CHAPTER XVIII TRANSFER AND NEGOTIATION 282. Methods of transfer.-We have thus far considered the principles governing the inception of negotiable contracts. We must now take up the rules concerning the circulation of these contracts. They may pass from hand to hand either by assignment, by operation of law or by negotiation. EXAMPLE 303. “On Jan. 3, 1910, I promise to pay to C or order $500. A." C entrusts this note to X and then writes to X., "I hereby give you my note made by A in satisfaction of my account." This is an assignment to X. The effect of an assignment is to place the assignee in exactly the same position as that held by his assignor. Title to a bill or note will vest in the holder's personal representatives upon his death or in case of his bankruptcy in his assignee. On the death of a joint payee or indorsee, title at once vests in the survivor or survivors. Transfer by operation of law has the same effect as transfer by assignment, the transferee taking the place of his transferor. 283. Negotiation.-A bill or note transferred in the form and manner prescribed by the law applicable to these particular forms of contracts is said to be negotiated. When an instrument is properly negotiated the transferee can sue all parties in his own name or can further negotiate the bill or note and under certain con If he sues, ditions may give a title better than his own. consideration will be presumed. Where the instrument is made payable to bearer or where the last indorsement is in blank, negotiation may take place by simple delivery. Where it is payable to order it is negotiated by indorsement and delivery. 284. Indorsement.-The act of indorsement must be distinguished from the act of negotiation. The latter transfers the instrument with the effect stated in the previous section. Indorsement may be defined as the act of writing one's name on a negotiable instrument with the intent either of transferring the title or of giving extra security to the holder or both. Where the indorsement is for the sole purpose of adding security the indorsement is said to be by accommodation. The indorsement is usually on the back of the instrument but is valid if placed on the face. When the back is filled a piece of paper called "an allonge" is usually attached to accommodate successive indorsements. 285. Requisites of indorsement.-The indorsement as a step in the transfer of the instrument, must be by the payee or a subsequent holder and must follow the tenor of the instrument. EXAMPLES 304. "Pay to the order of C, etc." cannot be negotiated till C's name is indorsed thereon. If C delivered the note to J and by mistake failed to indorse it, and J accepted it for value, he could demand C's indorsement and if it was refused, could procure C's indorsement in a court of equity. Till that was done J would be in the position of an assignee of paper not negotiated, i. e., J would hold the note subject to any defense that might be set up against C. 305. "Pay to the order of C $500. A." This is indorsed by C as follows: "Pay to X $250, pay to the order of M $250, C." An instrument cannot thus be indorsed for otherwise a maker or drawer could be subjected to two or more actions. An indorsement may be to two or more persons jointly, or to a third person who is to hold it merely as collateral security for a smaller debt due him from the indorser. So the maker or drawer may pay part of the instrument. It is usual and perfectly proper for the receiver to write a receipt on the back of the instrument in which case subsequent holders may sue the prior parties for the balance only. 286. Kinds of indorsement.—Various kinds of indorsements have been long known to the law merchant, each having its own peculiar effect upon the rights and liabilities of the parties to the instrument. The instrument given here may be indorsed in any one of the following ways: $2000.00. New York, Sept. 1, 1910. Two months after date I promise to pay to the order of William B. Nelson, two thousand dollars at 160 Broadway, New York City. Value received. No. Due Nov. 1, 1910. JAMES J. RIDDEL. 1. William B. Nelson. This is an indorsement ir blank and changes the note to a bearer instrument. If the note were then delivered to say Frank M. Collins, he could deliver the note to any one he saw fit who would get good title without further indorsement, or if it was desired to hold the note but to protect it against loss or theft Frank M. Collins could write the words "pay to the order of Frank M. Collins" above the blank indorsement, in which case the note could be transferred on indorsement only. In other words, a holder in due course may change a blank indorsement to a special indorsement. 2. Pay to the order of Charles A. Whittier, William B. Nelson. Here the indorsee is specified and the instrument cannot be negotiated without his indorsement. 3. Pay to James McKeon, without recourse, William B. Nelson, or Without recourse, William B. Nelson. These are called qualified indorsements, or indorsements without recourse. Sometimes other words are used, such as "Sans recourse" or "at the indorsee's own risk." Some words showing clear intention are necessary. The legal effect of an indorsement without recourse is to relieve the indorser from liability on the instrument. He transfers it but on condition that he will not be liable to the indorsee or any subsequent holder for acceptance or payment. The note or bill remains negotiable. 4. Pay to Clinton S. Scholes, unless before payment I give you notice to the contrary. William B. Nelson. Sometimes conditions like the above are attached to the indorsement. The negotiable instruments law provides that a party required to pay the instrument may disregard the condition and make payment to the indorsee or his transferee, whether the condition has been fulfilled or not. But any person to whom an instrument so indorsed is negotiated will hold the same, or the proceeds thereof, subject to the rights of the person indorsing conditionally. 5. Pay to Swartwout and Appenzellar for collection, William B. Nelson. Pay to John Coleman only. William B. Nelson. Pay to James McKinley for my use. William B. Nelson. These are restrictive indorsements and stop further negotiation. The commonest form is that for collection. The indorser gives notice that he does not part with title and while the instrument may be passed to other hands, whoever receives payment is not a holder in due course. He takes subject to the claims of William B. Nelson. An instrument drawn to X or order is not made non-negotiable by X's indorsement "Pay to A. B.," leaving out the words "or order." In fact, those words are superfluous and X's indorsement is to be looked upon as a special indorsement. 6. Pay to Otto C. Meyer, waiving protest. William B. Nelson. This is an indorsement waiving conditions and may embody the waiver of any requirements such as notice of dishonor, presentation, etc. When "protest" is waived all the formal acts which constitute dishonor are deemed dispensed with. 7. Irregular and other indorsements. When a signature is so placed upon the instrument that it is not clear in what capacity the person making the same intended to sign, he is to be deemed an indorser. Where the name of a payee or indorsee is misspelled it is customary for him first to indorse the instrument as it is misspelled and then to add the correct name. Where an instrument is drawn or indorsed to a person as "cashier" or other fiscal officer of a bank or corporation, it is deemed prima facie to be payable to the bank or corporation of which he is such officer. The bank or corporation may negotiate the instrument with its own indorsement or with the indorsement of the indorsee officer. If two or more payees or indorsees are not partners all must indorse unless the one indorsing has authority from the others. 287. Transfer without indorsement.-Title to an instrument drawn to order can be transferred by delivery and by parol, lack of indorsement operating to make the paper non-negotiable. Under the statute, the person receiving the paper acquires the right to have the |