"An instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof; if payable to bearer, it is negotiated by delivery; if payable to order, it is negotiated by the indorsement of the holder, completed by delivery.”

Question 462: When is an instrument negotiated? If payable to bearer, how may it be negotiated? (When is an instrument payable to bearer?) If payable to order, how may it be negotiated?

In

(Note: To negotiate negotiable paper means to transfer it to another in that manner which is sufficient under the law to make the transferee the legal owner. A person may have what may be termed equitable ownership as where the necessary indorsement has been omitted and not be the legal owner. such a case although having the right to receive legal ownership he has not the full benefits of a person to whom an instrument has been legally negotiated. If an instrument is payable to order and if in that case the only or last indorsement is not in blank, the instrument cannot be negotiated except by indorsement by the payee or other holder. If it is bearer paper, that, is payable to bearer, or to a specified person or bearer, or to an impersonal payee, etc., or the only or last indorsement is in blank, then, in all of such cases, the instrument may be negotiated by mere delivery, although of course, for purposes of giving additional credit, the indorsement of the transferor may be added. In that case, not being necessary to negotiation, it is not essential to the title of the holder, and therefore if forged, does not affect his title.)

§ 450. (Nego. Instru., Sec. 58.) Kinds of negotiation. (See note just preceding.)

§ 451. (Nego. Instru., Sec. 59.) How indorsement

accomplished.

Case 463. Uniform Negotiable Instruments Act, Sec. 31.

"The indorsement must be written on the instrument itself or upon a paper attached thereto. The signature

of the indorser, without additional words, is a sufficient indorsement."

Question 463: (1) A wrote a letter to B enclosing an unindorsed promissory note, not payable to bearer. In the letter, he stated that he thereby transferred and indorsed the instrument to B. B sent the instrument back for indorsement but before it was indorsed B learned of the fraud by which A had obtained the note from the maker. Was the negotiation to B complete before he learned of the fraud? Was B subject to the defense? Why?

(2) May an indorsement ever be made elsewhere than on the paper itself? Why?

Case 464. Markey v. Corey, 108 Mich. 184, 36 L. R. A. 117.

Facts: Markey, as indorsee, sues Corey, as indorser, of a note transferred to him by the following writing on the back thereof, signed by Corey:

"I hereby assign the within note to Matthew M. Markey."

Defense that Markey is not an indorsee, and cannot sue in his own name as such, and that the alleged indorser, the defendant, assumed no liability as indorser within the rules governing commercial paper.

Point Involved: Whether a transfer of a note on the back thereof in the language "I hereby assign" is an indorsement.

"The usual mode of transfer of a promissory note is by simply writing the indorser's name upon the back, or by writing also over it the direction to pay the indorsee named, or order, or to him or bearer. An indorsement, however, may be made in more enlarged terms, and the indorser be held liable as such. In Sands v. Wood, 1 Iowa, 263, the indorsement was, 'I assign the within note to Mrs. Sarah Coffin.' In Sears v. Lantz, 47 Iowa, 658, the indorsement on the note was, 'I hereby assign all my right and title to Louis Meckley.' And in each case the party so assigning was held as indorser, the Court in

the latter case saying of Sands v. Wood: 'He used no words that, in and of themselves, indicated that he had bound or made himself liable in case the maker, after demand, failed to pay the note. But it was held the law, as a legal conclusion, attached to the words used the liability that follows the indorsement of a promissory note.' See, also, Duffy's Adm'r v. O'Connor, 7 Baxt. 498; Shelby v. Judd, 24 Kan. 166; Brotherton v. Street, 124 Ind. 599.

"The language used in the assignment to the note in suit does not negative the implication of the legal liability of the assignor as indorser, and as the words are to be construed, as strongly as their sense will allow, against the assignor, he must be held as indorser. This rule is fully supported in Hatch v. Barrett, 34 Kan. 230. See, also, Adams v. Blethen, 66 Me. 19.

"It must be held, therefore, that the memorandum on the note did not relieve Corey from his liability as indorser.

