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V.

gens v. Jennings (1912) 148 App. Div. (1906) 78 C. C, A. 525, 148 Fed. 835, 879, 133 N. Y. Supp. 584.

where it is held that a writing between Ohio.-Farr v. Ricker (1889) 46 the parties must be construed with Ohio St. 265, 21 N. E. 354.

the indorsement; but it is stated in the Oklahoma. CLARK V. SALLASKA Crilly Case that the contract created (obiter) (reported herewith) ante, 746. by the indorsement and delivery of a

Oregon.-Smith v. Caro (1881) 9 negotiable note, even between the imOr. 278.

mediate parties to it, is itself a comSouth Carolina.-National Bank v. plete and perfect contract, and not Gary (1882) 18 S. C. 282 (obiter). See open to contradiction or susceptible of Smith Bros. v. Brabham (1896) 48 S. annulment by a separate contemporaC. 337, 26 S. E. 651, and other cases neous agreement, though likewise in from this state, infra, this subdivision, writing, unless, at least, the terms of

South Dakota.Schmitz v. Hawkeye the latter plainly disclose that the Gold Min. Co. (1896) 8 S. D. 544, 67 parties so intended. N. W. 618.

Evidence of all the facts and circumTexas.-Cresap v. Manor (1885) 63 stances surrounding the writing, at Tex. 485; Wizig v. Beisert (1909) the time the note is due, of the words, Tex. Civ. App. – 120 S. W. 954; Beh- "protest waived," by the indorser rens v. Kirkgard (1912) Tex. Civ. above a signature purporting to be App. 143 S. W. 698; First Nat. his, but which he denies, is competent Bank v. Powell (1912) Tex. Civ. for the purpose of showing his adopApp. 5149 S. W. 1096; Barger v.

;

tion of the signature, but not to vary Brubaker (1916) Tex. Civ. App. , or explain the contract of indorsement. 187 S. W. 1025; McKenzie v. Harris Robinson v. Barnett (1882) 18 Fla. (1880) 2 Posey Unrep. Cas. 180 (in 43 Am. Rep. 327. full).

Whether the use of words of asVirginia.-Woodward

Foster signment relieves the transferrer of (1868) 18 Gratt. 200 (in full); River- the character of indorser is not within view Land Co. v. Dance & Co. (1900) the scope of this note. Upon the as98 Va. 239, 35 S. E. 720.

sumption, however, that the transferWashington.-Holt Mfg. Co. V. rer is an indorser, it has been held Brotherton (1916) 91 Wash. 354, 157 that the contract implied from the inPac. 849.

dorsement cannot be changed by parol Wisconsin.-Charles V. Denis evidence in such a case. Sommerville (1877) 42 Wis. 56, 24 Am. Rep. 383; v. Stephenson (1831) 3 Stew. Ala.) Eaton v. McMahon (1877) 42 Wis. 484; 271; Odan v. Beard (1822) 1 Blackf. Halbach v. Trester (1899) 102 Wis. (Ind.) 191; Sands v. Wood (1855) 1 530, 78 N. W. 759.

Iowa, 263. (The rule is otherwise in England.—Hoare v. Graham (1811) case of a blank indorsement in Iowa.) 3 Campb. 57, 13 Revised Rep. 752. Behrens v. Kirkgard (1912) —Tex.

Canada.-Smith v. Squires (1901) Civ. App. -, 143 S. W. 698; Citizens' 13 Manitoba L. R. 360; Emerson v. Nat. Bank v. Walton (1898) 96 Va. 435, Erwin (1903) 10 B. C. 101; Decelle 31 S. E. 890. V. Samoiselle (1888) 32 Lower Can. See Phillips v. Bridges (1917) 20 Jur. 236.

Ga. App. 489, 93 S. E. 115, infra. See Prescott Bank v. Caverly (1856) The rule denying the admissibility 7 Gray (Mass.) 217, 66 Am. Dec. 473, of parol evidence was applied in Presinfra, III. 1, a.

ton v. Ellington (1883) 74 Ala, 133, in A written agreement made at the case of an indorsement in these words: time of the indorsement of the note "I transfer the within notes to W. R. that the indorser should not be held Preston & Co.,"—which words were liable on his indorsement has been signed by the indorser. Parol eviheld to be valid and to relieve him of dence has been held inadmissible to liability as between the parties to the vary the contract implied by law from agreement. Davis v. Brown ( 1877) 94 the indorsement of bond by the U. S. 423, 24 L. ed. 204. Davis v.

payee as follows: "I assign the withBrown is approved in Crilly v. Gallice in obligaton to . ." Dupuy v.

