note is not relieved from liabil-
ity by an extension of time of payment given with.out her consent.
The N. I. L. (Laws, 1897, c. 612, s. 55) provides that the maker
of an accommodation note is primarily liable, and s. 3 provides
that the person primarily liable 01:1 a negotiable instrument is abso-
lutely required to pay the same.
Bankers' Iowa State Bk. v. Mason Hana Latlze Co., 90 N. W.
Rep. 612, Sap. Ct. Iowa, May 22, 1902.
Want of consideration is not a defense to an action on a negoti-
able promissory note, against an accommodation indorser, even
though the plaintiff acquired the note with knowledge that the
defendant was only an accommodation indorser. ( Crawford, Ann.
N. I. L. s. 55).
The N. I. L. adopted in Iowa in 1902, is not referred to.
Sclzwarlz v. Wilmer, 90 Md.1.361 1899.
A purchaser for value in due course of a promissory note can
recover against an accommodation maker, whether or not he knew
him to be only an aecommodation maker, when he took the instru-
ment under the Neg. Ins. Act of 1898, c. 119 (Crawford, Ann. N.
I. L. s. 55) confirming antecedent law, 69 Md. 356.
Waiver of notice of dishonor may be before or after dishonor, and
may be expressed or implied, under the N. I. L. of 1898, s. 128
(Crawford, Ann. N. I. L. s. 180) confirming antecedent law in
Md. s. 68 Md. 587. '
When an instrument has been materially altered and is in the
hands of a holder in due course, not a party to the alteration, he
may enforce payment thereof accorcling to its original tenor. See
the N. I. Act of 1898, s. 143 (Crawford, Ann.' N. I. L. s. 205)
 THE NEGOTIABLE INSTRUMENTS LAW 293

changing the antecedent law in Md. As this act was not in force
at the time the parties' rights became fixed, the law prevailed as it
stood before the passage of the act.
Strickland v. Henry, 66 App. Div. N. Y. 23, 1901.
A negotiable promissory note made for the accommodation of the
payee, and transferred by him before maturity to a third person at
40 per cent discount for interest is not enforceable by the transferee
against the accommodation maker.
Transferee's want of knowledge that it was accommodation paper
and had no inception until it passed into his hands, is immaterial.
The N. I. L. fLaws, 1897, c. 612, s. 55) has not altered this
rule.
Tke M. Grolt's Sons v. Sclzneitler, 34 Misc. Rep. N. Y.195, 1901.
Where the evidence given upon the trial of an action upon a
check tends to show that the holder had knowledge the check was
originally delivered upon a condition that had not been fulfilled, and
that its payment had been stopped; and the holder accepts it in pay-
ment of a past indebtedness of the immediate assignor, the question
whether the holder was a holder in due course under N. I. L.
(Laws, 1897, c. 612, ss. 91, 94, 95) isforthe jury.
Valley Svgs Bk. v. Mercer, 55 At. Rep. 435, Md. 1903.
Under the N. I. Act, Art. 13, s. 75, Md. (Crawford, Ann. N. I.
L. s. 95), providing that the notice that will prevent an assignee of
a negotiable promissory note from recovery of a maker, is actual
knowledge of the infirmity or defect, or knowledge of such facts.
that his conduct in taking the instrument amounted to bad faith,
mere suspicion of defect of title, or knowledge of circumstances
that would excite suspicion in the mind of a prudent man, or gross
negligence on the part of the taker at the time of transfer, will
not defeat his title, following earlier Md. cases.
Black v. First Nat. Bk., 54 Atl. Rep. 88 (Md. 1903).
A holder for value of a negotiable promissory note, without notice
of fraud or breach of faith of intermediate parties, can recover of
the maker. See the N. I. L. Code, Art. 13, s. 75 (Crawford,
Ann. N. I. L. s. 95) affirming 82 Md. 518 (1896), a case ante-
cedent to the N. I. L.
Drinkallv.MorrisStateBk., 88 N. W.R. 724 (N. Dak. 1901).
Both at common law and under ss. 55, 59, c. 100, Rev. Codes
1899 (Crawford, Ann. N. I. L. ss. 91, 99), when defendant bank
issued its cashier's check to the plaintiff's order, and the plaintiff
indorsed and delivered it to a gambler in payment for chips used in
 294 MICHIGAN LAW REVIEW

