Bardwell, Stanford O., Jr.

English

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Louisiana Law ReviewVolume 24 | Number 3April 1964Status of Unendorsed Instrument Drawn toMaker's Own OrderStanford O. Bardwell Jr.This Note is brought to you for free and open access by the Law Reviews and Journals at LSU Law Digital Commons. It has been accepted for inclusionin Louisiana Law Review by an authorized editor of LSU Law Digital Commons. For more information, please contact kreed25@lsu.edu.Repository CitationStanford O. Bardwell Jr., Status of Unendorsed Instrument Drawn to Maker's Own Order, 24 La. L. Rev. (1964)Available at: https://digitalcommons.law.lsu.edu/lalrev/vol24/iss3/11NOTESample of judicial willingness to avoid a strict application of therule that a use of community funds will make the purchasedproperty community regardless of the intention of the parties.Since a rule of "conversion" through the use of communityfunds is seemingly based either on the theory that such use evi-dences an intention of the paying party that the property be-come part of the community, or on the principle that the com-munity should be maintained inviolate and therefore uses ofcommunity funds for non-community purposes should be penal-ized, it is submitted that an error-of-law approach to such prob-lems is proper. It is proper in the first instance because inten-tion in these cases is surely misguided when formed under anerror as to the legal nature of the funds used, and in the second,because penalties should be imposed only when it is known thatthe funds utilized for separate acquisitions were communityproperty, and the use was undertaken regardless of this knowl-edge.John M. KingSTATUS OF UNENDORSED INSTRUMENTDRAWN TO MAKER'S OWN ORDERIn return for a $2,000 loan, defendant executed and deliveredto plaintiff a demand instrument payable to the order of "my-self" which was signed and dated, but unendorsed. A $200payment held to constitute an acknowledgment of the debt wasmade one year later. Suit to recover the balance was filed some41/ years after the partial payment; defendant excepted, plead-ing the three-year prescription on money lent.' Plaintiff con-tended the five-year prescription for suits on a promissory notewas applicable. 2 The trial court sustained defendant's excep-tion, dismissing the suit, and the Fourth Circuit Court of Ap-peal on rehearing affirmed. Held, an unendorsed instrumentpayable to the maker's own order is not a promissory note,(increase in value of a one-half interest in furniture business) ; and dividends:Daigre v. Daigre, 228 La. 682, 83 So. 2d 900, 55 A.L.R.2d 951 (1956) (appliesonly to cash payments and not to stock dividends).1. "The following actions are prescribed by three years: . . ."That for the payment of money lent . .. " LA. CIVIL CODE art. 3538 (1870).2. Id. art. 3540: "Actions on . . . all promissory notes, whether negotiableor otherwise, are prescribed by five years, reckoning from the day when theengagements were payable."19641LOUISIANA LAW REVIEW [Vol. XXIVnegotiable or non-negotiable. Hence the three-year prescriptionof article 3538 for payment of money lent is applicable. Mar-cello v. LaRocca, 152 So. 2d 878 (La. App. 4th Cir. 1963).After an extensive definition of a negotiable promissory noteLouisiana R.S. 7:184 continues: "Where a note is drawn to themaker's own order, it is not complete until indorsed by him."8While no court has considered such an "incomplete" instrumentnegotiable, it has been held that this provision of the NegotiableInstruments Law governs only the negotiability vel non of theinstrument,4 and that it still is enforceable as a non-negotiablepromissory note even though unendorsed.5 Other courts includ-ing those of Louisiana have applied principles of equity tocomplete the instrument as between the parties,6 thus avoidinginterpretation of the statute.7  For instance, Louisiana has en-3. LA. R.S. 7:184 (1950) : "A negotiable promissory note within the meaningof this Chapter is an unconditional promise in writing made by one person toanother signed by the maker engaging to pay on demand, or at a fixed or deter-minable future time, a sum certain in money to order or to bearer. Where a noteis