was subject to the defense of accommodation paper. The Court held that the prior instrument, which established the rights of the parties, having been properly indorsed and the subsequent note being merely an extension of credit and given for the purpose of replacing the prior one, the plaintiff should be allowed to recover; that if the unindorsed note sued on had been an original note, the defense interposed would have been a perfect one. The law says that an accommodation party is liable to every holder for value with or without notice. True, but only when the instrument is taken in the regular course of business, which means, when payable to order, with the endorsement thereon of the payee. See Trust Co. v. Bank, 101 U. S. 68; Benson v. Abbott, et al., 22 S. E. Rep. 127. The negotiability of the paper is of the very essence of the holder's claim to protection against equities. The transferee can insist upon an indorsement and the law says that it must be furnished. If he fail to get it, it is his own fault. He may procure it at any time before maturity, with this qualification, however, as expressed in the statute: That for the purpose of determining whether the transferee is a holder in due course, the negotiation takes effect as of the time when the Indorsement is actually made. SECTION 64 provides that where one not otherwise a party to an instrument places thereon his signature in blank before delivery, he is liable as indorser in accordance with the following rules: (1) To the payee and all subsequent parties where the instrument is payable to the order of a third person; (2) Where the instrument is payable to the order of the drawer or maker, or is payable to bearer, he is liable to all parties subsequent to the maker or drawer. This section is declared faulty on the ground that one not otherwise a party to a bill payable to the order of the drawer may sign it for the accommodation of the acceptor, in which case, it is asserted, the stranger should be liable to the drawerpayee; but that by subsection 2 he is liable only to parties subsequent to the payee. The section refers to an indorsement before delivery. What is meant by delivery? A transfer of possession of the instru ment with intent to transfer the title. Suppose A draw a draft to his own order upon B, which the latter accepts and then procures the anomalous indorsement of C. Upon returning the bill to A, does B transfer the title? He cannot transfer that which he never had. Again, an anomalous indorsement can create no obligation to previous parties to the bill; the liability assumed runs in favor of subsequent parties only. Therefore C could not be held liable to A, as the latter was already a party to the bill when C affixed his signature thereto. That is the law in Great Britain and the United States and is founded upon commercial necessity and reason. SECTION 65 provides that one who transfers an instrument by a qualified indorsement impliedly warrants to every subsequent holder the genuineness of the instrument, that all prior parties had capacity to contract, &c. Professor Ames says that the idea that such indorser is liable any one except his immediate transferee is an original invention of the Negotiable Instruments Law. And, further, that to say that he is liable in any manner on the bill is to contradict the plain language of his indorsement; that his liability is extrinsic to the bill and he is liable to his vendee only, the same as the vendor of any chattel. Suit against an indorser by a remote indorsee on the former's implied liability seems to be a rare proceeding. In a series of New York cases1 a point was decided which indicates that qualified indorsers would be held liable to subsequent indorsees. In two of these cases suit was brought againt the maker by a transferee remote from the payee, who had indorsed in a qualified manner. The plaintiff desired to put the payee on the witness stand to testify in his behalf, but this the court would not allow, on the ground that he was an interested party, inasmuch as by proving the plaintiff's case, the payee would thereby be relieving himself from liability on his implied warranty to the subsequent holder. Referring to Professor Ames's statement that the indorser's liability is extrinsic to the bill and that he is liable to his vendee only, the same as the vendor of any chattel, citing Challis v. 1 Herrick v. Whitney, 15 Johns 240; Shaver v. Ehle, 16 Johns 201; Baskin v. Wilson, 6 Wendel 474. Mc Crum (22 Kans. 156), I find that the language used in that case is in favor of such contention and the court cited as authority Hannum v. Richardson (48 Vt. 508). But the decision in the latter case hardly justifies such a view. What the court said in Hannum v. Richardson was that "by indorsing without recourse' the defendant refused to assume the responsibility and liability which the law attaches to an unqualified indorsement, so that in respect to such liability it may perhaps be regarded as standing without an indorsement." (The italics are ours.) This seems to mean that a note bearing a qualified indorsement is the equivalent of one transferred by delivery, as regards the conditional liability to pay the instrument on default, but not otherwise. The Am. & Eng. Encyclopedia of Law (2d Ed.), referring to indorsements generally says: The liabilities of an indorser as a vendor or transferor of the instrument are identical with those of a transferor by delivery, with this exception, that while a transferor by delivery is liable only to his immediate transferee, an indorser, being a party to the