LECTURE XLIV.

OF NEGOTIABLE PAPER.

1. Of the History of Bills and Notes. It is the general opinion that the commerce of the ancients was carried on without the use of bills of exchange, and there is no vestige of them in the Roman law. A passage in the Pandects (a) shows it to have been the practice with the creditor who lent money on bottomry, or respondentia, to a foreign merchant, to send his slave to receive the loan, with maritime interest, on the arrival of the vessel at the foreign port. This certainly would not have been necessary, says Pothier, (b) if bills of exchange had been in use. But however the fact may have been with the Romans, it would seem, from a passage in one of the pleadings of Isocrates, that bills of exchange were sometimes resorted to at Athens as a safe expedient to shift funds from one country to another. (c) *72 Bills of exchange are of such indispensable use in the remittance of the value of money between distant places, without risk and expense, that foreign commerce cannot conveniently be carried on without them. They grew into use on the coasts of the Mediterranean, in the fourteenth century. (a)

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(a) Dig. 22. 2. 4. 1.

(b) Traité du Con. de Change, n. 6.

(c) See the pleading of Isocrates, entitled Trapeziticus. (Isocratis Scripta Omnia, ed. H. Wolfius, Basle, 1587.) In that interesting forensic argument which Isocrates puts into the mouth of a son of Sopæus, the governor of a province of Pontus, in his suit against Pasion, an Athenian banker, for the grossest breach of trust, it is stated that the son, wishing to receive a large sum of money from his father, applied to Stratocles, who was about to sail from Athens to Pontus, to leave his money and take a draft upon his father for the amount. This, said the orator, was deemed a great advantage to the young man, for it saved him the risk of remittance from Pontus, over a sea covered with Lacedæmonian pirates. It is added, that Stratocles was so cautious as to take security from Pasion for the money advanced upon the bill, and to whom he might have recourse if the governor of Pontus should not honor the draft, and the young Pontian should fail.

(a) In 1394, the city of Barcelona, by ordinance, regulated the acceptance of bills of exchange; and the use of them is said to have been introduced into Western

As they serve the purposes of cash, and facilitate commerce, and are the visible representatives of large masses of property, they may truly be said to enlarge the capital stock of wealth in circulation, as well as increase the trade of the country.

Promissory notes are governed by the rules that apply to bills. The statute of 3d and 4th Anne made promissory notes payable to a person, and to his order, or bearer, negotiable like inland bills, according to the custom of merchants, and by the statutes of 9 and 10 Wm. III. c. 17, and 3 and 4 Anne, inland bills are put upon the footing of foreign bills, except that no protest is requisite. These statutes have been generally adopted in this country, either formally or in effect, and promissory notes are everywhere negotiable. (6) The effect of the statute *is*73 Europe by the Lombard merchants, in the thirteenth century. Bills of exchange are mentioned in a passage of the Jurist Baldus of the date of 1328. Hallam's Introduction to the Literature of Europe, i. 68. M. Boucher received from M. LegouDeflaix, a native of India, a memoir showing that bills of exchange were known in India from the most high antiquity. But the ordinance of Barcelona is, perhaps, the earliest authentic document in the middle ages of the establishment and general currency of bills of exchange. (Consulat de la Mer, par Boucher, i. 614, 620.) The first bank of exchange and deposit in Europe was established at Barcelona, in 1401, and it was made to accommodate foreigners as well as citizens. Prescott's Ferdinand and Isabella, Int. 112. M. Merlin says the edict of Louis XI., of 1462, is the earliest French edict on the subject; and he attributes the invention of bills of exchange to the Jews, when they retired from France to Lombardy. The Italians and merchants of Amsterdam first established the use of them in France. Réper toire de Jurisprudence, tit. Lettre et Billet de Change, sec. 2. In England, reference was made, in the statute of 5 Rich. II. c. 2, to the drawing of foreign bills. This was in the year 1381.

(b) By the N. Y. Revised Statutes, i. 768, secs. 1-6, promissory notes payable in money to any person, or to the order of any person, or to bearer, are negotiable in like manner as inland bills of exchange, according to the custom of merchants. The payee and indorsee of every such note, payable to them or their order, and the holder of every such note, payable to bearer, may sue thereon in like manner as in cases of inland bills of exchange. If such notes are made payable to the order of the maker, or to the order of a fictitious person, and are negotiated by the maker, they have the same effect and validity as if made payable to bearer. [See Brown v. De Winton, 6 C. B. 336; Hooper v. Williams, 2 Exch. 13; Wood v. Mylton, 10 Q. B. 805; Miller v. Weeks, 22 Penn. St. 89; Muldrow v. Caldwell, 7 Mo. 563; Woods v. Ridley, 11 Humph. 194; Smalley v. Wight, 44 Me. 442; post, 78, n. 1.] Promissory notes are negotiable throughout the Union, and the indorsee can sue in his own name. Notes ncgotiable where made, are negotiable everywhere. This is so held in England and in this country, under the statute of 3 and 4 Anne, and its substitute. Milne v. Graham, 1 B. & C. 192; Hatcher v. McMorine, 4 Dev. (N. C.) 122. So, if a note or debt be assigned or indorsed abroad, and be suable in the name of the assignee by the law of the country where it was assigned or indorsed, it would seem to be the better opinion in England, that the assignee might sue there in his own name, upon the

