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"A bill of exchange,” says Mr. Justice Story,“ought to specify to whom the same is payable, for in no other way can the drawee, if he accepts it, know to whom he may properly pay it, so as to discharge himself from all further liability :" Story, $ 54.
By French Code, Art. 110, a bill must be drawn payable to order, and it seems that a bill drawn payable to bearer would be invalid. By German Exchange Law, Art. 4, the payee must be named.
Extrinsic evidence is admissible to identify the payee when misnamed, or when designated by description only, but not to explain away an uncertainty patent on the bill.? Thus, if a bill is payable “ to the order of the Treasurer of Portugal,” evidence is admissible to show that C. was the treasurer when the bill was issued ;; and if a bill is payable “ to the order of J. Smythe," evidence is admissible to show that T. Smith is the person intended to be described thereby. But if a bill be drawn in the form,“ Pay
a or order," evidence is not admissible to show that C. was intended to be the payee. A bill payable to “. order," and indorsed by the drawer, is payable to drawer's order. 6 As to filling up the blank by inserting a payee's name, see sect. 20, post, p. 49. In a Scotch case, an instrument running, “ Received from C. the sum of 301. payable on demand,” and signed, was held to be a note payable to C.;? and in a New York case a note payable" to the order of the indorser” was held good as being payable to any holder who might indorse it.8 By sect. 32 (4), post, p. 108, where the payee is wrongly designated or his name is misspelt, he may indorse the bill as therein described, adding, if he think fit, his proper signature.
(2) A bill may be made payable to two or more payees jointly, or it may be made payable
Alternative payee or office holder.
See, too, Spanish Code, Art. 430 : Russian Code, Art. 295. 2 Soares v. Glyn (1845), 8 Q. B. 24, Ex. Ch. 3 Ibid. ; Cf. Holmes v. Jaques (1866), L. R. 1 Q. B. 376. * Willis v. Barrett (1816), 2 Stark. 29; Jacobs v. Benson (1855), 39 Maine R. 132.
6 R. v. Randall (1811), R. & R. 195. But exchequer biils in this form are deemed to be payable to bearer, Wookey v. Pole (1820), 4 B. & Ald. 1.
6 Chamberlain v. Young, (1893) 2 Q. B. 206, C. A. 7 Thorburn on Bills, p. 35; M'Gubbin v. Stephen (1856), 18 D. 1824. 8 United States v. White (1841), 2 Hill, R. 59.
in the alternative to one of two, or one or some $ 7. of several payees. A bill may also be made payable to the holder of an office for the time being.
This sub-section materially alters the law. Before its enactment a bill drawn payable to the “ treasurer for the time being ” of a society was void for uncertainty ; too, was a bill drawn payable" to the order of T. Smith or S. Jones," unless there was apparent community of interest. The section presumably applies only to bills made on or after the 18th August, 1882. See note to sect. 1.
(3) Where the payee is a fictitious or non- Fictitious existing person the bill
be treated as payable to bearer.
ILLUSTRATIONS. 1. A. draws a bill payable to C.'s order. C. is a fictitious person. The drawee accepts in ignorance of this fact. A. then indorses the bill in blank in C.'s name, and discounts it with D., who knows the circumstances. D., before the Act, could not recover from the acceptor ;3 but since the Act it seems he could.
2. A bill purporting to be drawn by A. and indorsed in blank by C., the payee, is accepted supra protest for the honour of the drawer. It turns out that A.'s signature was forged, and that C. was a fictitious person. The acceptor for honour is estopped from setting up these facts if the bill is in the hands of a holder in due course.
3. By arrangement between the indorsee and acceptor a bill is drawn and indorsed in the name of a deceased person. The indorsee can recover from the acceptor.“
4. A bill purporting to be drawn by A. to the order of C. & Co., and to be indorsed by them, is accepted by the drawee payable at
1 Cowie v. Sterling (1856), 6 E. & B. 333, Ex. Ch. ; Yates v. Nash (1860), 29 L. J. C. P. 306.
Blanckenhagen v. Blundell (1819), 2 B. & Ald. 417; Cf. Holmes v. Jacques (1866), L. R. 1 Q. B. 376 ; and Watson v. Evans (1863), 32 L. J. Ex. 137, where the instruments were upheld.
3 Hunter v. Jefiery (1797), Peake, Ad. Cas. 146 ; aliter, if the acceptor knew the facts : Gibson v. Minet (1791), 1 H. Bl. 569, H. L. ; Gibson v. Hunter (1794), 2 H. Bl. 288 ; Cf. Vagliano v. Bank of England (1889), 23 Q. B. D. at p. 258, where the cases are reviewed.
* Phillips v. im Thurm (1865), 18 C. B. N. S. 694, on demurrer ; see same case, L. R. 1 C. P. 463, on evidence.
5 Ashpitel v. Bryan (1863), 32 L. J. Q. B. 91 ; affirmed by Ex. Ch., 33 L. J. Q. B. 328 ; Cf. Vagliano v. Bank of England (1889), 23 Q. B. D. at p. 260, C. A.
his bankers'. The bankers pay it at maturity. A. is a correspondent of the acceptor's, who often draws bills in favour of C. & Co. It turns out afterwards that the names and signatures of the drawer and payees were forged by a clerk of the acceptor's, who obtained the money.
In these circumstances C. & Co. are fictitious payees, and the bankers can debit the acceptor's account with the sum so paid. Aliter, if the bill had really been drawn in favour of C. & Co. and their signature had been forged. See sect. 24.
5. A clerk, by false pretences, induces the plaintiff, his employer, to draw cheques in favour of B., a fictitious person.
