NEGOTIABLE INSTRUMENTS.

BOOK I.

THE MAKING OF THE INSTRUMENT.

CHAPTER I.

NATURE, HISTORY, AND USES OF NEGOTIABLE INSTRUMENTS.

SECTION I.

NATURE, ORIGIN, AND HISTORY OF BILLS AND NOTES. § 1. An instrument is called negotiable when the legal title to the instrument itself, and to the whole amount of money expressed upon its face, may be transferred from one to another by indorsement and delivery by the holder, or by delivery only. The peculiarities which attach to negotiable paper are the growth of time, and were acceded for the benefit of trade.

It was a rule of the common law of England, that a chose in action-by which is meant a claim which the holder would be driven to his action at law to recover-could not be assigned to a stranger, our forefathers conceiving that if claims and debts could be assigned, “pretended titles might be granted to great men, whereby right might be trodden down and the weak oppressed, which the common law forbiddeth.” 1 The first relaxation of this rule was made in respect to bills of exchange, and was gradually

*Coke, Litt. 214a; Chitty on Bills (*7], 9; Edwards on Bills, 55.

VOL. I.-I.

extended to notes and other securities, until the rule itself disappeared.

But while all choses in action are now transferable, the nostrument is the only species which carries by

*clear title and a full measure ; and like an instru:ment under seal imports a consideration. It has, therefore, 'three peculiar and distinguishing characteristics :

First. Respecting the title. If a horse, or other personal chattel, or a non-negotiable instrument, be stolen, no purchaser, however innocent or ignorant of the theft, can ac quire title against the true owner, who may at any place, and at any time, identify his property and reclaim it. But if a negotiable instrument be stolen, and transferred by the thief to a third person in the usual course of business, before maturity, and for a valuable consideration, the person so acquiring it may hold it against the world.

Second. Respecting the amount. If a bond or nonnegotiable note be assigned, the assignee steps into the shoes of the assignor, and if the bond or note has been paid, or is subject to any counter-claim or set-off against the original maker, they attach to and incumber it into whosesoever hands it may fall. But a negotiable paper carries the right to the whole amount it secures on its face, and is subject to none of the defences which might have been made between the original or intervening parties, against any one who acquired it in the usual course of business before maturity. It is a circulating credit like the currency of the country, and, before maturity, the genuineness and solvency of the parties are alone to be considered in determining its value. It has been fitly termed “a courier without luggage.” 1

Third. Respecting the consideration. By the common law, an instrument under seal imports a consideration, by virtue of the solemn ceremony of its execution; and

a

1

'Overton v. Tyler, 3 Barr, 346, Gibson, C. J.

no other non-negotiable instrument does. A bill of ex change, however, by the usages of merchants, also prima facie imports a consideration; and now by statute promissory notes of a certain kind are placed on the same footing. As between immediate parties, the true state of the case may be shown, and the presumption of consideration rebutted. But when a bill of exchange or negotiable note has passed to a bona fide holder for value, and before maturity, no want or failure of consideration can be shown. Its defects perish with its transfer; while, if the instrument be not a bill of exchange or negotiable note, they adhere to it in whosesoever hands it may go.

$ 1a. The term “negotiable,” in its enlarged signification, is used to describe any written security which may be transferred by indorsement and delivery, or by delivery merely, so as to vest in the indorsee the legal title, and thus enable him to bring a suit thereon in his own name. But in a strictly commercial classification, and as the term is technically used, it applies only to those instruments which, like Bills of Exchange, not only carry the legal title with them by indorsement, or delivery, but carry as well, when transferred before maturity, the right of the transferee to demand the full amounts which their faces call for. “Assignable" is the more appropriate term to describe bonds, and ordinary notes, or notes of hand as they are most commonly called; as “negotiable” is the more

' fitting term to describe the peculiar instruments of commerce. 1

$ 2. Bills of exchange were probably the first instruments for the payment of money that were accorded a negotiable quality, though promissory notes, being simpler in form, were doubtless used as evidences of debt before bills of exchange came in vogue amongst merchants. Cer

* See Odell & Gray, 15 Mo., 342 ; International Bank v. German Bank, 71 Mo., 183.

tainly these two securities were recognized as negotiable instruments before any other paper representatives of money or property passed currently from hand to hand in like manner as money ; and from them, as fruitful parents, have sprung all the varieties of negotiable instruments now known. Of bills and notes, therefore, we shall first speak, and after they have been sufficiently treated of, the other varieties of negotiable instruments will receive due attention.

$ 3. As to the origin and history of bills and notes.The numerous commentators on the law of bills of exchange and promissory notes have generally enriched their pages with the results of their classic and antiquarian researches into the origin and history of those instruments. But notwithstanding the number and the diligence of the laborers in this interesting field of inquiry, it can not be now stated, with any degree of certainty, by whom they were invented, or when they were first used. In respect to bills of exchange, it is said by Pothier, that there is no vestige of them among the Romans, or of any contract of exchange; for though it appears that Cicero directed one of his friends at Rome, who had money to receive at Athens, to cause it to be paid to his son at that place, and that friend accordingly wrote to one of his debtors at Athens, and ordered him to pay a sum of money to Cicero's son, yet, it is observed, that this mode amounted to nothing more than a mere order or mandate, and was not that species of negotiation which is conducted through the medium of a bill of exchange.

Chancellor Kent seems to think that a passage in one of the pleadings of Isocrates indicates the use of bills of exchange amongst the Greeks, but Story considers that the

1

· Pothier de Change, n. 6; Story on Bills, $ 6; 1 Bell Com. b. 3, c. 2, $4.

P. 386.

2

3 Kent Com., Lect. 44.