gambling, and was present when the defendant paid the amount of
the check to the gambler, the plaintiff protesting against such pay-
ment, the defendant bank is liable to plaintiff for the amount of the
check.
McNamara v. Jose, 28 Washington, 461, 1902.
Under Sess. Laws, Wash. 1899,p. 350, ss. 52, 56, 57 (Crawford,
N. I. L,, ss. 91, 95, 96), where the plaintiff in good faith purchased
a negotiable promissory note before maturity for one-half the face
value, he may collect the full amount from the maker, although the
maker has a good defense against the payee, affirming antecedent
cases.
Andrews v. Robertson, 87 N. W. Rep. 190 (Wisc. 1901).
The payee of a negotiable promissory note, with knowledge of a
defect in the instrument, selling it to an innocent purchaser for value,
and repurchasing it, cannot recover thereon. He is not, within the
N. I. L., s.1676, c. 356, Laws of Wisc. 1899 (Crawford,Ann. N. I.
L., s. 97), an innocent purchaser for value without notice.
Wirtv. Stubblefield, 17 App. Gases, D. C., 283-1900.
A negotiable promissory note, although made upon a gambling
consideration, is valid in this District, in the hands of a bona fide
purchaser for value without notice, before maturity, under the
N. I. L., s. 57 (Crawford, Ann. '.N. I. L., s. 97).
The English Statutes, 16 Car. 2, c. 8 and 9, Anne c. 14 against
gaming, etc., in this respect are repealed, and a different rule estab-
lished under the N. I. L.
Lucker v. Iba., 54App. Div. N. Y., 566-1900.
The holder of a negotiable promissory note given to him bv a
. member of a firm in payment of such member's own debt, ostensi-
bly signed by the firm, but not by the nal]le authorized in the arti-
cles of partnership, cannot recover of the firm. He is not a holder
in due course under the N. I. L. (L. 1897, c. 612, s. 98) affirming
cases decided antecedent to the N. I. L.
McMann v. Walker, 72 Pac. Rep. 1055 Sup. Ct. Col. May 5,
1903.
A negotiable promissory note to the order of a foreign corpora-
tion that had not complied with Col. law (Sess. Laws, 1897, c. 51)
without doing which it could not do business in the state, is never-
theless valid in the hands of an innocent purchaser for value with-
out notice, before maturity. (Sess. Laws, Col. 1897, c. 64, s. 60,
Crawford, Ann. N. I. L., s. 110).
McLean v. Bryer, 24 R. I., 599, 1903.
 THE NEGOTIABLE INSTRUMENTS LAW 295

Where a negotiable promissory note was transferred for value to

the plaintiff sixteen months after its issue and the defendant signed
her name on the back before delivery of the note to the payee (who
transferred the note to the plaintiff), she became an ingorser, under
Pub. Laws R. I., c. 674, ss. 71, 72 (Crawford, Ann. N. I. L.,
s.113, 114).
, Cokn v. 7ke Cons. Butter & Egg Co., 30 Misc. Rep. N. Y. 725-
1900.
The provisions of the N. I. L. (L.1897, c. 611, s. 114) as to the
l_iability of irregular indorsers, apply only to persons who indorse
before delivery to the payee.
Since the statute, the legal presumption is changed where the
complaint alleges that the irregular indorsers indorsed bef~re deliv-
ery to the payee.
The true intention of indorsers as between themselves can always
be shown by oral evidence.
Tke German Am. Bank v. Milliman, 31 Misc. Rep. N. Y., 87-
1900.
The maker of a negotiable promissory note has until the close of
the banking hours of the bank where the note is made payable, in
which to pay it, under the .N. I. L. (L. 1897, c. 612, ss. 130 to.135)
affirming the prior rule in such cases.
In re Swift, 106 Fed. Rep. 65 (Mass., 1901).
Under the N. I. L. (Mass. Laws, 1898, c. 533, ss. 82-115, Craw-
ford N. I. L.,.ss. 142-186) as wellasunderpriordedsions in Mass.,
and under the law merchant, words or acts of a maker and indorser
of a negotiable promissory note which misled and put the holder off
his guard, and reasonably induced him to omit due presentment and
notice of non-pa~ent, constitute an implied waiver thereof.
Second Nat. Bank v. Smitk, 94 N. W. Rep. 664, Wisc. 1903.
In an action against the indorser of a negotiablepromissory note,
dated in Wisconsin, but actually executed, negotiated and made
payable in Indiana, in the absence of evidence to the contrary the
note must be considered an Indiana contract. The laws of Indiana
control upon all questions relating to the construction and legal
effect of the contract, ( days of grace and manner of notice to the
indorser) while the law of Wisconsin controls as to the form of the
remedy, the conduct of the trial and the rules of evidence (the kind
and sufficiency of the evidence necessary to prove dishonor).
In the absence of evidence to the contrary, the presumption is
that the law of Indiana as to what n,otice of dishonor is necessary to
charge indorsers, is the same as that of Wisconsin.
296 MICHJGAN LAW REVIEW