instrument, is liable to all subsequent bona fide holders. The language used indicates that so far as the liabilities as a vendor are concerned no distinction is made between a qualified and an unqualified indorse ment. SECTION 66 provides that one who indorses without qualification warrants to all subsequent holders in due course. Professor Ames says that this section betrays the same misconception in regard to warranty as the preceding one; that the liability is extrinsic to the instrument and that it runs to the immediate transferee only. Many judges and text-writers have laid down the doctrine that the liability which an indorser for value incurs is an extrinsic one, but Benjamin on Sales (4th Am. Ed. sec. 607), after referring to the liability on his warranty of a vendor of a chattel, says: "A vendor who sells bills of exchange, notes, shares, certificates and other securities, is bound, not by the collateral contract of warranty, but by the principal contract itself, to deliver, as a condition precedent, that which is genuine, not that which is false, counterfeit or not marketable by the name or denomination used in describing it." And Daniel, in his treatise on Negotiable Paper (Sec. 733a), refers to the definitions given by the American and English courts, and indicates the view that the form of expression used by Benjamin, as quoted above, is the more accurate one. In Warren-Scharf Co. v. Bank (97 Fed. Rep. 181), referred to by Professor Ames, an action was brought by a bank to recover from an indorser, on its implied warranty, the amount of a forged check paid by the bank, and the court said: "The liability of the defendant growing out of its relation to the instrument as an indorser, was, by reason of the fact that the instrument was a forgery, not the usual contingent liability of an indorser, but one of fixed responsibility as a warrantor of the genuineness of the paper indorsed." Which seems to indicate that the court considered that the liability was connected with the indorsement. I wish to call attention to the provisions of sections 55 and 58 of the Bills of Exchange Act in reference to the respective liabilities of the transferor of an instrument by indorsement and by delivery. Section 55-2 provides that "The indorser of a bill by indorsing it—(6) Is precluded from denying to a holder in due course the genuineness and regularity in all respects of the drawer's signature and all previous indorsements; (c) Is precluded from denying to his immediate or a subsequent indorsee that the bill was at the time of his indorsement a valid and subsisting bill and that he had good title thereto." Section 58, on the other hand, provides that ❝ (2) The transferor by delivery is not liable on the instrument," and "(3) The transferor by delivery who negotiates a bill thereby warrants to his immediate transferee being a holder for value that the bill is what it purports to be, that he has a right to transfer it and that at the time of the transfer he is not aware of any fact which renders it valueless." " According to section 55 of the Act the indorser, by the act of indorsing, is precluded from denying to his immediate or a subsequent indorsee, &c., while section 58 says that the transferor by delivery is not liable on the instrument, and also by negotiating it by delivery warrants to his immediate transferee, &c. The distinction seems to be significant. The liability as warrantor of the transferor by delivery is extrinsic to the instrument, while in the case of the transfer by indorsement the liability grows out of and is a direct result of the indorsement. There are no cases appended which can be used as a guide in determining the purport of the language or the reason for the distinction, but the above interpretation is natural and reasonable. If the liability be extrinsic to the bill, as Professor Ames asserts, and merely such as results from the sale of the chose, the same as the sale of any chattel, then his contention that an accommodation indorser, not being a vendor, is not liable on any warranty, but only as an indorser after due notice of dishonor, is, of course, a logical deduction therefrom, and in support of this theory he cites Susquehanna Bank v. Loomis (85 N. Y. 207) and Case v. Bradburn (1 Daly 256). As a matter of fact, the decision in the case first named was not based on any question of warranty, and the plaintiff's case rested solely on the draft and the indorsement placed thereon by the defendant. It is true that in the pleadings there had been some allegations of forgery, but no evidence was introduced to prove it; in fact, it was not denied that the signature of the drawer was genuine and it was not shown that the payee's name as indorser was forged. Therefore, the defendant, being liable only on his indorsement, and not having been duly notified of refusal of payment, could not be held. The second case was similar to Turnbull v. Bowyer (infra). It was an action against an indorser, who, after indorsing a check for deposit, had negligently permitted its return to the person from whom he had received it. No question of accommodation was involved. But it has been held that an accommodation indorser, like the indorser of ordinary business paper, warrants the capacity of prior parties to contract.' Taking up the question of the liability of an indorser of instruments other than accommodation paper: In Turnbull v. Bowyer (40 N. Y. 456), cited by Professor Ames, the defendant had indorsed a check on which the name of the payee had 1 Edmonds v. Rose, 51 N. J. L. 547; Erwin v. Downs, 15 N. Y. 575. |