He then forges an indorsement in B.'s name, and negotiates the cheques to the defendant for value. The bankers pay the defendant. The plaintiff cannot recover the money so paid from the defendant."
This sub-section was inserted in committee in place of a clause working out in detail the effect of the cases. The words“ or non-existing seem superfluous ; but they were probably intended to cover the case given in Illustration 3.
Before the Act it appears that even a holder in due course could not enforce a bill which he held under the indorsement of a fictitious person, except as against parties who were privy to the fiction; "the exception that bills drawn to the order of a fictitious or non-existing payee might be treated as payable to bearer was based uniformly upon the law of estoppel, and applied only against the parties who at the time they became liable on the bill were cognizant of the fictitious character or non-existence of the supposed payee.
But the Act has swept away the former qualifications, and now any holder who could recover if the bill had been drawn payable to bearer can recover if the payee be fictitious. When a bill is payable to the order of a fictitious person it is obvious that a genuine indorsement can never be obtained, and in accordance with the language of the old cases and text-books the Act puts it on the footing of a bill payable to bearer. But inasmuch as a bill payable to one person, but in the hands of another, is patently irregular, it is clear that the bill should be
Bank of England v. Vagliano, (1891) A. C. 107, H. L., reversing Vagliano v. Bank of England (1889), 23 Q. B. D. 243, C. A. See this case discussed by the author, Law Quarterly Review, vol. 7, p. 216, and by Mr. Butterworth, vol. 10, p. 40.
2 Clutton v. Attenborough, (1895) 2 Q. B. 707, C. A.
3 Vagliano v. Bank of England (1889), 23 Q. B. D. 243, at p. 260, per Bowen, L. J., reviewing the cases ; Story on Bills, SS 56, 200.
indorsed, and perhaps a bona fide holder would be justified in indorsing it in the payee's name. It might have been better if the Act had provided that a bill payable to the order of a fictitious person might be treated as payable to the order of any one who should indorse it, or, in other words, as indorsable by the bearer. Though the bill may be payable to bearer, it is clear that a holder who is party or privy to any fraud acquires no title. What the Act has done is to declare that the mere fact that a bill is payable to a fictitious person shall not affect the rights of a person who has received or paid it in good faith.
Vagliano's Case, cited in Illustration 4, gave rise to a great conflict of judicial opinion as to whether C. & Co. were fictitious payees. The Courts below held that, inasmuch as there was a real firm of C. & Co., the payees were not fictitious; but according to the judgment of the majority of the Lords, C. & Co. were fictitious payees, and for this reason—the bill was a forgery throughout, and the real C. & Co. never were, and never were intended to be, the payees. If by any means they had obtained the bill they would not have been entitled to it, and their indorsement could have conveyed no title against the supposed drawer whose name was forged. It was as if the forger had inserted the first name he came across in a directory.
The signature of a fictitious person must be distinguished from (a) the forged signature of a real person, and (b) the signature of a real person using a fictitious name—for instance, John Smith may trade as “The Birmingham Hardware Company,” and sign accordingly.?
By sect. 34 (3), post, p. 111, the provisions of the Act relating to a payee apply, with the necessary modifications, to an indorsee under a special indorsement. As to the estoppels which bind an acceptor as such, see sect. 54, post, p. 183; and as to the estoppels which bind a drawer or indorser as such, see sect. 55, post, pp. 186, 187. As to estoppel by negligence, see note to sect. 24, post, p. 74.
Before the Act, it was held that where a bill was drawn payable to a deceased person in ignorance of his death, his
i Bank of England v. Vagliano, (1891) A. C. 107, H. L., judgment of Lord Herschell; and see judgment of Lord Esher in Court below, 23 Q. B. D. at p. 247, and Law Quarterly Review, vol. 7, p. 216, vol. 10, p. 40.
? See, too, Schultz v. Astley (1836), 2 Bing. N. C. 544, where Thomas Wilson Richardson drew a bill as Thomas Wilson.
What bills are negotiable.
personal representatives might enforce the bill, and there is nothing in the Act to derogate from this ruling.
In France the insertion of a fictitious payee constitutes a “supposition de nom,” which avoids the bill in the hands of any party with notice thereof.? Under most of the foreign codes it is expressly provided that the payor (acceptor or his banker) is not bound to verify the genuineness of the indorsements, on the ground that he has no means of doing so.
8. (1) When a bill contains words prohibiting transfer, or indicating an intention that it should not be transferable, it is valid as between the parties thereto, but is not negotiable.
This sub-section must be read with sub-sect. (4). The foreign codes do not recognize bills which are not negotiable in their origin. As to when a bill negotiable in its origin ceases to be negotiable, see sects. 35 and 36, post, pp. 112, 115.
Where a cheque payable to _C.'s order was crossed “ Account of C., National Bank, Dublin,” it was held that these words in the crossing did not prohibit further transfer, and that the bank, having credited C. with the amount, could sue the drawer. 4
(2) A negotiable bill may be payable either to order or to bearer.
(3) A bill is payable to bearer which is expressed to be so payable, or on which the only or last indorsement is an indorsement in blank.
See “bearer" defined by sect. 2. This sub-section alters the law. It was intended to bring the law into accordance with the mercantile understanding by making a special indorsement control a previous indorsement in blank. Before the Act it was held that where a bill was
1 Murray v. East India Co. (1821), 5 B. & Ald. 204. ? Nouguier, SS 277, 284-288. 3 See Italian Code, Art. 287 ; German Exchange Law, Art. 36. 4 National Bank v. Silke, (1891) 1 Q. B. 435, C. A.