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YOUNG V. HEMBREE, 181 Okl. 202, 73 P.

2d 393 (1937)

FACTS: Defendant Hembree issued a check in favor of Horn
and Faulkner to assist them in their oil operations and in turn,
Horn agreed to issue Hembree a trust stock that would
guarantee repayment
1. As such, Hembree wrote a check and designated Horn
and Faulkner Oil as payee. The following day, the
defendant stopped payment on the check before it was
presented to the bank. As a result of the stop payment,
the drilling operations were halted.
2. The check, without being presented for payment, indorsed
Horn and Faulkner by HL Horn, and delivered to plaintiff
Young as partial payment for labor and material furnished
to Horn and Faulkner Oil Trust
3. Young did not make any investigation regarding the check
when there he received it. There was also no indication
that there was a stop payment on the subject check.
When Young tried to cash the same, but it was denied.

ISSUE: WON plaintiff Young is a holder in due course

HELD: No.

In order to be a holder in due course (HDC), where the
instrument is payable to order, plaintiff must prove that
the check was indorsed by the payee. When indorsement
cannot be proved or there is no indorsement at all, plaintiff is
subject to the defenses against the payee.

In the case at bar, plaintiff contends that the signature Horn
and Faulkner by HL Horn is sufficient indorsement of Horn and
Faulkner Oil Trust. However, on the face of the check itself, the
indorsement is not that of the payee, Horn and Faulkner Oil.
There is also no evidence that Horn and Faulkner Oil and
Horn and Faulkner by HL Horn is one and the same entity.

A maker has a right to stop payment. The bank must respect
the order stopping payment, but it does not destroy the
contractual liability between the maker and the payee, which in
this case is the agreement for maker to loan money to the
indorsee Horn and Faulker Oil. Since defendant has stopped
payment, he is not liable on the instrument itself.







































COPELAND V. BURKE, 59 Okl. 219, 158 Pac. 1162 (1916)

FACTS: Petitioner Copeland filed an action against Burke based
on a negotiable promissory note executed by Messengill in
favor of Burke as payee. Burke, in turn, transferred
(negotiated) the said note to Copeland by a memorandum on
the back of the note, I transfer my right, title and interest in
same. JM Burke

ISSUE: WON defendant Burke is a qualified indorser (mere
assignor)

HELD: No, Burke is a an indorser in this case.

Qualified indorsement constitutes the indorser a mere
assignor to the title of the instrument. It may be made
by adding the words without recourse or any words of
similar import. However, such indorsement does not impair
the negotiability of the instrument.

A person who signs upon an instrument, otherwise as maker,
drawer or acceptor, is deemed to be indorser, unless he clearly
indicated by appropriate words his intention to be bound in
some other capacity.

There are two line of reasoning with regard these cases:
1. A memorandum of similar import as used in this case
exempts the indorser from personal liability or
constitutes him as a mere assignor
2. An indorser, in order to limit his liability, must do so by
words clearly expressing such intent

The Court used the latter interpretation and held that by
placing said words on the back of the promissory note, Burke
had instituted himself as an indorser. The law provides that
the indorsement may be qualified by the use of words,
without recourse, or words of similar import.

The effect and liability incurred by an indorsement is a matter
of common knowledge. The phrase without recourse, as used
in business transactions, is in everyday use and there is hardly
a person engaged in business affairs of importance, as the
defendant in this case, who is not familiar with its use and
meaning. If the defendant did not intend to be bound by
the indorsement on the note in question, he should have
used such words which would clearly indicate that he
was a qualified indorser. But in this case, he did not.

An indorsement without recourse does not affect the
negotiable character of an instrument. It only shows an
unwillingness to be answerable for the solvency of prior parties.































