Smalley v. Wight , 44 Me. 442 ( 1857 )

May, J.

It is competent for the maker of a promissory note or the drawer of a bill, to make it- payable to- the order of himself. This mode of creating negotiable paper is found to be convenient, especially in our commercial cities, because when such paper has been properly issued, it may be transferred by the holder by delivery, and it does not require his indorsement to make it further negotiable. The practice of issuing such paper has now become very common, and its validity, when indorsed by the maker or drawer, is not questioned.

It is well settled, that notes and bills payable to order cannot be negotiated in the first instance, except by the indorsement of the payee or his legal representative, so as to enable the holder to maintain an action thereon in his own name. The negotiability of such paper does not exist by the common law; it depends entirely upon the custom of merchants; and this custom, says Eyre, C. J., in Gibson v. Minet, 1 Hen. Bla., 605, “ has directed that the assignment should be made by a writing on the bill, called an indorsement appointing the contents of the bill to be paid to some third person;” and such is now the well, if not universally, established law in relation to bills and promissory notes, when made payable to the order of any other than a fictitious payee. Bolles v. Stearns, 11 Cush. R., 320; Foster v. Shattuck, 2 N. H. R., 446; Cook v. Fellows, 1 Johns. R., 143.

It is contended that the rule above stated does not apply to a bill or note which is payable upon its face to the order of the drawer or promisor. No case has been cited to establish such a proposition; and we are aware of no principle upon which such paper can be treated as payable to the bearer, so as to pass the legal title in the first instance, by a mere delivery. It is no better than blank paper, so long as it remains in the hands of the maker; and although it has the form, it has not the legal vitality of a contract. It becomes a contract only by being negotiated. Its very language indicates the intention of the maker to determine the extent of its negotiability; and if he chooses he may limit or restrict it, or he may make it general. The fact that it is payable to Ms own order manifestly shows the purpose of appointing for himself, by his own order, the person to whom it shall be paid, and of fixing the extent of the power of negotiation with which his appointee shall be clothed. If it had been his intention to make the paper in itself negotiable by delivery, without any order or indorsement of his own, the insertion of the word bearer would have been the natural and appropriate mode of doing it. We cannot doubt, for the reasons already stated, that such paper is invalid as a contract until it is indorsed. It is the indorsement alone which gives it efficacy. The plaintiff, therefore, cannot recover upon the note declared upon in the second count, the same not having been indorsed by the payee; and being void, it will not sustain the action upon the money count. Sherman v. Goble, 4 Conn. R., 246; Taylor v. Benney, 7 Mass. R., 479.

According to the agreement of the parties, the second count in the writ is to be stricken out, and the defendant is to be defaulted for the amount of the note and interest described in the first count.

Defendant defaulted,

Tenney, C. J., Rice, Hathaway, Appleton, and Davis J. J., concurred.