drawn to the maker's own order, it is not complete until indorsed by him."This provision is identical to section 184 of the Uniform Negotiable Instru-ments Law, in force in substantially the same form in every state whose casesare referred to herein.4. Cassetta v. Baima, 106 Cal. App. 196, 201, 288 Pac. 830, 832 (1930)"The provisions of the statute are not to be taken as meaning that an instrumentpayable to order can only be transferred by indorsement; they mean only thatsuch indorsement is necessary in order to carry the qualities and incidence ofnegotiable paper to the indorsee." Cf. LA. R.S. 7:52 (1950), which providesthat one is not a holder in due course unless the instrument is "complete andregular upon its face." Conceivably, the same policy in regard to this provision-that an incomplete instrument is just non-negotiable -should be applied to in-struments "incomplete" under section 184.5. Cassetta v. Baima, 106 Cal. App. 196, 288 Pac. 830 (1930). See alsooriginal hearing in instant case.6. In both Pineland Realty v. Clements, 149 La. 274,_88 So. 818 (1921)and Achee v. Williams, 6 La. App. 316 (La. App. 2d Cir. 1927) a mortgage wasexecuted as security for the note and contained therein a statement to the effectthat the mortgage accompanied notes which were "drawn to the maker's ownorder and indorsed by him." The courts seemed to construe the two documentstogether and in effect read in an endorsement on the notes. The situation inKiel Wooden Ware Co. v. Laun, 233 Wis. 559, 290 N.W. 214 (1940) presentsa slightly stronger set of facts. The note was made payable to the corporatemaker's own order and was endorsed by the defendant (president) prior todelivery to plaintiff -but in defendant's own name. The court looked beyondthe technicalities of the maker having named no other payee besides itself andlooked only to the intent of the parties, which was (and had been for 18 years)that the endorser would be jointly liable with the corporate maker. As he hadsigned the back before delivery he became an original promissor. For all prac-tical purposes, therefore, the paper had been endorsed by the original promissor.That this was technically not the maker seemed of no moment.7. It may appear at this point that there is no distinction between the legalrights of a holder of endorsed "myself" paper and a holder of unendorsed paper;however, the courts which treat the latter as a non-negotiable note require itsholder to prove affirmatively the circumstances under which he received thepaper, whereas the holder of the former is extended a presumption of ownership.Bank of Seattle v. Titlow, 233 Fed. 838 (D.C. Wash. 1916) ; Ochs v. Kroehle,1964] NOTESforced unendorsed instruments payable to "myself" when re-citals in accompanying mortgages stated that the notes hadbeen endorsed." However, the vast majority of Louisiana courtsand courts of other jurisdictions interpreting this provision ofthe Negotiable Instruments Law have held the instrument com-pletely null as either a negotiable or non-negotiable promissorynoteY On the other hand, although such instruments are nullas promissory notes, they have been admitted in Louisiana andelsewhere as evidence tending to establish a right to recover onthe underlying indebtedness.' 0On original hearing, the court in the instant case held thatthe failure to endorse a note payable to "myself" rendered thenote non-negotiable but did not destroy its character as a note;"therefore, the five-year prescription on notes was applicableand the exception overruled. On rehearing, however, the courtrealigned its position with that of the earlier jurisprudence andthe majority view in other states 12 and held that the unendorsedinstrument was not a promissory note, negotiable or non-nego-tiable.1 3 Consequently, the three-year prescription on recoveryof money lent was applicable14 -not the five-year prescriptionon notes.' 5The decision in the instant case is clearly in line with thejurisprudence of this state. 