to make notes, when negotiated, assume the shape and operation of bills, and to render the analogy between them so strong, that the rules established with respect to the one apply to the other. (a) It was a question much discussed before the statute of Anne, whether notes were not, by the principles of the lawmerchant, to be treated as bills; and Lord Holt vigorously and successfully resisted every such attempt. (b) The history of that struggle is no longer interesting; but there is no doubt that assignment as creating a right of action in him, and which it does upon the application of the doctrine of the lex loci contractus. Innes v. Dunlop, 8 T. R. 595; O'Cal laghan v. Thomond, 3 Taunt. 82. [But see Foss v. Nutting, 14 Gray, 484; Richardson v. N. Y. C. R.R., 98 Mass. 85, 92.] In Massachusetts, Connecticut, Vermont, Ohio, North Carolina, South Carolina, Alabama, Mississippi, Illinois, Michigan, Missouri, and most of the states, the indorsee has all the privileges of an indorsee under the law-merchant. But in New Jersey, Pennsylvania, Virginia, Kentucky, and Indiana, his rights, under the law-merchant, are to be taken with some qualification. See Griffith's Law Register, passim. Minor (Ala.), 5, 296; Revised Statutes of North Carolina, 1837, i. 93; Revised Statutes of Vermont, 1839, 336; Revised Code of Mississippi, 1822, 464. In Georgia, notice to the indorser of nonpayment of a promissory note by the maker is declared to be unnecessary, and every such indorser is held to be bound as security, and in that character may require the holder to proceed against the maker. Hotchkiss's Code of Laws, 441. Notes or bills discounted at a bank, or deposited for collection, are placed by statute in Pennsylvania on the footing of foreign bills of exchange as to payment and remedy. Purdon's Dig. 108. As the English statute has not been adopted in Virginia, the last assignee of a promissory note cannot maintain an action against a remote indorser, there being neither consideration nor privity. Dunlop v. Harris, 5 Call, 16. In New Hampshire the statutes of 9 and 10 William III. and 3 and 4 Anne, respecting inland bills, and promissory notes, were reenacted during the colony administration. In Indiana, promissory notes, payable at a chartered bank within the state, are, by statute, placed on the same footing as inland bills of exchange by the law-merchant. Revised Statutes of Indiana, 1838, 119. But other promissory notes are not governed by the law-merchant, which has never been applied in that state by statute to them. Bullitt v. Schribner, 1 Blackf. (Ind.) 14. The lex mercatoria, applicable to foreign and inland bills of exchange, is considered to be adopted in Indiana as part of the common law of England, which has been adopted by statute. Piatt v. Eads, ib. 81. In Pennsylvania, Virginia, Georgia, Arkansas, Missouri, and Mississippi, sealed instruments, as well as notes, are made negotiable by statute; and in Arkansas, all agreements and contracts in writing, for the payment of money or property, are made assignable. But these assignments, in some of these last mentioned states, expressly reserve to the debtor all matters of defence existing prior to the notice of the assignment. This is the case in Mississippi. Allein v. The Agricultural Bank, 2 Smedes & M. 48. In Georgia, by statute of 1799, promissory notes are made negotiable, though given for specific articles. And so are specialties and liquidated demands negotiable by act of 1799. Broughton v. Badgett, 1 Kelly, 75; Daniel v. Andrews, Dudley, 157; Gamblin v. Walker, 1 Ark. 220; Hening's Statutes, xii.; Block v. Walker, 2 Ark. 7; Revised Statutes of Arkansas, 107; Revised Code of Mississippi, 1824, 464.

(a) Heylin v. Adamson, 2 Burr. 669; Brown v. Harraden, 4 T. R. 148. (b) Clerke v. Martin, 2 Ld. Raym. 757.

promissory notes were recognized as mercantile instruments, and a species of bills of exchange, by the canon law and the

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usage of trade; and even by the French ordinance of 74 1673, long before Lord Holt asserted them to be of late English invention. (a)

My object in the present lecture is to endeavor to take a comprehensive, and at the same time precise and accurate view of the general doctrine and most material rules relative to bills and notes; and to effect this purpose, I shall point out their essential qualities; the rights of the holder; the negotiation of them, and the requisite steps to fix the responsibility of the several parties whose names are upon the paper.

