Oklahoma. CLARK V. SALLASKA (obiter) (reported herewith) ante, 746. Oregon.-Smith v. Caro (1881) 9 Or. 278.

South Carolina.-National Bank v. Gary (1882) 18 S. C. 282 (obiter). See Smith Bros. v. Brabham (1896) 48 S. C. 337, 26 S. E. 651, and other cases from this state, infra, this subdivision.

South Dakota.-Schmitz v. Hawkeye Gold Min. Co. (1896) 8 S. D. 544, 67 N. W. 618.

Texas.-Cresap v. Manor (1885) 63 Tex. 485; Wizig v. Beisert (1909) Tex. Civ. App., 120 S. W. 954; Behrens v. Kirkgard (1912) Tex. Civ. App. -, 143 S. W. 698; First Nat. Bank v. Powell (1912) Tex. Civ. App. 149 S. W. 1096; Barger v. Brubaker (1916) Tex. Civ. App. 187 S. W. 1025; McKenzie v. Harris (1880) 2 Posey Unrep. Cas. 180 (in full).

Virginia. Woodward V. Foster (1868) 18 Gratt. 200 (in full); Riverview Land Co. v. Dance & Co. (1900) 98 Va. 239, 35 S. E. 720.

Washington.-Holt Mfg. Co. V. Brotherton (1916) 91 Wash. 354, 157 Pac. 849.

Wisconsin.-Charles

V. Denis

(1877) 42 Wis. 56, 24 Am. Rep. 383; Eaton v. McMahon (1877) 42 Wis. 484; Halbach v. Trester (1899) 102 Wis. 530, 78 N. W. 759.

England.-Hoare v. Graham (1811) 3 Campb. 57, 13 Revised Rep. 752.

Canada. Smith v. Squires (1901) 13 Manitoba L. R. 360; Emerson v. Erwin (1903) 10 B. C. 101; Decelle v. Samoiselle (1888) 32 Lower Can. Jur. 236.

See Prescott Bank v. Caverly (1856) 7 Gray (Mass.) 217, 66 Am. Dec. 473, infra, III. 1, a.

A written agreement made at the time of the indorsement of the note that the indorser should not be held liable on his indorsement has been held to be valid and to relieve him of liability as between the parties to the agreement. Davis v. Brown (1877) 94 U. S. 423, 24 L. ed. 204. Davis v. Brown is approved in Crilly v. Gallice

(1906) 78 C. C. A. 525, 148 Fed. 835, where it is held that a writing between the parties must be construed with the indorsement; but it is stated in the Crilly Case that the contract created by the indorsement and delivery of a negotiable note, even between the immediate parties to it, is itself a complete and perfect contract, and not open to contradiction or susceptible of annulment by a separate contemporaneous agreement, though likewise in writing, unless, at least, the terms of the latter plainly disclose that the parties so intended.

Evidence of all the facts and circumstances surrounding the writing, at the time the note is due, of the words, "protest waived," by the indorser above a signature purporting to be his, but which he denies, is competent for the purpose of showing his adoption of the signature, but not to vary or explain the contract of indorsement. Robinson v. Barnett (1882) 18 Fla. 602, 43 Am. Rep. 327.

Whether the use of words of assignment relieves the transferrer of the character of indorser is not within the scope of this note. Upon the assumption, however, that the transferrer is an indorser, it has been held that the contract implied from the indorsement cannot be changed by parol evidence in such a case. Sommerville v. Stephenson (1831) 3 Stew. (Ala.) 271; Odan v. Beard (1822) 1 Blackf. (Ind.) 191; Sands v. Wood (1855) 1 Iowa, 263. (The rule is otherwise in case of a blank indorsement in Iowa.) Behrens v. Kirkgard (1912) -Tex. Civ. App. 143 S. W. 698; Citizens' Nat. Bank v. Walton (1898) 96 Va. 435, 31 S. E. 890.

See Phillips v. Bridges (1917) 20 Ga. App. 489, 93 S. E. 115, infra.

The rule denying the admissibility of parol evidence was applied in Preston v. Ellington (1883) 74 Ala. 133, in case of an indorsement in these words: "I transfer the within notes to W. R. Preston & Co.,"-which words were signed by the indorser. Parol evidence has been held inadmissible to vary the contract implied by law from the indorsement of a bond by the payee as follows: "I assign the within obligaton to Dupuy v.

Gray (1824) Minor (Ala.) 357. In an action on a written promise to assign a note, parol evidence was held inadmissible to prove that the assignment was to be without recourse, in Blair v. Williams (1844) 7 Blackf. (Ind.) 132. The indorsement by one of two payees to the other, as follows: "For value received I hereby assign and transfer unto all right, title, and interest that I may have in the within notes," cannot be varied or explained by parol evidence. Citizens' Nat. Bank v. Walton (1898) 96 Va. 435, 31 S. E. 890.

