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 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. Bills *72 *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

Dig. 22. 2. 4. 1.

b Traité du Con. de Change, No. 6.

• See the pleading of Isocrates, entitled Trapeziticus. (Isocratis Scripta omnia, edit. 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 honour the draft, and the young Pontian should fail.

on the coasts of the Mediterranean, in the fourteenth century.a 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.

bills.

Promissory notes are governed by the rules that apply to The statute of 3d and 4th Anne made promissory notes payable to a person, and to his order, (1) 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.

The

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 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, vol. i. 68. M. Boucher received from M. Legon Deflaix, 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, tome 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. 1 Prescott's Ferdinand and Isabella, Int. p. 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. Repertoire 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 1881.

b By the N. Y. Revised Statutes, vol. i. 768. sec. 1-6, promissory notes payable

(1) The question, whether an instrument, payable to a person's own order, can be declared on as a promissory note, under the statute of Anne, has recently been much discussed in the English courts. The Court of Exchequer, in Flight v. MacLean, 16 M. & W. 51, held that such an instrument was not a promissory note.

In the subsequent case of Wood v. Mytton, 10 Ad. & El. R. 805, the question came before the Q. B., and after a review of the preceding case, it was held, that such an instrument was a promissory note within the statute.

In Hooper v. Williams, 2 Excheq. R. 18, the question came a second time before the Court of Exchequer, and that court adhered to its previous construction, but held that the endorsement of such an instrument made it a valid promissory note, upon which the endorser might declare as such.

*73 effect of the statute *is to make notes, when negotiated, assume the shape and operation of bills, and to render

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 endorsee 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. Promissory notes are negotiable throughout the Union, and the endorsee can sue in his own name. Notes, negotiable 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. Mylne v. Graham, 1 Barnw. & Cress. 192. Hatcher v. M'Morine, 4 Dev. N. C. Rep. 122. So, if a note or debt be assigned or endorsed abroad, and be suable in the name of the assignee by the law of the country where it was assigned or endorsed, it would seem to be the better opinion in England, that the assignee might sue there in his own name, upon the 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 Term, 595. O'Callaghan v. Thomond, 3 Taunton, 82. In Massachusetts, Connecticut, Vermont, Ohio, North Carolina, South Carolina, Alabama, Mississippi, Illinois, Michigan, Missouri, and most of the states, the endorsee has all the privileges of an endorsee 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. 1 Miner's Alabama Rep. 5. 296. Revised Statutes of North Carolina, 1837, vol. i. 93. Revised Statutes of Vermont, 1839, 336. Revised Code of Mississippi, 1822, 464. In Georgia, notice to the endorser of non-payment of a promissory note by the maker is declared to be unnecessary, and every such endorser is held to be bound as surety, and in that character may require the holder to proceed against the maker. Hotchkiss' Code of Laws, p. 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 mantain an action against a remote endorser, 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 Blackford's Ind. Rep. 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, 1 ibid. 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

the analogy between them so strong, that the rules established with respect to the one apply to the other. It was a question much discussed before the statute of Anne, whether notes were not, by the principles of the law-merchant, 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 promissory notes were recognised as mercantile instruments, and a species of bills of exchange, by the canon law and the usage of trade; and even by the *French ordinance of 1673, long be- *74 fore Lord Holt asserted them to be of late English invention.c

My object in the present lecture is to endeavour 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.

(2.) Of the essential qualities of negotiable paper.

A bill of exchange is a written order or request, and a promissory note a written promise, by one person to another, for

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, 3 Smedes & Marshall, 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's Rep. 157. Gamblin v. Walker, 1 Arkansas R. 220. Henning's Statutes, vol. xii. Block v. Walker, 2 Arkansas R. 7. Revised Statutes of Arkansas, 107. Revised Code of Mississippi, 1824, 464.

148.

Heylin v. Adamson, 2 Burr. Rep. 669. Brown v. Harraden, 4 Term Rep.

b Clerke v. Martin, 2 Lord Raym. 757.

The pragmatic of Pope Pius V. De Cambiis, as early as 1571, is mentioned by Mr. De 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 favour of the position, that at common law, and before the statute of Anne, an endorsee of a promissory note could sue a remote endorser.

a

the payment of money, at a specified time, absolutely, and at all events. (1) If A., living in New-York, wishes to receive 1000 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 1000 dollars, and take his draft on B. for that sum, payable at sight. This is an accommodation to all parties. A. receives his debt for 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 *75 paid. This is the *plain and familiar illustration of this

mode of remittance, 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 earliest periods of commerce. (2) 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.b As the bill is payable to C. or his order, he may, by endorsement, direct the bill to be paid to D.; and, in that case, C. becomes the endorser, and D., to whom

This definition is taken from Bailey 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.

An instrument may be a bill of exchange, though the drawer and drawee be the same person. Harvey v. Kay, 9 Barnw. & Cress. 356. Randolph v. Parish, 9 Porter's (Alabama) Rep. 86. Potter v. Tyler, 2 Metcalf's Rep. 58. In Miller v. Thomson, 3 Manning & Granger, 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.

(1) A late work contains the following definitions: "A bill of exchange is a written order from A. to B., directing B. to pay C. a sum of money therein named," or A. himself may be made the payee.

"A promissory note, or, as it is frequently called, a note of hand, is a promise or engagement, in writing, to pay a specified sum at a time therein limited, or on demand, or at sight, to a person therein named, or to his order or bearer." Byles on Bills of Exchange and Promissory Notes, pp. 1. 4.

This treatise of the learned sergeant is a work of unusual merit, and combines accuracy and perspicuity, with brevity and completeness.

(2) A bill drawn on the consignee of goods, does not transfer the goods to a party discounting the bill. Marine F. Ins. Bank v. Jauncey, 3 Sandf. S. C. R. 257. Wheeler v. Stone, 4 Gill