16 That this is also the correct posi-185 App. Div. 374, 173 N.Y. Supp. 184 (1918); BRITTON, BILLS AND NOTES§46 (2d ed. 1961).8. Pineland Realty v. Clements, 149 La. 274, 88 So. 818 (1921); Achee v.Williams, 6 La. App. 316 (La. App. 2d Cir. 1927).9. Lea & Landon v. Branch Bank at Mobile, 8 Port. 119 (Ala. 1838) ; Ricev. Goldstein, 234 Ill. App. 448 (1924); Wilson v. Hillman, 306 Ky. 508, 208S.W.2d 493 (1948) ; Succession of Rabasse, 49 La. Ann. 1405, 22 So. 767 (1897) ;Armato v. Ross, 170 So. 400 (La. App. Orl. Cir. 1936) Prestenbach v. Mansur,14 La. App. 429, 129 So. 445 (La. App. 1st Cir. 1930) Bank of St. Martinvillev. Duchamp, 6 La. App. 562 (La. App. 1st Cir. 1927) Market & Fulton Nat.Bank v. Ettenson, 172 Mo. App. 404, 158 S.W. 448 (1913).10. Armato v. Ross, 170 So. 400 (La. App. Orl. Cir. 1936) ; Reid v. Windsor,111 Va. 825, 69 S.E. 1101 (1911). "While it is true that a note made payableto the maker's own order is not complete as a negotiable instrument in the handsof a third person without the maker's indorsement, such a note is not a nullitybut is good in equity against the maker where it is shown that the note was givenfor a valuable consideration and was delivered by the maker to his creditor inaccordance with the terms of the contract in connection with which the note wasexecuted." Achee v. Williams, 6 La. App. 316, 319 (La. App. 2d Cir. 1927) andquoted with approval in Armato v. Ross, supra. See also LA. CivrL CODE art.1762 (1870).11. Marcello v. LaRocca, 152 So. 2d 878 (La. App. 4th Cir. 1963).12. See note 9 supra.13. See Marcello v. LaRocca, 152 So. 2d 878 (La. App. 4th Cir. 1963).14. See note 1 supra.15. See note 2 supra.16. Succession of Rabasse, 49 La. Ann. 1405, 22 So. 767 (1897) ; Armato v.LOUISIANA LAW REVIEWtion seems equally clear. The Negotiable Instruments Law re-quires that a promissory note contain a promise to pay another.I7Obviously an unendorsed instrument payable to "myself" doesnot meet this requisite.' Furthermore, the negative tenor ofthe concluding sentence of R.S. 7:184 following an extensivedefinition of a negotiable promissory note19 would seem to implythat such incomplete instruments are to be excluded from thedefinition of a promissory note. The court was correct, there-fore, in treating the instrument as null and requiring that suitto recover be brought within the three-year prescription periodon money lent.Stanford 0. Bardwell, Jr.TORTS - LIABILITY FOR DAMAGES CAUSED BY INFANTSSuit was brought against a father to recover for damagesdone by his six-year-old child to a neighbor's home and its fur-nishings. The plaintiff predicated liability on Louisiana CivilCode article 2318, which makes the father liable for damagescaused by his children without regard to his personal fault.The district court maintained defendant's exception of no causeof action and the court of appeal affirmed. Held, a petition al-leging property damage deliberately, wantonly, and maliciouslyinflicted by a child of six, but failing to allege the personal faultof the parent, does not state a cause of action against the fatherunder article 2318, since a six-year-old child is legally incapableof fault. Scottish Union and National Ins. Co. v. Prange, 154So. 2d 623 (La. App. 4th Cir. 1963).Neither in France nor at common law is the parent vicari-ously liable for the torts of his children simply by virtue of thefamilial relationship.' The principal basis of parental liabilityRoss, 170 So. 400 (La. App. Orl. Cir. 1936) ; Prestenbach v. Mansur, 14 La.App. 429, 129 So. 445 (1930) ; Bank of St. Martinville v. Duchamp, 6 La. App.562 (La. App. 1st Cir. 1927).17. See note 3 supra. See also Navin v. McCarty, 240 Mass. 447, 1344 N.E.232 (1922) ; First Nat'l Bank v. Payne, 111 Mo. 291, 20 S.W. 41 (1892).18. Under elementary obligations principles, it is difficult to see how aninstrument whose promissor and promissee are the same party could be a contractof any kind, much less a promissory note.19. See note 3 supra.1. French authorities: FRENCH CIVIL CODE art. 1384; 1 MAZEAUD, TRAIT]tTHItORIQUE ET PRATIQUE DE LA RESPONSIBILITt CIVILE D]tLICTUELLE ET CONTRAC-TUELLE n " 732-734, 764 (5th ed. 1957) [hereinafter cited as MAZEAUD]; 2[Vol. XXIV

Status of Unendorsed Instrument Drawn to Maker\u27s Own Order

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Status of Unendorsed Instrument Drawn to Maker\u27s Own Order

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