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THUS far we have been considering the several particular
contracts of the parties liable upon the instrument, in other
words the strength of the defendant's position; Nature of
now we are to consider the opposite side, in other subject.
words the strength of the plaintiff's position, a matter which
in general affects alike all the particular contracts heretofore
under consideration. The subject will relate mainly to mediate
(more commonly called remote) as distinguished from immedi-
ate parties; that is, mainly to cases in which the holder is
separated by at least one link from the defendant, the plaintiff
being usually (but not necessarily) either an indorsee, or the
payee of a bill of exchange. The plaintiff's right of action is
either presumptive or paramount; between any immediate parties
it is presumptive, consideration and right of action both being
presumptive; between remote parties it may be paramount.
This assumes that the plaintiff's title is regular on the face of
the instrument.


1 The payee of a promissory note may legally be in the same position; that is, he may be a holder in due course, taking (for instance by discount) for value and without notice. Lookout Bank v. Aull, 93 Tenn. 645; Jordan v. Jordan, 10 Lea, 129, 134; Passumpsic Bank v. Goss, 31 Vt. 2 Met. 608; Deardorff v. Forseman, 24 Ind. 481. drawn to the drawer's own order, and sued upon by him. Merritt v. Duncan, 7 Heisk. 156; Lookout Bank v. Aull, supra.

315; Willet v. Parker, So of a bill of exchange

2 N. I. L. § 31: Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears thereon to have become a party thereto for value.' The same is true of non-negotiable paper.


§ 2. RIGHT TO SUE MEDIATE OR REMOTE Party. The first thing that calls for remark is that the right of the holder to sue remote parties is a right given by the law merPresumptive chant in its adoption of the custom of merchants. right of holder: That right is as perfect, when the plaintiff holds thereof. the paper conformably to the custom, as the right to sue an immediate party can be. And further, as a mere right to sue, that is, leaving out of sight any other question, the right rests upon the same footing substantially as the right of any other plaintiff suing upon a written contract of the common law; possession of the instrument according to the law merchant raises, in favor of the plaintiff, a presumptive right to it, and after maturity a presumptive right of action upon it, a right of action against remote as well as against immediate parties.1

How significant that right may be, may be seen in the statement that it will support the plaintiff in the face (1) of an admission that he holds the paper only as agent or as trustee for another, for still the law presumes that he holds it rightfully until the contrary is shown; (2) of evidence offered even to show that it is not improbable that he holds it as agent for another against whom the defendant has a set-off or a defence. Something more is necessary than evidence showing that it is very likely that the plaintiff has no right to the paper, or right of action upon it, after he has produced it in evidence in court with the presumption of title in his favor and, with that, the

1 N. I. L. § 66; Pettee v. Prout, 3 Gray, 502; Cases, 225; Williams v. Holt, 170 Mass. 351; First National Bank v. Green, 43 N. Y. 298; Grant v. Walsh, 145 N. Y. 502, 507; Limerick Bank v. Adams, 70 Vt. 132; Mumford v. Weaver, 18 R. I. 801; Sprekels v. Bender, 30 Oreg. 577; Middleton v. Griffith, 57 N. J. 442; Newmarket Bank v. Hanson, 67 N. H. 501; New England Loan Co. v. Robinson, 56 Neb. 50; First National Bank v. McKibben, 50 Neb. 513; Crosby v. Ritchey, 47 Neb. 924; s. c. 56 Neb. 336; Robinson v. Smith, 62 Minn. 62; Duerson v. Alsop, 27 Gratt. 229, 248; Bedell v. Herring, 11 Am. St. Rep. 320.

Where two or more parts of a bill of exchange drawn in a set are negotiated to different holders in due course, the holder whose title first accrues is, as between such holders, the true owner of the bill. N. I. L. § 186.

presumption of consideration. For example: The plaintiff in a suit upon a promissory note payable to a certain corporation or bearer offers the note in evidence of his title and right to recover. The defendant denies that the plaintiff is the 'bearer' and owner of the note, alleging that it is the property of said corporation, against which the defendant has, and desires to plead, a valid set-off. The facts are that the plaintiff is the general agent of said corporation, having custody of all notes belonging to it; the corporation is insolvent and has no property; and the stockholders, of whom the plaintiff is one, are liable for its debts. The plaintiff is entitled to recover, and the defendant cannot have the benefit of the set-off; the evidence is not sufficient to rebut the presumption of right in favor of the plaintiff.1


It matters not indeed that the instrument bears a special indorsement by the holder at the time of the suit; still the holder is presumptively owner and entitled to sue as if there were no such indorsement. The indorsement has no validity until delivery of the instrument, and meantime the holder has the legal right to strike it out. The strength of the holder's position as indorsee is seen in still stronger light by the settled rule that proof of want of consideration between the original parties is not enough to affect his right of action. The plaintiff is presumptively a holder for value, before maturity, and without notice of any defence, in other words a holder in due course; want of consideration between the original parties touches no part of the presumption. Indeed, the plaintiff is presumptively entitled to recover though he took the instrument after maturity."