"The Court was not in error in admitting the contract in evidence, as its purpose was to show that the note was not in fact limited by its provisions, and those provisions of the contract cited did not destroy the negotiability of the note. (Daniel Neg. Inst., § 48.)—The judgment must be affirmed."

The other justices concurred.

Question 464: State the point involved and the Court's decision.

(Note: There is a conflict of authority in this point, although the weight of authority seems to be with the above case. See Spencer v. Halpern, 62 Ark. 595, 36 L. R. A. 130 contra. It need hardly be said that such phraseology is unfortunately used in any case.)

Case 465. Leavitt v. Putnam, 3 N. Y. 494.

HURLBUT, J.:

"The note in the present case was upon its face trans ferable, and its character in respect to negotiability could

only have been changed by an indorsement containing express words of restriction. The defendants' indorsement was a full one, containing the name of the person in whose favor it was made, but omitting the words 'or order,' the legal effect of which was, nevertheless, to make the note payable to him or his order, and his endorsement therefore was effectual to transfer the note to the plaintiff. (Chitty on Bills, 136; Story on Prom. Notes, § 139.)

"I am of opinion that the judgment of the superior court should be reversed, and a new trial awarded.Judgment reversed."

Question 465: If the note is negotiable on its face, must the indorsement contain the words "to order" If it omit such words, is the negotiation restricted to the immediate indorsee; or can it be further negotiated?

(Note: It is a common error to suppose that an indorsement must contain words "to order." Thus in a little booklet distributed by certain banks the statement is made that if a check is indorsed "Pay to John Smith" John Smith cannot further negotiate the check but must deposit it for collection or cash it. The very banks which issue this booklet are not observing this statement of the booklet. "Pay to John Smith" is not a restrictive indorsement.)

§ 452. (Nego. Instru., Sec. 60.) Partial indorsement.

Case 466. Uniform Negotiable Instruments Act,, Sec. 32.

"The indorsement must be an indorsement of the entire instrument. An indorsement which purports to transfer to the indorsee a part only of the amount payable, or which purports to transfer the instrument to two or more indorsees severally, does not operate as a negotiation of the instrument. But where the instrument has been paid in part, it may be indorsed as to the residue."

Question 466: State the rule as here stated? If a part of the sum in the instrument has been paid, can the instrument be indorsed as to the residue?

§ 453. (Nego. Instru., Sec. 61.) Effect of indorsements to transfer incidents.

(Note: The transfer by negotiation of a negotiable instrument entitles the transferee to all the rights, titles and remedies of the transferor, including right to collateral, etc.)

§§ 454, 455. (Nego. Instru., Secs. 62, 63.) Presumptions as to indorsements. Miscellaneous rules concerning indorsement.

Case 467. Uniform Negotiable Instruments Act, Secs. 43 to 50.

"(Sec. 43.) Where the name of the payee or indorsee is wrongly designated or misspelled, he may indorse the instrument as therein described, adding, if he think fit, his proper signature.

"(Sec. 44.) Where any person is under obligation to indorse in a representative capacity, he may indorse in such terms as to negative personal liability.

"(Sec. 45.) Except where an indorsement bears date after the maturity of the instrument, every negotiation is deemed prima facie to have been effected before the instrument was overdue.

"(Sec. 46.) Except where the contrary appears, every indorsement is presumed prima facie to have been made at the place where the instrument is dated.

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(Sec. 47.) An instrument negotiable in its origin continues to be negotiable until it has been restrictively indorsed or discharged by payment or otherwise.

"(Sec. 48.) The owner may at any time strike out any indorsement which is not necessary to his title. The indorser whose indorsement is struck out, and all indorsers subsequent to him, are thereby relieved from liability on the instrument.

"(Sec. 49.) Where the holder of an instrument payable to his order transfers it for value without indorsing it, the transferrer vests in the transferee such title as the transferrer had therein, and the transferee acquires, in addition, the right to have the indorsement of the trans