TRANSFER AND NEGOTIATION 1. Methods of transfer.—In the preceding chapter we have examined the definitions of our subject, and have obtained some idea of the form and contents of bills, notes and checks, and of the inception of negotiable contracts. To be of use, these instru ments must circulate, and their circulation is gov erned by rules which must now be dealt with. They circulate by transfer, or passing from hand to hand by assignment, by operation of law and by negotia tion.
2. By assignnient.—A check or a bill of exchange does not operate as an assignment of funds in the hands of the drawee available for payment. Hence, the drawee of a bill of exchange who does not accept it is not liable on the instrument. Similarly, a check which is a bill of exchange on a banker, unless it is certified, gives the holder no right against the bank to claim or enforce payment. We have seen that an order which is not unconditional, in that it calls for payment out of some particular fund, is not a bill of exchange, but may, under a provincial law, operate as an assignment of the amount in question to him in whose favor the instrument is drawn. A bill or a note may be transferred, as for example, to a purchaser or a pledgee, without being indorsed by the holder. The holder thus assigns it. The transfer gives the trans feree such title as the transferor had in the bill and no more, but the transferee can also demand the in dorsement of the transferor. The transferee is in no better position and has not a better title than the transferor. By receiving and giving value for it, even before maturity, and before indorsement, he does not become a holder in due course. "He holds the bill subject to any defect of title in the transferor, of which he becomes aware before the indorsement of the bill to him, and if it is not indorsed before ma turity, it is subject to any defects of title that existed in the transferor." A simple form of assignment takes place under the following circumstances: A holds a note of B for five hundred dollars. He en trusts it to C. Later he writes to C, telling him to keep the note in payment of his indebtedness to him (C). The note is thus assigned to C, who, neverthe less, can demand A's indorsement, not in order to hold A, but in order to sue B. The point to observe
is that the note has not been transferred by negotia tion.
3. By operation of law.—From the preceding par agraph it will be understood that negotiable instru ments may be treated as personal property, transfer able by voluntary assignment. They may also be transferred by operation of law. When a testator holds a note, for instance, it passes to his executor to be dealt with according to the provincial law. When a person dies without a will—intestate----bills or notes in his possession pass to the administrator of his per sonal estate, or to the heirs, as in Quebec. Similarly, if a person becomes insolvent, and in his estate are found bills and notes, these pass to the assignee, cura tor or trustee to be collected or dealt with as he may be authorized by the provincial law. On the death of a joint payee or indorsee, the title vests immediately in the survivor. And when transfer by operation of law occurs, the transferee takes the place of the trans feror, just as in the case of an assignment.
4. By negotiation.—As to what is a negotiable in strument, it may be well to cite the. words of a great authority : .
It may therefore be laid down as a safe rule, that where an instrument is by the custom of trade transferable, like cash, by delivery, and is also capable of being sued upon by the person holding it pro tempore, then it is entitled to the name of a negotiable instrument, and the property in it passes to a bona fide transferee for value.' Bills of exchange and promissory notes, whether payable to order or to bearer, are by the law merchant negotiable in both senses of the word.' Now a bill or note is negotiated when it is trans ferred from one person to another in such a manner as to constitute the transferee the holder of the bill. A holder means the payee or indorsee of a bill or note who is in possession of it, or the bearer thereof. He need not be the legal owner. But if he is in posses sion and may legally recover from the person liable thereon, he is a holder, whether he be the owner or a holder for discount or a holder for collection.