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The Select Committee in their report of 27th May 1878 say, “ Section 76 of Bill No. II declares, in accordance with American “decisions, that the effect of an indorsement for part of the sum “ remaining due to the indorser, is to give to the indorsee a lien “on the bill, but not to transfer a right to sue, except in the “ indorser's name. There can be no doubt that such indorse. “ments are not warranted by the custom of merchants.” The latter clause of the section is founded on a case decided in the

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unlawful means or for unlawful con. sideration.

Legal represen. 57. The legal representative of a deceased pertative cannot by delivery

son cannot negotiate by delivery only a promissory instrument in. note, bill of exchange or cheque payable to order dorsed by de- and indorsed by the deceased but not delivered. ceased.

The reason of this is, as we have seen (ante, Sec. 29), that the representative is not the agent of the deceased. To make a valid transfer, the representative must indorse, and deliver the instrument.

58. When a negotiable instrument has been lost, obtained by

or has been obtained from any maker, acceptor or holder thereof by means of an offence or fraud, or for an unlawful consideration, no possessor or indorsee who claims through the person who found or so obtained the instrument is entitled to receive the amount due thereon from such maker, acceptor or holder, or from any party prior to such holder, unless such possessor or indorsee is, or some person through whom he claims was, a holder thereof in due course.

This section must be read with Secs. 8, 9 and 10. Instrument ac 59. The holder of a negotiable instrument, who quired after

has acquired it after dishonor, whether by nonacceptance or non-payment, with notice thereof, or after maturity, has only, as against the other parties, the rights thereon of his transferor :

dishonor or when overdue.

" Hawkins v. Cardy, I Ld. Raym., 360.

... Bromage v. Lloyd, 1 Ex. 32.

Provided that any person who, in good faith and Accommoda

tion note or for consideration, becomes the holder, after maturity, bill. of a promissory note or bill of exchange made, drawn or accepted without consideration, for the purpose of enabling some party thereto to raise money thereon, may recover the amount of the note or bill from any prior party.

ILLUSTRATION. The acceptor of a bill of exchange, when he accepted it, deposited with the drawer certain goods as a collateral security for the payment of the bill, with power to the drawer to sell the goods and apply the proceeds in discharge of the bill if it were not paid at maturity. The bill not having been paid at maturity, the drawer sold the goods and retained the proceeds, but indorsed the bill to A. A's title is subject to the same objection as the drawer's title.

The judgment of Gibbs, C. J., in O'Keeffe v. Dunn? gives a very lucid exposition of the law contained in the first clause of this section, he says,

“ He who takes a bill after it has arrived at maturity, takes it subject to all the defences which could have “ been made by any previous holder; for the bill being unpaid, its “ date is notice to him, sufficient to put him on inquiry. But if “ he takes the bill before it is due, he takes it, not subject to the

same infirmity of title, because he then takes it without notice of any suspicious circumstances that

may break in upon his “remedy against any former holder. This is the general law; “ but there

may be circumstances that may make it otherwise. A " holder is not bound to present a bill for acceptance ; there is nothing therefore on the face of an unaccepted bill to awaken

suspicion, that it has been presented for acceptance and refus“ed. But it is said, the general law is, that where notice is

requisite, if notice be not given, the drawer and all persons " claiming to be entitled to have notice of the dishonor, are dis“charged. I think that, is a begging of the question. If a “holder comes to a knowledge that the drawee will not accept,

or will not pay the bill when it becomes due, and omits to "give notice, he shall never sue the drawer, because his neglect

16 Taunt., 305 ; S. C. (affd, in error) 5 M, & S. 282.

66

prevents the drawer from using diligence in withdrawing “ from the drawee the effects which were destined to satisfy the “ bill. But I am of opinion, that if the bill passed for a valua“ ble consideration, without notice of that defect of title, he who so innocently takes the bill, is not guilty of any breach of

duty towards the drawer, and is therefore not affected by the “omission. Roscow v. Hardy,' is mainly distinguishable from the "present case, in respect that the bill there, continued up to the “time of its maturity, in the hands of a holder, who had neglect“ed to give that notice at the time when the bill was first

refused acceptance; and the holder, I agree, had thereby, as “to his own claim, discharged the drawer. I therefore think " that the present plaintiff, not having had notice that the bill “ had been presented for acceptance and dishonored, before she “ took it, is entitled to recover.” As to taking a bill after its maturity, Lord Ellenborough says,