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Gray (1824) Minor (Ala.) 357. In an only in case of an indorsement before action on a written promise to assign maturity. Smith Bros. v. Brabham a note, parol evidence was held inad- (1897) 48 S. C. 337, 26 S. E. 651. missible to prove that the assignment Price v. Perry (1818) 2 Mill, Const. 32, was to be without recourse, in Blair v. cited in Smith Bros. v. Brabham (S. Williams (1844) 7 Blackf. (Ind.) 132. C.) supra. In case of an indorsement The indorsement by one of two payees made after maturity, it has been held to the other, as follows: "For value that parol evidence is admissible. received I hereby assign and transfer Rugely V. Davidson (1818) 2 Mill, unto

all right, title, and in- Const. (S. C.) 33, cited in Sloan v. terest that I may have in the within Gibbes (1900) 56 S. C. 480, 76 Am. St. notes," cannot be varied or explained Rep. 559, 35 S. E. 408. In Sloan v. by parol evidence. Citizens' Nat. Bank Gibbes (S. C.) supra, the South Carov. Walton (1898) 96 Va. 435, 31 S. E. lina court uses language which indi890.

cates that it was then of the opinion As above stated, parol evidence is that parol evidence is admissible. The held inadmissible as between the par- court states: “A regular blank in. ties; the fact that the rights of a dorsement on a negotiable promissory bona fide holder are involved is simply note ordinarily imparts a legal obligaan additional reason, under this the- tion to pay the note in default of the ory, for excluding the evidence. Law- maker, after due diligence by the holdrence v. Dobyns (1860) 30 Mo. 196; er and due notice of the default to the Lewis v. Dunlap (1880) 72 Mo. 174; indorser, primarily in the first inHalbach v. Trester (1899) 102 Wis. dorser, and successively in following 530, 78 N. W. 759. The same reason- indorsers in their order. Whether this ing applies in case of one who knew implication is conclusive and irrebutnothing of the agreement. It seems table, or only prima facie and subject that the plaintiff in Stubbs v. Goodall to parol evidence showing the real re(1848) 4 Ga. 106, holding such evi- lation of the parties, has been the subdence inadmissible, knew nothing of ject of much diversity of opinion the agreement, but this is not clear. among the courts. But in this state In Johnson v. Glover (1887) 121 III. we think the law favors the admission 283, 12 N. E. 257, an enlargement of of such evidence as not in violation of the indorser's liability was sought by the very salutary rule forbidding the parol evidence, and it does not appear altering, varying, or contradicting of whether the plaintiff knew of the a written instrument by parol eviagreement at the time he took the in- dence." The action, however, in Sloan strument or not.

v. Gibbes was by the first indorser, Some limitations in various jurisdic- who had been compelled to pay the tions upon the incompetency of parol note, against the second indorser for evidence should be noted. In Georgia,

contribution, and the evidence was to a statute makes parol evidence admis

the effect that the indorsers were disible as between the parties in case

rectors in the corporation and signed of an indorsement in biank. This stat

the notes as original parties thereto, ute does not apply in case of an in

with the understanding that all indorsement in full. Meador v. Dollar

dorsers would be sureties, and the Sav. Bank (1876) 56 Ga. 605. This

court states that parol evidence is same limitation to indorsements in

“admissible to show the real relation blank was made in the cases in Iowa

of the indorsers to each other.” The prior to Porter v. Moles (1911) 151

case, therefore, did not present the Iowa, 279, 131 N. W. 23; see supra. question of varying the contract imAnd see infra, II. b, 1, for jurisdictions plied from the indorsement of the note which hold the evidence admissible in by a regular holder of the instrument case of an indorsement in blank, but in the regular course of a commercial which do not definitely limit its admis- transaction. sibility to such an indorsement. Some The cases generally do not limit the cases hold parol evidence inadmissible rule to indorsements before maturity, as in Smith Bros. v. Brabham (S. C.) The rule denying the admissibility supra; at least, no point is made as to . of parol evidence has been applied in the time of the indorsement with ref- case of indorsements in unusual plaerence to maturity. In Cox v. Jones ces. In Cook v. Brown (1886) 62 Mich. (1823) 2 Cranch, C. C. 370, Fed. Cas. 473, 4 Am. St. Rep. 870, 29 N. W. 46, No. 3,303, parol evidence was held in- parol evidence was held incompetent admissible in an action by an indorsee to explain or vary the contract aswithout notice to show an agreement sumed by a payee in a note payable between previous parties that the in- to him or bearer, who signed the note. dorser should not be liable as indorser, immediately under the name of the where the indorsement was made after maker. It cannot be shown by parol, maturity, that court stating that it in an action by one who received a would be a fraud in the defendant to note for value before maturity against indorse the note generally so as to the maker, that the contract evidenced give a new negotiability to the instru- by the writing of the name of the ment, and then set up his secret equity payee across the face of the instruagainst an innocent holder.