As above stated, parol evidence is held inadmissible as between the parties; the fact that the rights of a bona fide holder are involved is simply an additional reason, under this theory, for excluding the evidence. Lawrence v. Dobyns (1860) 30 Mo. 196; Lewis v. Dunlap (1880) 72 Mo. 174; Halbach v. Trester (1899) 102 Wis. 530, 78 N. W. 759. The same reasoning applies in case of one who knew nothing of the agreement. It seems that the plaintiff in Stubbs v. Goodall (1848) 4 Ga. 106, holding such evidence inadmissible, knew nothing of the agreement, but this is not clear. In Johnson v. Glover (1887) 121 III. 283, 12 N. E. 257, an enlargement of the indorser's liability was sought by parol evidence, and it does not appear whether the plaintiff knew of the agreement at the time he took the instrument or not.

Some limitations in various jurisdictions upon the incompetency of parol evidence should be noted. In Georgia, a statute makes parol evidence admissible as between the parties in case of an indorsement in blank. This statute does not apply in case of an indorsement in full. Meador v. Dollar Sav. Bank (1876) 56 Ga. 605. This same limitation to indorsements in blank was made in the cases in Iowa prior to Porter v. Moles (1911) 151 Iowa, 279, 131 N. W. 23; see supra. And see infra, II. b, 1, for jurisdictions which hold the evidence admissible in case of an indorsement in blank, but which do not definitely limit its admissibility to such an indorsement. Some cases hold parol evidence inadmissible

only in case of an indorsement before maturity. Smith Bros. v. Brabham (1897) 48 S. C. 337, 26 S. E. 651. Price v. Perry (1818) 2 Mill, Const. 32, cited in Smith Bros. v. Brabham (S. C.) supra. In case of an indorsement made after maturity, it has been held that parol evidence is admissible. Rugely v. Davidson (1818) 2 Mill, Const. (S. C.) 33, cited in Sloan v. Gibbes (1900) 56 S. C. 480, 76 Am. St. Rep. 559, 35 S. E. 408. In Sloan v. Gibbes (S. C.) supra, the South Carolina court uses language which indicates that it was then of the opinion that parol evidence is admissible. The court states: "A regular blank indorsement on a negotiable promissory note ordinarily imparts a legal obligation to pay the note in default of the maker, after due diligence by the holder and due notice of the default to the indorser, primarily in the first indorser, and successively in following indorsers in their order. Whether this implication is conclusive and irrebuttable, or only prima facie and subject to parol evidence showing the real relation of the parties, has been the subject of much diversity of opinion among the courts. But in this state we think the law favors the admission of such evidence as not in violation of the very salutary rule forbidding the altering, varying, or contradicting of a written instrument by parol evidence." The action, however, in Sloan v. Gibbes was by the first indorser, who had been compelled to pay the note, against the second indorser for contribution, and the evidence was to the effect that the indorsers were directors in the corporation and signed the notes as original parties thereto, with the understanding that all indorsers would be sureties, and the court states that parol evidence is "admissible to show the real relation of the indorsers to each other." The case, therefore, did not present the question of varying the contract implied from the indorsement of the note by a regular holder of the instrument in the regular course of a commercial transaction.

The cases generally do not limit the rule to indorsements before maturity,

dorsement. Givens v. Carter (1912) -Tex. Civ. App. 146 S. W. 623. The rule that parol evidence is inadmissible finds further support in the following miscellaneous cases., In Harvard Pub. Co. v. Benjamin (1896) 84 Md. 333, 57 Am. St. Rep. 402, 35 Atl. 930, an action against a husband and wife in which it was alleged that the wife made her note payable to the husband with the intent and understanding that the note should be indorsed by the husband to the plaintiff, to be by it received in part payment of certain property agreed to be sold to the husband, and that in pursuance of said agreement the note was indorsed by the husband, the court states that parol evidence cannot be received to vary or alter the character fixed by the law to the undertaking of the husband as payee and indorser of the note. The effect of the assignment of one of a series of notes secured by a mortgage, upon the security, cannot be qualified or changed by parol evidence. Dixon v. Clayville (1876) 44 Md. 573. In Bookstaver v. Jayne (1874) 3 Thomp. & C. (N. Y.) 397, parol evidence was held inadmissible in an action by the indorsee against the payee who had indorsed the instrument, to show that the consideration of the indorsement was an agreement which had not been met by the indorsee, the court applying the general rule that the legal effect of the indorsement of a bill or note cannot be controlled or varied by parol evidence.

