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§ 34. prima facie evidence that he took up the bill on its dishonor, although there was no re-indorsement to him: Black v. Strickland, 3 O. R. 217 (1883); Callow Lawrence, 3 M. & S. 95 (1814).
35. An indorsement is restrictive which prohibits the further negotiation of the bill, or which expresses that it is a mere authority to deal with the bill as thereby directed, and not a transfer of the ownership thereof, as, for example, if a bill is indorsed "Pay D. only," or "Pay D. for the account of X.," or "Pay D., or order, for collection": Imp. Act, s. 35 (1).
A restrictive indorsement indicates that the indorsee is merely an agent to receive the money, and that he is not a purchaser of the bill. He cannot sell or pledge the bill except in the case mentioned in sub-section 3 of this section, and all subsequent indorsees are subject to the same restriction.
An indorsement in favor of a person named, as "Pay D.," was not restrictive before the Act, when the same words in the body of a bill or note would have rendered it not negotiable: Acheson v. Fountain, 1 Str. 557 (1723); Edie v. E. I. Co., 2 Burr. 1227 (1761); Cunliffe v. Whitehead, 8 Bing N. C. 829 (1837); Gay v. Lander, 6 C. B. 336 (1848). An acceptance in favor of D. only," is not a qualified acceptance: Decroix v. Meyer, 1891] A. C. 520. The meaning of adding the word "only" in the acceptance in that case was that it was a bill of which D. was the only drawer per Lord Esher, 25 Q. B. D. at p. 348. The adding of the word, however, in an indorsement makes it restrictive according to this section. The examples given are not the only words that render an indorsement restrictive, any others which show that the indorsee is not a purchaser of the bill are equally effective. Where a wife, separated from
her husband, received notes of third parties in settlement of $ 35. the amount to be paid to her, with the indorsement that they were not to be sold, her indorsee could not recover on them: Wilson v. McQueen, Rob. & Jos. Ont. Digest, 491 (1840). A method adopted by some with cheques about to be deposited in a bank is to indorse them "For deposit only," to prevent any person acquiring them in good faith, in case they should be lost or stolen before reaching the bank.
Even if the indorsee, under a restrictive indorsement, has given full value, he cannot sue the indorser on the bill: Williams v. Shadbolt, 1 C..& E. 529; 1 T. L. R. 417 (1885); White v. National Bank, 102 N. S. (12 Otto) 658 (1880); Third Nat. Bank v. Nat. Bank, ibid. 663 (1880).
The following are examples of the restrictions referred to in this section:-
1. "Pay D. only": Byles, p. 180; Randolph, § 725.
2. "Pay D. for the account of X.," or "for my use," or "for the use of X.," or the like: Evans v. Cramlington, 2 Ventris 307 (1687); Snee v. Prescott, 1 Atk. 247 (1743); Ancher v. Bank of England, 2 Douglas, 637 (1781); Treuttel v. Barandon, 8 Taunt. 100 (1817); Sigourney v. Lloyd, 5 Bing. 525 (1829); Wedlake v. Hurley, 1 C. & J. 83 (1830); Wilson v. Holmes, 5 Mass. 543 (1809); Blaine v. Bourne, 11 R. I. 119 (1875); Hook v. Pratt, 78 N. Y. 371 (1879); White v. National Bank, supra; First Nat. Bank v. Reno Co. Bank, 3 Fed. Rep. 257 (1880).
3. "Pay D. or order for collection": Williams v. Shadbolt, supra Sweeney v. Easter, 1 Wall. 166 (1863); Merchants' Bank v. Henson, 53 Am. Rep. 5 (1884).
The holder under a restrictive indorsement cannot strike out indorsements on the bill: C. C. Art. 2289; Barthe v. Armstrong, 5 R. L. 272 (1885); Mayer v. Jadis, 1 M. & Rob. 247 (1833).
Right of indorsee thereunder.
An indorsement is not restrictive on account of its containing a statement of the transaction out of which it arose Potts v. Reed, 6 Esp. 57 (1806); or of being for "value in account with A": Murrow v. Stuart, 8 Moore P. C. 267 (1853); Buckley v. Jackson, L. R. 3 Ex. 135 (1868).