After a bill or note is due, it comes disgraced to the indorsee, and it is his duty to make enquiries concerning it. If he take it, though he give value for it, he takes it on the credit of the indorser, and subject to all the equities with which it may be encumbered.” The use of the word thereon in the expression in the section, the holder, has only against the other parties, the rights thereon of his transferor, is probably due to a dictum of Cresswell, J., who says, “Perhaps the better expression would be that “he takes the bill, subject to all its equities.”'3 It is to be noticed, that the rights on a dishonored or overdue instrument which are conferred on an indorsee, are those of his immediate transferor, so, it has been held, that where a bill, accepted in respect of an illegal transaction, had been indorsed before maturity to a bonâ fide holder for value, and such indorsee indorsed it over to a third person for value after it became due, it was held in an action by the last indorsee against the acceptor, to be immaterial that the payee had a defective title, as the plaintiff's indorser had a perfectly good title. Where two hundis were sent by plaintiff to his correspondent at Calcutta for realization, the proceeds thereof to be applied towards payment of a hundi, which the correspon

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dent had accepted in favor of the plaintiff, and the correspondent had paid a larger sum on his acceptance, than the plaintiff had paid him, and before the whole amount of his acceptance had been paid and before the two hundis had matured, the correspondent stopped payment, and soon after and after the hundis had matured, indorsed them over to the defendant for the benefit of his creditors; it was held that the indorsement to the defendant being after the due date, he could not take a better title than his indorser, who having held them for a specific purpose, which had failed, and he having given no consideration for them (the mere acceptance of plaintiff's hundi without payment thereof, was no consideration), they remained the property of the plaintiff, and he was entitled to recover the possession of them.' Promissory notes payable on demand are within the section, but in order to restrict a holder's rights it is submitted, the English rule that there must be proof of demand and refusal of payment, will be applicable : Parke, B., says, “If a promissory note payable on demand is after a certain time to be treated as overdue, although payment has not been demanded, it is no longer a negotiable instrument; but a promissory note payable on demand, is intended to be a continuing security." (See post, notes to Sec. 74).

The following are some equities attaching to an overdue bill, and by which an indorsee after maturity would be affected ; payment or satisfaction to a holder, whose title was only to secure a balance of an account due ;3 the case given in the illustration ;- the purchase of a bill with stolen money.5

A right of set-off by the acceptor against the drawer, is not an equity on the instrument, so as to affect an indorsee of an overdue bill.6

The latter clause of the section, makes an exception in favor of accommodation bills, the reason probably being that the original want of consideration is not an equity which attaches against an indorsee for value of an overdue bill.? (See notes to Sec. 43).

1. Hazari Mull v. Sobagh Mull, 9 Beng. L. R. 1.

2 Brooks v. Mitchell, 9 M. & W. at p. 18; Cripps v. Davis, 12

3 Collenridge v. Farquharson, 1 Stark, N. P. C. 259.

4 Holmes v. Kidd, 3 H. & N., 891; S. C. 28 L. J. (Ex.) 113.

M. & W. 159;

5 Oriental Commercial Bk., ex parte, L. R. 5 Ch. 358.

6 Swan, ex parte, L. R. 6 Eq. 344.

i Sturtevant v. Ford, i M. & G. 101; Lazarus v. Cowie, 3 Q. B. 465; Stein v. Yglesias, i C, M. &. R. 565.

This section puts all negotiable instruments on the same footing and consequently would include cheques. In England it has recently been distinctly held that the rule of law as to bills of exchange and promissory notes, that an indorsee taking them after maturity, takes them upon the credit of, and can stand in no better position than his indorser,' does not apply to cheques.? In his judgment in this case Field J., gives as the reason of the rule laid down in Brown v. Davies, that such instruments are usually current only during the period before they become payable, and their negotiation after that period, is out of the usual and ordinary course of dealing, a circumstance sufficient of itself to excite suspicion. He then called attention to the cases relating to cheques and pointed out that in Down v. Halling, 3 Lord Tenterden had said, that it could not be laid down as a matter of law, that a party taking a cheque after any fixed time from its date, did so at his peril: and that Littledale, J., had said in the same case, that though the rule of law was so as to bills and notes, it could not be applied to cheques : and after going through the cases relating to the position of a party who took a cheque some days after its date, held following a dictum of Maule, J.,* “ that as against the maker, cheques must be presented promptly, but “ that where a reasonable time has passed they stand on the same

footing as bills of exchange," and that it was a question for the jury whether a cheque had been taken under such circumstances as should have excited suspicion and that the lapse of time (in this case 8 days) though not conclusive on the point, was a circumstance to be taken into consideration, (see further as to cheques, post, Secs. 72 and 73.)

In this section and Sec. 131 the expression good faith is used. The definition of this term given in the Penal Code, Sec. 52, “nothing is said to be done or believed in good faith, which is "done or believed without due care and attention" would seem "applicable.

60. A negotiable instrument may be negotiated (except by the maker, drawee or acceptor after

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Instrument negotiable till

i Brown v. Davies, 3 T. R. 80.

i London & C. Bk, V. Groom, 8 Q. B. D. 288.

4 B. & C. 330; S. C. 6 D. & Ry. 445; 2 C. & P. 11,

4 Serrell v. Derbøshere, Ry. & Co. 9 C. B. 811 ; see also Rothschild v. Corney, 9 B. & C. 388 ; S. C. 4 Moo. & R. 411,

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