The correctness of the admission of parol evidence has not been raised in all cases. Testimony of an oral agreement enlarging the liability of the indorser seems to have been admitted in Finley v Green (1877) 85 Ill. 535. But, assuming the correctness of such admission, the testimony, as given was not sufficient to establish the agreement and the question of the admissibility of the evidence did not in fact arise. A similar decision appears in Schnell v. North Side Planing Mill Co. (1878) 89 Ill. 581, where the court states that, assuming parol evidence to be admissible for this purpose, the testimony

It is, of course, true that an indorser who has been allowed to introduce evidence to show a parol agreement limiting his liability, and fails to convince the court that such agreement existed, cannot object to the admission of the evidence. Crockett v. Shaw (1866) 29 Tex. 507. Upon an appeal by the indorsees of a note from a nonsuit in an action against the maker, it is stated in McCoon v. Biggs (1841) 2 Hill (N. Y.) 121, that the plaintiffs were allowed the utmost latitude in being permitted to show, by parol evidence, an intent to negotiate the note by prior holders, who had merely indorsed a receipt of partial payment thereon and signed the

same.

Several jurisdictions have changed from the rule holding parol evidence admissible to the rule denying its admissibility. The decisions in Ohio prior to Farr v. Ricker (1889) 46 Ohio St. 265, 21 N. E. 354, held parol evidence admissible to vary the contract implied from an indorsement, but in Farr v. Ricker the general rule that such evidence is inadmissible was adopted. The earlier cases are distinguished by the court in the Farr Case, and some of them on their facts are not contrary to the general rule. This is especially true of Dye v. Scott (1878) 35 Ohio St. 194, 35 Am. Rep. 604, holding that the usual demand and notice may be waived by an oral agreement at the time of indorsement.

The

All of the earlier cases, however, including Dye v. Scott, proceed upon the theory that parol evidence is generally admissible, and this theory is overruled in the Farr Case. broad doctrine stated in Smith v. Barber (1790) 1 Root (Conn.) 207, that a blank indorsement may be explained by parol evidence, is qualified by subsequent cases in this state. From the facts in the Barber Case, which are not clearly stated, it seems probable that there was no transfer of the note intended by the indorsement there involved, and as to that situation the case is not overruled. See comment on Iowa cases, supra. On the other hand, the earlier decisions in Maine denied the admissibility, while the later ones affirm it. See infra, II. b, 1.

2. Theory.

According to the cases which support the general rule excluding parol evidence, the contract implied from the regular indorsement of a bill or note is of a fixed and definite character; the contract is implied by law as clearly and perfectly from the blank indorsement as if written out in full. "The contract by a blank indorsement is fixed by law, and should not be rendered uncertain by parol any more than when written out in full." Smith v. Caro (1881) 9 Or. 278. Justice Brewer states in Doolittle v. Ferry (1878) 20 Kan. 230, 27 Am. Rep. 166, that "the contract which the law implies is of the same force as though it were reduced to writing, and can be limited or impeached by only the same kind of testimony. It would be folly to assert that the authorities are all in harmony, and that the cases in which testimony of a parol agreement has been admitted to vary the effect of an indorsement can all be reconciled as mere exceptions to and not in conflict with this rule. But the rule itself is well supported by authority, and seems to us resting upon sound foundations, and conducive to the stability and value of negotiable paper. The law gives to an indorsement a twofold force. It operates to transfer title; it is the assumption of a conditional liability. If an absolute liability is

desired, apt words are well known, and in common use. A waiver of notice and protest, written above the indorsement, will make the liability certain the liability of a surety, it may be, but still a fixed and certain liability on the instrument. If a transfer of title without assumption of liability is sought, equally apt and well-known words are at hand. 'Without recourse' relieves the indorser. Where the law furnishes such apt, brief, and well-known expressions for making the indorsement accomplish exactly what the parties may desire, wise policy demands that each form of indorsement should conclusively carry with it the liability which it implies. There are no instruments concerning which it is more important that the rules should be clear, settled, and conclusive than negotiable paper. Such paper subserves an invaluable purpose in business transactions, and should tell upon its face the whole story of its obligations. Where for convenience, and to facilitate business, certain short forms and expressions are used, to which the law has attached certain implications, those implications should be as conclusive upon all the parties as though the full contract were reduced to writing." Mr. Justice Matthews in Martin v. Cole (1881) 104 U. S. 30, 26 L. ed. 647, states that "the contract created by the indorsement and delivery of a negotiable note, even between the immediate parties to it, is a commercial contract, and is not in any proper sense a contract implied by the law, much less an inchoate or imperfect contract. It is an express contract and is in writing, some of the terms of which, according to the custom of merchants and for the convenience of commerce, are usually omitted but not the less on that account perfectly understood. All its terms are certain, fixed, and definite, and, when necessary, supplied by that common knowledge based on universal custom which has made it both safe and convenient to rest the rights and obligations of parties to such instruments upon an abbreviation. So that the mere name of the indorser signed up