Court Opinion

ID: 3950461
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:12:36.561631+00
Date Added: 2024-06-11T14:17:13.835401
License: Public Domain

If the note in question was changed from one payable "to the order of Lew W. Cochran, Crawfordsville, Ind.," to one reading pay "to the order of Lew W. Cochran, or bearer, Crawfordsville, Ind.," the alteration would be, in my opinion, material, and I must therefore dissent from my Associates on that question. In this case the evidence tends to show the notes were given for a horse represented to have been the property of Lew W. Cochran, a well-known breeder and importer of horses. The notes were on a printed form, with the words "payable to the order of Lew W. Cochran." There was inserted after the name of Cochran, with a pen, the words "or bearer." Cochran testified he sold no such horse, took no such notes, never saw the notes, and never authorized any person to accept the notes for him, or authorized any person to negotiate the notes for him. These notes are not indorsed. The appellee testified he paid $600 for the notes, and got them from a man who gave his name as G. M. Hatch. The appellants delivered the notes to a man by the name of Dygert. Cochran testifies that Dygert was not his agent in the transaction, and that he (Cochran) never executed the guaranty to the horse delivered to appellants with him. The appellants, or at least some of them, testified positively the words "or bearer" were not in the notes when signed by them.
I do not understand the law merchant to have been changed by article 582, R.S. 1911, to the extent of making a note drawn payable "to order" to one payable "to bearer." The effect of the statute is to change the method of proving the transfer and title to the notes. The holder of the note payable "to order" may prove its transfer, either verbally or by writing, and without indorsement, and when so proven, if made before maturity, he is protected under the law merchant as a bona fide holder, if the facts otherwise protect him as such. Under the law merchant, a note being payable to order, the legal and only proper way to transfer it was by indorsement. Tiedeman on Conmercial Paper, §§ 246, 257. It has been held in this state, as to a note payable to the order of the payee and not indorsed by him, suit cannot be maintained thereon by a holder thereof other than the payee. Ross v. Smith, 19 Tex. 171, 70 Am.Dec. 327; Rosebrough v. Gorman, 6 Tex. 313; Merrill v. Smith, 22 Tex. 53; 7 Cyc. 818. Where the note was payable to order, it was required to be indorsed before it was negotiable. In other words, it was not transferred by delivery before indorsement, and the delivery of it evidenced no right to it. Indorsement was the proper and legal way to prove the transfer. On the other hand, a note payable to bearer was transferred by delivery (Johnson v. Mitchell, 50 Tex. 212, 32 Am.Rep. 602; Jackson v. Marshall,6 Tex. 324; 7 Cyc. 560); and the holder thereof could maintain a suit to recover on such delivery. The statute provides that any person to whom any negotiable instrument may have been "assigned" may maintain an action in his own name. In Word v. Ellwood, 90 Tex. 130, 37 S.W. 414, it is said:
"The form of the transfer and whether written or verbal is immaterial."
Prouty v. Musquiz, 94 Tex. 87, 58 S.W. 721, 996, held:
"The holder of a negotiable instrument by an assignment not in writing being placed upon the same footing as an indorsee at common law, it follows that the rule of the commercial law must determine," etc.
As pointed out under commercial law, an indorsement must be shown to maintain a right of action on a note payable to order. Under the statute there must be an assignment, either verbal or in writing. The maker who executes a note payable to a named payee or order contracts that he will pay the note to the payee or to whom he shall order it paid. The statute, in dispensing with a written indorsement, does not dispense with the proof of the assignment. It, in other words, permits proof of an assignment other than by indorsement, but nowhere stipulates that the delivery is presumptive evidence of an assignment, and does not make such delivery prima facie evidence of an assignment. The mode of transferring negotiable instruments and the evidence required by the statute does not in the least change the well-known meaning of negotiable words as defined by law merchant, found in works on that branch of commercial law. Cases in this state, from the beginning, follow the meaning of negotiable words as defined by that law. I find nothing in the statute changing the meaning of "or order" to that of "or bearer." It requires proof of assignment when "or order" is used. It took an indorsement to pass the title before the statute. By the statute assignment can be shown otherwise; but an assignment must be shown. When "bearer" is used, delivery, if sufficient evidence of assignment and delivery or ownership, may be inferred from possession. I *Page 385 
think it will be hard to find any case holding an unindorsed note payable to order in which there is a presumption of assignment. At least I do not think the Ellwood Case and others in this state hold that the meaning of the words is changed by the statute.
It has been held by the courts that alteration affecting the negotiability of the note is a material alteration. Taylor v. Moore (Sup.) 20 S.W. 53; Simkins on Contracts (3d Ed.) p. 541. Modifying the manner of negotiating it has been held material, McCauley v. Gordon, 37 Am.Rep. 68; adding to a note the phrase "or order," see note 10 Am.Dec. on top page 271, and note 16, 86 Am. St. Rep. 95; or adding the words "or bearer." Crosswell v. Labree, 81 Me. 44, 16 A. 331, 10 Am. St. Rep. 238; Belknap v. National Bank, 100 Mass. 376, 97 Am.Dec. 105.
Judge Bleckley, in McCauley v. Gordon, supra, speaking for the Supreme Court of Georgia, said:
"There can be no doubt that to tamper with a promissory note so far as to insert in it words `or bearer' is grossly improper. It verges on forgery. The introduction of such words is a material alteration, for they go to modify the manner of negotiating the instrument. Scott v. Walker, Dud. 243. Without them, or words of similar import, the instrument is negotiable by indorsement only; with them, it is negotiable by bare delivery as well as by indorsement."
So I take it under our statute, when a note is payable to order, that it is transferable by assignment alone, either verbal or in writing, and such assignment must be proven; but if a note is payable to bearer, delivery is sufficient to prove the assignment. Hence I think there is a material difference in the meaning of the two words when used in negotiable notes.
For the reasons above given, I cannot concur in the opinion of the majority.