1 Pettee v. Prout, 3 Gray, 502; Cases, 225.

2 Middleton v. Griffith, 57 N. J. 442; Sprekels v. Bender, 30 Oreg. 577. * Same cases; Dugan v. United States, 3 Wheat. 172; Pilmer v. State Bank, 19 Iowa, 112.

• Crosby v. Ritchey, 47 Neb. 924; s. c. 56 Neb. 336. Further on a sub sequent page.

Robinson v. Smith, 62 Minn. 62.

§ 3. ABSOLUTE DEFENCES AND EQUITIES. Assuming now that no question of title to or ownership of the paper is raised, the plaintiff's right to recover will depend upon Explanation of the defence set up, which may be either absolutely or presumptively sufficient. There are then two classes of defences; the first of which may be called Absolute Defences; the second are called Equities shortly for Equitiesfixed-upon-the-holder.


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These terms, however, must not be taken in their ordinary sense; in that sense they would be misleading. Equities are legal defences in the ordinary sense of defences available in suits at law, quite as much as are absolute ones. The term equities applies to a class of defences most of which originally were not available as defences to suits at law on contract, being of the nature of cross-rights of action. The defences at law were few, being simply defensive in nature, such as payment, want of consideration, the Statute of Limitations, usury, and the like. The familiar modern defence of misrepresentation, for instance, was not considered a defence; it admitted a contract, and did not show any discharge; accordingly it was a cross-right, to be sued upon by the injured party.


Such cross-rights were, however, available in chancery, where they were treated as equities. Finally, in the 18th century, the common law courts came to admit them, under the name of recoupment, by way of preventing circuity of action; and the law merchant adopted them under their proper name of equities, and then extended the use of the term to other cases. Accordingly it will be taken here for convenience to embrace all defences not absolute.

An equity may be a perfect and complete defence between immediate parties to it, as where it consists in fraudulent misrepresentation; but at most it is only a presumptive defence against a mediate or remote holder; if the holder took the paper for value and without notice, or (speaking generally) stands upon the rights of another who so took, the 'equity' will not avail. The plaintiff's right of action as a holder in due course is accord. 1 Harrington v. Stratton, 22 Pick. 510.

ingly paramount, and not merely presumptive, in a equities.

case of

The meaning given to the two terms, respectively, may then be thus explained: Absolute defences import either want of contract, want of capacity, downright illegality of contract (that is, a contract which the law wholly repudiates), alteration of the original contract, or forgery of indorsement. The Statute of Limitations belongs to the same category. No action can be maintained against a party having such a defence, not even by a holder in due course. Equities, on the other hand, imply the existence of a contract between prior parties, but a contract which is invalid and hence defeasible in whole or in part. Between the parties immediately concerned, and against subsequent holders without value or having notice, these equities are perfect defences; but against a holder in due course they are of no avail.1

The two subjects must now be considered in detail. First, then, of Absolute Defences. That subject is considered here because it almost always appears in contests in regard to the rights of bona fide holders for value. The question then will be, what are these defences against which not even a bona fide holder for value can recover?

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To prevent possible misapprehension, it should be stated that in strictness of language these are not defences at all; for it is incumbent upon the plaintiff to prove the existence of the contract upon which he seeks to recover. The term defences,' in the cases about to be considered, is to be taken conventionally; and such use of the term is common enough. Thus, the books speak of the defence' of want of consideration in actions upon simple contract, though, apart from any statute, it is for the plaintiff to prove the consideration. But there is better justification for the use of the term in relation to the present subject, because after all the defendant has the laboring oar for the greater part. The plaintiff, who now is usually a bona fide holder for value, makes a presumptive case easily, as we have seen, and then the defendant must do what he can to save himself.

1 Cristy v. Campau, 107 Mich. 172.

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