ment was an acceptance only. Perry Parol evidence was held inadmis- v. Bray (1881) 68 Ga. 293. sible in Johnson v. Glover (1887) 121 Parol evidence has been held inadIII. 283, 12 N. E. 257, where the payee missible to vary the method of payindorsed the note twice before delivery ment. It has been held that the makto his indorsee, the court stating that er, when sued by the indorsee of a if a different contract than an indorse- note, cannot set up as a defense a pament was intended it should have been rol agreement between the indorser written out. A similar decision ap- and the indorsee to the effect that only pears in Hately v. Pike (1896) 162 a definite sum should be collected by M. 241, 53 Am. St. Rep. 304, 44 N. the latter on the note, since the effect E. 441, where a corporation note pay- of this agreement is to vary the terms able to “A. B. President" was indorsed of the written assignment and qualiby the payee in this form and again by fy their legal effect. Loudermilk v. him as an individual, the court holding Loudermilk (1893) 93 Ga. 443, 21 S. that the word, "President," added to E. 77. Neither the maker nor the inthe signature, was descriptio per- dorser of a note stipulating for the sonæ.

payment of a certain sum can prove Parol evidence has been held inad

by parol evidence that there was an missible to vary the contract implied

agreement by which the note was to from the indorsement of a promissory

be satisfied by something else than note, even though it is accompanied by

money. Kerr v. Holder (1913) 13 Ga. a written assignment of the note and a

App. 9, 78 S. E. 682. mortgage securing the same. Clarke

The ownership of the note has also v. Patrick (1895) 60 Minn. 269, 62 N. W. 284. In fact evidence has been

been sought to be varied by parol evi

dence. Parol evidence has been held denied to show an oral agreement that the instrument in suit should be with

not admissible to show that the in

dorsement of a note to an individual in the terms of a written agreement

not designated as the cashier of a between indorsee and indorser that

bank was such a transfer as to vest the indorser should not be held liable

the legal title in the bank and preclude as indorser on instruments sold to the

a defense which would be good against indorsee after the date of the agree

the payee. First Nat. Bank v. McCulment. First Nat. Bank y. National

lough (1908) 50 Or. 508, 17 L.R.A. Marine Bank (1873) 20 Minn. 63, Gil.

(N.S.) 1105, 126 Am. St. Rep. 758, 93 49.

Pac. 366. But in an action involving This rule has been applied as be- the ownership of the note it may be tween the parties in a suit by the in- shown that an indorser thereon had dorsee against the indorser on the no title to the note; such evidence does indorsement of a bond. Dupuy v. Gray not violate the rule against varying (1824) Minor (Ala.) 357.

or contradicting the contract of in4 A.L.R.–49.

.

dorsement. Givens v. Carter (1912) does not have the effect of enlarging -Tex, Civ. App. 146 S. W. 623. the liability of the indorser. Parol

The rule that parol evidence is in- evidence was admitted in Worden v. admissible finds further support in the Salter (1878) 90 Ill. 160, to enlarge following miscellaneous cases. In the liability assumed by an indorser, Harvard Pub. Co. v. Benjamin (1896) but it seems the evidence was admit84 Md. 333, 57 Am. St. Rep. 402, 35 ted without objection. Mr. Justice Atl. 930, an action against a husband Sheldon, dissenting from the decision, and wife in which it was alleged that states that the conclusion reached the wife made her note payable to may perhaps be justified on the ground the husband with the intent and un- that, as parol evidence was entered derstanding that the note should be into without objection by both sides indorsed by the husband to the plain- to show what was the liability astiff, to be by it received in part pay- sumed, the question as to the incomment of certain property agreed to petency of such evidence might be be sold to the husband, and that in considered as having been waived. pursuance of said agreement the note Justice Sheldon then proceeds to afwas indorsed by the husband, the firm the general rule that such evicourt states that parol evidence can- dence is inadmissible. not be received to vary or alter the It is, of course, true that an incharacter fixed by the law to the un- dorser who has been allowed to indertaking of the husband as payee troduce evidence to show a parol and indorser of the note. The effect agreement limiting his liability, and of the assignment of one of a series fails to convince the court that such of notes secured by a mortgage, upon agreement existed, cannot object to the security, cannot be qualified or the admission of the evidence. Crockchanged by parol evidence. Dixon v. ett v. Shaw (1866) 29 Tex. 507. Upon Clayville (1876) 44 Md. 573. In an appeal by the indorsees of a note Bookstaver v. Jayne (1874) 3 Thomp. from a nonsuit in an action against & C. (N. Y.) 397, parol evidence was the maker, it is stated in McCoon v. held inadmissible in an action by the Biggs (1841) 2 Hill (N. Y.) 121, that indorsee against the payee who had the plaintiffs were allowed the utmost indorsed the instrument, to show that latitude in being permitted to show, the consideration of the indorsement by parol evidence, an intent to newas an agreement which had not been gotiate the note by prior holders, who met by the indorsee, the court apply- had merely indorsed a receipt of paring the general rule that the legal ef- tial payment thereon and signed the fect of the indorsement of a bill or same. note cannot be controlled or varied by Several jurisdictions have changed parol evidence.

from the rule holding parol evidence The correctness of the admission of admissible to the rule denying its adparol evidence has not been raised in missibility. The decisions in Ohio all cases.

