By negotiation is meant the transfer of negotiable paper by the payee thereof or his transferee with the intention and effect of constituting the transferee the holder of the legal title thereof.
To negotiate commercial paper is to transfer it to another for the purpose of investing the ownership in him generally or for some special purpose.
Negotiation is by delivery and by indorsement.
Some instruments, we have noticed, are negotiable by delivery. That is when they are payable to bearer. And when they are payable to bearer has also been stated.77 In such case they may also be indorsed, but this enlarges the liability of the transferor. But when payable to order they are transferred by indorsement, and the indorsement is necessary to negotiation. A holder of paper which must be negotiated by indorse77. Sec 26, supra, ment does not become a holder in due course until indorsement has actually been made, no matter when he acquired the paper.
(1) Must be in writing. An indorsement must be in writing on the instrument itself or on a paper attached thereto.
An indorsement must be written on the instrument or on a paper attached thereto. This attached paper is called an allonge.
If a transfer is made by separate writing, it is an assignment; for negotiable instruments may be assigned, as well as indorsed. The title, in that case, is that of an assignee, that is, it is subject to defenses.
(2) Words sufficient or necessary. The signature of the indorser is sufficient.
The contract of the indorser is implied from his mere indorsement. If the indorsement is special, as noted below, there is also the name of indorsee, and restrictive, qualified and conditional indorsement also require additional words. But indorsement may be by signature alone, and there must be such signature. But any word or mark intended as a signature is sufficient.
The contract of the indorser, though not expressed, except by his signature, is well understood in law. He contracts to pay if the party primarily liable does not pay, provided the necessary steps are taken to charge him, as we shall see later. He also contracts that he has good title and that prior parties have competency to contract, etc. All this is contained in the mere signature on the back of the note. The indorsers contract is noted more at length, later.
Words of negotiability are not necessary in the indorsement. An indorsement "Pay to John Brown" instead of "pay to the order of John Brown," will not restrict further negotiation provided the instrument itself is in its body in negotiable form. See forms of indorsement hereafter.
Opinions have differed whether "I hereby assign all my right, title and interest," or "I hereby assign the within note" or similar words constitute an indorsement sufficient to constitute one a holder in due course. If held a valid indorsement, it seems it should be at least a qualified one, transferring title and not preventing holder from being holder in due course, but qualifying liability.77a
Indorsement must be of the entire instrument, but if any part of the sum has been paid, there may be a good indorsement of the residue.78
An indorsement of part of an instrument is not good as an indorsement because if indorsements could be divided up it would subject the party liable to great inconvenience and expense.
An indorsement of a negotiable instrument is effective to transfer the incidental rights therein to aid or secure the enforcement of the debt.
The debt expressed in the negotiable instrument is the main thing. Provisions and securities to aid in its en77a. Marion National Bank v. Harden, 83 W. Va. 119, holds it to be a qualified indorsement. 78. Nego. Instru. Act, SEC. 32.
forcement and which do not destroy negotiability, pass with an indorsement of the note.
Thus one who receives a note which has been secured by collateral, is entitled to the collateral for the purposes for which it was given; and mortgages should be assigned with the debt which they secure.
So authority to confess judgment, waivers of rights, agreements to pay costs, attorney's fees, etc., all pass to the holder of the note, because they are incidental to the debt.
(1) Presumption as to time. Presumed unless dated after maturity to have been before instrument was overdue.
Indorsements after maturity though good to transfer title, subject one to defenses, if any, as we shall note later; hence the importance of this presumption. Indorsements are not usually dated.
(2) Presumption as to place. Presumed unless contrary appears, to have been at place where instrument is dated.
The place of dating is important to determine what law will govern when there is a conflict.
(1) Indorsement to "Cashier."
An indorsement to the fiscal officer of a corporation or bank, so describing him, is deemed prima facie an indorsement to the bank or corporation. And may be negotiated further either by the cashier's or the institution's indorsement. This applies to paper payable to any fiscal officer.
79. Nego. Instru. Law, SEC. 45.
(2) Payee or indorsee misdescribed or name misspelled.
If a payee or indorsee's name is misspelled or he is otherwise misdescribed he may indorse as described, adding his correct name, if he choose, or is so required.
(3) Striking out indorsement.
Holder may strike out any indorsement not necessary to his title. This discharges the indorser whose name is so stricken and all indorsements subsequent thereto.
(4) Negotiation by prior party.
If an instrument is negotiated back to a prior party he may re-issue and further negotiate the instrument, but cannot enforce payment against any party to whom he was personally liable.