LEONARDI V. CHASE NATIONAL BANK OF THE CITY OF
NEW YORK, 363 App. Div. 552, 33 N.Y.S. 2d 706 (1942)
FACTS: Plaintiff Leonardi deposited a check for $3,750 made to
the order of plaintiff and drawn on the Bank of Manhattan Trust
Co (trust company).
1. The check was deposited with the Bank of Bay Biscayne
(Florida) with the following indorsement: For deposit of
Florence Leonardi and Jogn Leonardi.
2. The check was received by defendant National Chase
Bank on June 9. On the same day, the check was
cleared and the amount was credited to the plaintiffs
account
3. Based on bank custom, the trust company has an
opportunity to dishonor the check by 3 pm of the same
day and failure to do so, the credit by the trust company
becomes final and irrevocable
4. The following day, June 10, the Bank of Bay Biscayne
become insolvent and was taken over by the
Comptroller of the State of Florida.
5. The Bank of Bay Biscayne owed Chase National Bank
over $1 million. Upon learning of the insolvency, Chase
National Bank set off the credits to the bank in the sum
of $257,458.81, which included the amount represented
by Leonardis check
6. As such, Leonardi filed the instant case to recover
against defendant, alleging that by setting off the Bank
of Bay Biscayne, it converted the proceeds of the check
which belonged to the plaintiffs

ISSUE: What is the relationship of Plaintiff Leonardi and
defendant Chase National Bank at the time of the setoff

HELD: Chase National Bank was only a collecting agent at the
time of the setoff. Where an item is deposited or received
for collection, the bank of deposit shall be the agent of
the depositor for its collection and each subsequent
collecting bank shall be the sub-agent of the depositor.
Normally, the relationship between the depositor and his bank
is that of debtor and creditor, a bank taking the title to the
proceeds of the deposit. However, whenever a check which
must be presented to some other bank for payment is
deposited for collection in the depository bank, the bank and
all subsequent banks through which the check passes in the
course of collection are agents of the depositor.

Under the Florida law, in such transaction the defendant Chase
National Bank is deemed to be a sub-agent of the plaintiff
Leonardi in the collection of the proceeds of the check until
actual final payment has been made by defendant to the Bank
(Biscayne). This relationship cannot be altered by an
agreement between the Bank of Bay Biscayne and defendant
bank without the consent of the plaintiffs unless it is shown that
there is a agreement or a certain custom known to the
depositor.

While the law contemplates that the defendant is merely a
collecting agent until final and actual payment, the deposit slip
used by the plaintiffs contains a statement that all items are
credited subject to final payment in case or solvent credits.
This means that pursuant to the agreement to which the
deposit is made, a credit provisionally given upon deposit
becomes final when the item is collected and final
payment by way of solvent credit is received by the
bank.

In the case at bar, a final credit was given the bank by
defendant Chase National Bank when it cleared the check and
did not dishonor the same. As a result, the agency was
terminated and the relationship of creditor and debtor existed
between the defendant and the bank. As such, Chase National
Bank was entitled to set off the credit as against the general
indebtedness of the Bank of Bay Biscayne.

Plaintiffs endorsement for deposit on the check was
restrictive and indicated that the forwarding bankn was
an agent for collection and not owner of the item.
Pursuant to the indorsement, the check was deposited
for collection and credit. When the final payment was
made by collection, the depositor became a creditor.




WHISTLER V. FORSTER, 16 Com. Bench Rep. 246 (1863)

FACTS: This is an action filed by the indorsee against the
maker of the check drawn by defendant Forster payable to
Griffiths and endorsed by Griffiths to plaintiff Whistler
1. A negotiable bill of exchange was obtained by means of
fraud from defendant Forster (drawer). Griffiths, in turn,
transferred the check to Whistler in part satisfaction of a
debt of a larger amount
2. However, Griffiths did not indorse the check

ISSUE: WON the plaintiff can recover from defendant drawer

HELD: No.

Under such circumstances, plaintiff Whistler had only the same
rights that the transferor Griffiths had. Since Griffiths defrauded
Forster in obtaining the bill, he could pass no right by merely
handing over the bill to another.

This is because title to a negotiable instrument passes by
endorsement and delivery. A title so acquired is good against
allthe world, provided the instrument is taken for value and
without any notice of any fraud.

Plaintiff has no right as transferee of the bill at all given the fact
that at the time he obtained indorsement, he had notice that
the bill was fraudulently obtained by Griffiths from defendant
Forster and that Griffiths had no right to make the
indorsement.

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