2. A restrictive indorsement gives the indorsee the right to receive payment of the bill and to sue any party thereto that his indorser could have sued, but gives him no power to transfer his rights as indorsee unless it expressly authorizes him to do so:
If further transfer is
3. Where a restrictive indorsement authorizes authorized. further transfer, all subsequent indorsees take the bill with the same rights and subject to the same liabilities as the first indorsee under the restrictive indorsement. Imp. Act, s. 35 (2) (3).
If the restrictive indorsement be in favor of the indorsee "or order," this gives him authority to transfer the bill, but always subject to the same restriction. as in the indorsement to himself: Munro v. Cox, 30 U. C. Q. B. 363 (1870); Lloyd v. Sigourney, 5 Bing. 532 (1829).
The relation between the restrictive indorser and indorsee is that of principal and agent, so that if the acceptor pay the indorser the indorsee cannot recover from him, although he may have given value for the bill: Williams v. Shadbolt, C. & E. 529 (1885). Such indorser is sometimes spoken of as a trustee, but this is true only so far as an agent or bailee is a trustee Cook v. Lister, 13 C. B. N. S. 597 (1863); re Hallett's Trusts, 13 Ch. D. 708 (1879).
In some of the United States a restrictive indorsee § 35. cannot sue in his own name: Rock Co. Nat. Bank v. Hollister, 21 Minn. 385 (1875); Iselin v. Rowlands, 30 Hun 488 (1883).
negotiable bill ceases to be so.
36. Where a bill is negotiable in its origin, it when continues to be negotiable until it has been (a) restrictively indorsed or (b) discharged by payment or otherwise Imp. Act, s. 36 (1).
A bill is not negotiable in its origin which contains words prohibiting transfer, or indicating an intention that it should not be transferable. A bill negotiable in its origin is one made payable to bearer, or to a particular person or to his order: section 8.
As to what is a restrictive indorsement, see section 35. Under the Quebec Civil Code which recognized restrictive indorsements, it was provided by Art. 2288, that "no indorsement other than that by the payee can stop the negotiability of the bill." A cheque payable to C. M. & S. or bearer, was indorsed by them and stamped for deposit to their credit in the bank where they kept their account. Their clerk, instead of depositing it, took it to the bank on which it was drawn and the teller paid it without noticing the writing on the back. It was held, that such a cheque could not be restrictively indorsed: Exchange Bank v. Quebec Bank, M. L. R. 6 S. C. 10 (1890).
2. Where an overdue bill is negotiated, it can Negotiabe negotiated only subject to any defect of title overdue affecting it at its maturity, and thenceforward no person who takes it can acquire or give a better
§ 36. title than that which had the person from whom he took it: Imp. Act, s. 36 (2).
Overdue. A bill payable on demand is deemed to be overdue when it appears on its face to have been in circulation for an unreasonable length of time: section 36, s-s. 3. A note payable on demand is not deemed to be overdue for the purpose of this sub-section by reason that it appears that a reasonable time for presenting it for payment has elapsed since its issue: section 85, s-s. 3. A time bill or note is overdue after the expiration of the last day of grace: Leftley v. Mills, 4 T. R. 170 (1791).
Defect of title.-This phrase was introduced into the Imperial Act as a substitute for the old expression equity attaching to the bill," as the latter term was unknown in Scotch law. The corresponding provision in the Quebec Civil Code is found in Art. 2287: "The transfer of a bill by indorsement may be made either before or after it becomes due. In the former case the holder acquires a perfect title free from all liabilities and objections which any parties may have had against it in the hands of the indorser; in the latter case the bill is subject to such liabilities and objections in the same manner, as if it were in the hands of the previous holder." The chief "defects of title" are fraud, duress, force or fear, or other unlawful means in obtaining the bill or the acceptance thereof, illegal consideration, or negotiation in breach of faith: section 29, s-s. 2; or being given for a patent right: section 30, s-s. 4; or set-off or compensation.
Where a bill has been discharged by payment or otherwise and is improperly negotiated after maturity, this is not strictly speaking, a defect of title, as the bill is no longer a bill.