A certificate of the notary in Indiana, fully showing that the note

itself was presented, that payment thereof was refused and that it
was protested, that notice of the protest of "the aforementioned
note" (a copy of which was attached), was served on the indorsers
by depositing copies in the postoffice, is sufficient to charge the
indorsers, under Laws, 1899, p. 720, c. 356, s. 1678-25 (Crawford 1
Ann. N. I. L. s. 167.
Ebling Brewing Co. v. Rlzeinlzez"mer, 32 Misc. Rep. N. Y. 594,
190·0.
. Under the N. I. L. (L. 1897, c. 612, s. 179), notice of dishonor
to an indorser who has added no address to his signature, mailed to
him directed to the place where he resides is sufficient, affirming
cases decided prior to the N. I. L.
Twelfth Ward Bk. v. Brooks, 63 App. Div. N. Y. 220; 1901.
In an action on a negotiable promissory note by an indorsee,
against an indorser, allegation of payment thereof by a subsequent
indorser (who is only secondarily liable) under the N. I. L. (L.
1897, c. 612, s. 202), and prior Jaw. (137 N. Y. 444), is demur-
rable.
Hoffman v. Planters' Nat. Bk., 39 S. E. Rep. 134 (Va., 1901).
'I'he bank, without the knowledge or consent of the payee of a
negotiable promissory note, but not indorsed by him, struck out
his name as payee and inserted another name. Held, this was a
material alteration under the N. I. L. (Acts, Va., 1898, ss. 124,
125, Crawford, Ann. N. I. L. ss. 205, 206), and under the law
merchan~, that avoided the note as to such payee, upon stµt by the
bank.
Jefjrey v. Rosenfeld, 179 Mass., 506, 1901.
Semble, that a bill in equity seeking relief on the ground of
alteration of a certain negotiable instrument, should describe the
alteration, that the court may see whether it was a material altera-
tion, as a matter of law, under Mass. St. 1898, c. 533, s. 125
(Crawford, Ann. N. I. L. s. :?06).
Quaere, whether the rule laid down in Drum v. Drum, 133
Mass., 566, would be applied, that a material alteration of such an
instrument by a stranger,will avoid it, or whether, following prob-
ably s. 64 of the English Bill of Exchange Act, the rule would be
applied that the effect of a material alteration, by whoever made,
would be to avoid the note as to all parties, except those consenting
to it, and subsequent endorsers?
Westburg- v. Chicago Lumber Co., 94 N. W. Rep. 572 Wisc.,
1903.
 THE NEGOTIABLE INSTRUMENTS LAW 297

Under the laws 1899, p. 733, c. 356, s. 1680K. (Crawford, Ann.

N. I. L. 225), mere retention of a bill of exchange by the drawee
to whom it has been delivered for acceptance; is not equivalent to
acceptance. Some circumstance, either destruction or refusal to
return to the holder, if within the N. I. L., or some circumstance,
contractual or tortious, to arouse estoppel, if by reason of non-
negotiability, this instrument is governed only by the common law,
must be shown in addition, and where the facts are in dispute, it is
a question for the jury, confirming the antecedent cases. The Wisc.
act says also "mere retention of the bill is not acceptance." Craw-
ford, note to s. 225, considers these words unnecessary.
Under Rev. St. Wisc. 1898, s. 1680, as amended by laws, 1899,
c. 356 (Crawford, Ann. N. I. L. s. 210, see also s. 20) a draft that
has no time of paymenf expressed, and is not payable to order, or
bearer, is non-negotiable.
It will be noticed not only how few cases have arisen under the
Negotiable Instruments Law, but also how few of the cases have
arisen in consequence of any defect in that law, and that very few
cases have been carried to the courts of last resort. Indeed, the
wonder is that many of these cases were ever brought, foritis diffi-
cult to see how the result could have been otherwise than as was
decided. In the language used by Werner, J. in Brewster v.
$lzratler, 26 Misc. Rep. N. Y. 480, 1899, commenting on s. 51 of
the N. Y. N. I. L. ("An antecedent or pre-existin~ debt consti-
tutes value'') and overruling the leading case in N. Y. of Codding-
ton v. Bay, 20 Johns, 627, 1822:-
"The language of this section, when given its usual and ordinary signifi-
cation, ought to leave no room for doubt upon the subject. There is, how-
ever, mch a universal disposition among lawyers to look for some hidden
or mbtle meaning in the most simple language, that it has become quite the
fashion to require the courts to construe statutes, which to the average lay
mind, seem to require no construction."
What the learned judge says of this case might well be said of
several objections and several cases we have been considering.
The conclusion we reach, upon a review of these cases, is that
the general result is to increase the negotiability of negotiable
instruments, and this is certainly in the interest of commerce.
The writer acknowledges his indebtedness, in th~ preparation of
this paper, to the gentlemen from whom he ha~ so often quoted.
AMASA M. EATON
PB.oVIDENCIC, R. I.