1

2. Of the Essential Qualities of Negotiable Paper, as Bills, Notes, and Checks. A bill of exchange is a written order or request, and a promissory note a written promise, by one person to another, för the payment of money, at a specified time, absolutely, and at all events. (b) If A, living in New York, wishes to receive one thousand dollars, which await his orders in the hands of B, in London, he applies to C, going from New York to London, to pay him one thousand dollars, and take his draft on B, for that sum payable at sight. This is an accommodation to all parties. A receives his debt by transferring it to C, who carries his money across the Atlantic in the shape of a bill of exchange, without any danger or risk in the transportation; and on his arrival at London, he presents the bill to B, and is paid. This is the * plain and familiar illustration of this mode of remittance, *75 given by Sir William Blackstone; and the practice is so very convenient, and suggests itself so readily, and gives such extension to credit and circulation to capital, that it would seem almost impossible that it should not have been in use in the ear

(a) The pragmatic of Pope Pius V., De Cambiis, as early as 1571, is mentioned by Mr. Du Ponceau, in his dissertation on the Nature and Extent of the Jurisdiction of the Courts of the United States, 122, as proof of the early recognition of notes as negotiable instruments within the custom of merchants. I would also refer to the Appendix to 1 Cranch's Reports, for a very elaborate argument in favor of the position, that at common law, and before the statute of Anne, an indorsee of a promissory note could sue a remote indorser.

(b) This definition is taken from Bayley on Bills, 1, which is a concise, clear, and accurate production. The American edition, published at Boston in 1826, is enriched with all the English and American decisions in its very copious notes.

1 See 76, n. 1.

liest periods of commerce. A, who draws the bill, is called the drawer. B, to whom it is addressed, is called the drawee, and, on acceptance, he becomes the acceptor. C, to whom the bill is made payable, is called the payee. (a) As the bill is payable to C, or his order, he may, by indorsement, direct the bill to be paid to D; and in that case, C becomes the indorser, and D, to whom the bill is indorsed, is called the indorsee or holder. A check upon a bank partakes more of the character of a bill of exchange than of a promissory note. It is made payable to bearer, or to order, and transferable by delivery or indorsement like a bill of exchange. It is not a direct promise by the drawer to pay, but it is an implied undertaking, on his part, that the drawee shall accept and pay, and the drawer is answerable only in the event of the failure of the drawee to pay. A check payable to bearer passes by delivery, and the bearer may sue on it as on an inland bill of exchange. (b)1

A bill or note is not confined to any set form of words. A promise to deliver, or to be accountable, or to be responsible for so much money, is a good bill or note; but it must be exclusively and absolutely for the payment of money. (c) In England, negotiable paper must be for the payment of money in specie, and

(a) An instrument may be a bill of exchange, though the drawer and drawee be the same person. Harvey v. Kay, 9 B. & C. 356; Randolph v. Parish, 9 Porter (Ala.), 76; Potter v. Tyler, 2 Met. 58. In Miller v. Thomson, 3 Mann. & Gr. 576, Ch. J. Tindal said that two distinct parties, as drawer and drawee, were essential to the constitution of a bill of exchange; and as the instrument in that case was drawn by one of the company upon the firm, and on its behalf, it was good as a promissory

note.

(b) See infra, 104, note; Cruger v. Armstrong, 3 Johns. Cas. 5; Conroy v. Warren, ib. 259; Woods v. Schroeder, 4 Harr. & J. 276; Lord Kenyon, in Boehm v. Sterling, 7 T. R. 430; Walker v. Geisse, 4 Whart. 252. In the late case in England, of Serle v. Norton, 9 M. & W. 309, a post-dated check was held altogether void. [Taylor v. Sip, post, 88, n. 1.] We may well demur to that decision. In Wookey v. Pole, 4 B. & Ald. 1, it was held that exchequer bills pass by delivery to the bona fide [holder] for value, because they were negotiable securities, and represented money. The statute of 48 Geo. III. c. 6, directed them to be circulated.

(c) Morris v. Lee, 2 Ld. Raym. 1396; 8 Mod. 362; Str. 629; Martin v. Chauntry, Str. 1271; Thomas v. Roosa, 7 Johns. 461. [Barnes v. Gorman, 9 Rich. 297; Austin v. Burns, 16 Barb. 643; Dodge v. Emerson, 34 Me. 96. The student should be warned that the law-merchant is more or less modified by statute in the different states, e.g. Muhling v. Sattler, 3 Met. (Ky.) 285.] The initials of the maker's name will bind him as the maker of a promissory note. Palmer v. Stephens, 1 Denio, 471. So, I O. U. £10, is a promissory note. 1 Carr. & K. 35.

1 See, as to checks, post, 88, n. 1; 76, n. 1; 78, n. 1.