Testimony of an oral prior to Farr v. Ricker (1889) 46 agreement enlarging the liability of Ohio St. 265, 21 N. E. 354, held parol the indorser seems to have been ad- evidence admissible to vary the conmitted in Finley v Green (1877) 85 tract implied from an indorsement, Ill. 535. But, assuming the correct- but in Farr v. Ricker the general rule ness of such admission, the testimony, that such evidence is inadmissible as given was not sufficient to estab- was adopted. The earlier cases are lish the agreement and the question distinguished by the court in the Farr of the admissibility of the evidence Case, and some of them on their facts did not in fact arise. A similar de- are not contrary to the general rule. cision appears in Schnell v. North This is especially true of Dye v. Scott Side Planing Mill Co. (1878) 89 Ill. (1878) 35 Ohio St. 194, 35 Am. Rep. 581, where the court states that, as- 604, holding that the usual demand suming parol evidence to be admig- and notice may be waived by an oral sible for this purpose, the testimony agreement at the time of indorsement.

All of the earlier cases, however, including Dye v. Scott, proceed upon the theory that parol evidence is generally admissible, and this theory is overruled in the Farr Case. The broad doctrine stated in Smith v. Barber (1790) 1 Root (Conn.) 207, that a blank indorsement may be explained by parol evidence, is qualified by subsequent cases in this state. From the facts in the Barber Case, which are not clearly stated, it seems probable that there was no transfer of the note intended by the indorsement there involved, and as to that situation the case is not overruled. See comment on Iowa cases, supra. On the other hand, the earlier decisions in Maine denied the admissibility, while the later ones affirm it. See infra, II. b, 1.

2. Theory. According to the cases which support the general rule excluding parol evidence, the contract implied from the regular indorsement of a bill or note is of a fixed and definite character; the contract is implied by law as clearly and perfectly from the blank indorsement as if written out in full. "The contract by a blank indorsement is fixed by law, and should not be rendered uncertain by parol any more than when written out in full." Smith v. Caro (1881) 9 Or. 278. Justice Brewer states in Doolittle v. Ferry (1878) 20 Kan. 230, 27 Am. Rep. 166, that “the contract which the law implies is of the same force as though it were reduced to writing, and can be limited or impeached by only the same kind of testimony. It would be folly to assert that the authorities are all in harmony, and that the cases in which testimony of a parol agreement has been admitted to vary the effect of an indorsement can all be reconciled as mere exceptions to and not in conflict with this rule. But the rule itself is well supported by authority, and seems to us resting upon sound foundations, and conducive to the stability and value of negotiable paper. The law gives to an indorsement a twofold force. It operates to transfer title; it is the assumption of a conditional liability. If an absolute liability is

desired, apt words are well known, and in common use. A waiver of notice and protest, written above the indorsement, will make the liability certain—the liability of a surety, it may be, but still a fixed and certain liability on the instrument.

If a transfer of title without assumption of liability is sought, equally apt and well-known words are at hand. 'Without recourse' relieves the indorser. Where the law furnishes such apt, brief, and well-known expressions for making the indorsement accomplish exactly what the parties may desire, wise policy demands that each form of indorsement should conclusively carry with it the liability which it implies. There are no instruments concerning which it is more important that the rules should be clear, settled, and conclusive than negotiable paper. Such paper subserves an invaluable purpose in business transactions, and should tell upon its face the whole story of its obligations. Where for convenience, and to facilitate business, certain short forms and expressions are used, to which the law has attached certain implications, those implications should be as conclusive upon all the parties as though the full contract were reduced to writing." Mr. Justice Matthews in Martin V. Cole (1881) 104 U. S. 30, 26 L. ed. 647, states that “the contract created by the indorsement and delivery of a negotiable note, even between the immediate parties to it, is a commercial contract, and is not in any proper sense a contract implied by the law, much less an inchoate or imperfect contract. It is an express contract and is in writing, some of the terms of which, according to the custom of merchants and for the convenience of commerce, are usually omitted but not the less on that account perfectly understood. All its terms are certain, fixed, and definite, and, when necessary, supplied by that common knowledge based

on universal custom which has made it both safe and convenient to rest the rights and obligations of parties to such instruments upon an abbreviation. So that the mere name of the indorser signed up

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