By the Court,
Paine, J.
This action was brought to foreclose what is commonly called a farm mortgage. It was given to the Milwaukee & Mississippi Railroad Company, and the note given in connection with it was made payable to that company or order. It is conceded that it was transferred to the plaintiff before due, for value, and that the plaintiff had no notice of any equitable defense. But on the trial, .the defendant offered in evidence, a defense set up in the answer, founded [624]*624upon alleged false and fraudulent representations by the agents of the company in procuring the mortgage. This was excluded, on the ground that such facts would constitute no defense against the plaintiff, he being a bona fide holder for value.
This ruling is alleged to be erroneous. And it is claimed that this note never was transferred to the plaintiff, within the rule of mercantile law, so as to transfer the legal title, and that therefore the equities between the original parties may still be shown in defense. This position is based entirely upon the mode of transfer, which was as follows: The® company executed to the plaintiff its own negotiably bond, payable to him or bearer, and attached the note to it, reciting in the bond .that they thereby transferred the note and mortgage to the plaintiff as security, and that both should be transferrable in connection with the bond, and not otherwise.
The sole question is, whether this was a sufficient endorsement of the note within the law merchant, to pass the legal title.
It must be admitted that the company did not assume the liability of endorsers. Rut this is clearly not necessary to transfer the note. Thus, a payee may endorse without recourse, which transfers the note, though he assumes no liability whatever. So he may transfer the title, by signing on the back or attached to the note, a guaranty of the payment or collection, which is an entirely a different contract from that of an indorser. And even though he shall fail to bind himself as guarantor, by not complying with the statute of frands, there is no room for doubt that the title to the note would pass. In every case of a sale of negotiable paper, there are two objects to be accomplished: first, to pass the title to the purchaser; and second, to fix the relation of the vendor to the paper after the sale. The latter may release him from any liability, or charge him with the ordinary liability of indorser, or with the unconditional liability of a guarantor of collection. But it is immaterial which, so far as the accomplishment of the first object is [625]*625concerned. In either case, the name of the payee on the paper, with the intent to pass the title, has that effect, whatever may be the nature or fate of the balance of the contract. Judge BRONSON, in Miller vs. Graston, 2 Hill, 192, states the fact incidentally, that “ a guaranty, as well as an indorsement, may have the effect of transferring the legal title to the note.” There are but few authorities directly in point, and those are somewhat in conflict. They are all mentioned in Parsons on Notes and Bills, vol. 2, p. 185, note a. The author gives it as his opinion, that on principle, a note transferred by guaranty remains negotiable; and those cases which sustain that conclusion seem founded upon the better reasoning. If an indorsement without recourse transfers the title, because the parties so intended, an indorsement with guaranty should have the same effect, and that whether the guaranty, as such, stand or fall.
It being established,.then, that it is not necessary to a transfer of title, that the vendor should assume the technical liability of indorser, but that the parties may contract on that subject as they please, can there be any room for doubt, that if the bond of the railroad company had been actually written on the back of the note, it would have been a sufficient in-dorsement to transfer the title, within the law merchant ? I can see none whatever. Stronger language could not be used, showing an intent to pass the title to the note, to be held as collateral security for the bond, and that it was designed to circulate as negotiable paper, transferrable by delivery with the bond, which the company must be assumed to have known could not have been done without being first indorsed by it. The intent, then, to pass the title and make the note transfer-rable by delivery afterwards, as a note payable to order and duly indorsed by the payee, is beyond question. And this contract, like all others, must take effect according to the intent of the parties, if it is sufficient in law to express that intent. And the fact that the-parties contracted for an absolute liability by the vendor, evidenced by a distinct negotiable [626]*626instrument on the back of the one transferred, cannot, upon any rational principle, be bold to distinguish the case so far as tbe mere question of a transfer is concerned, from a case where they contract for no liability, or for tbe conditional liability of an indorser, or the absolute liability, of a guarantor. I conclude, then, that if tbe bond bad- been written on tbe back of the note, it would have been fully sufficient to pass tbe legal title within the law merchant.
The only question remaining is, whether the fact that it was on another paper attached to the note,, prevents this effect. This must depend upon the question whether there is any inflexible rule of the mercantile law, requiring the indorsement to be on the identical paper on which the note was originally written. That there is any such, certainly cannot be maintained. All the cases where the question is raised, and, all elementary writers, concur iu saying that an indorsement may be on another paper attached to and made a part of the note. Such paper is called an allonge. And it is true that the usual reason stated for using such a paper, is that there is no longer room on the note to make the indorsement. But this does not mean that there must be an actual physical impossibility to write the indorsers name on the original paper. On the contrary, the usage of the mercantile law is, as chief justice MARSHALL says, “founded in convenience.” And all that its spirit or its letter requires is, that when it is inconvenient to write on the back of the note the real contract between the vendor and the vendee, and which if so written would pass the title, it may be written on another paper and attached to it with like effect. Thus, suppose the consideration for the ordinary indorsement was a sale of real estate, and the parties desired to express the consideration. It might be wholly unnecessary, yet no one could question their right to do so. Suppose the description of the real estate was too long to be written on the back of the note, and they should write the in-dorsement on an other paper containing the full description, [627]*627and attach it to the note, could it be for a moment contended that it would not pass the title ? I think not. Yet if not, it must be because the spirit of the mercantile rule is as above stated. And if such is its spirit, the particular reason which makes the contract too long to be written on the note is wholly immaterial. All that can be material is, that it would be a contract which, if on the note would pass the title, and that for some reason it is inconvenient to write it on the note. When this is true, the transfer may be effected by writing it on another paper attached to the note.
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By the Court,
Paine, J.
This action was brought to foreclose what is commonly called a farm mortgage. It was given to the Milwaukee & Mississippi Railroad Company, and the note given in connection with it was made payable to that company or order. It is conceded that it was transferred to the plaintiff before due, for value, and that the plaintiff had no notice of any equitable defense. But on the trial, .the defendant offered in evidence, a defense set up in the answer, founded [624]*624upon alleged false and fraudulent representations by the agents of the company in procuring the mortgage. This was excluded, on the ground that such facts would constitute no defense against the plaintiff, he being a bona fide holder for value.
This ruling is alleged to be erroneous. And it is claimed that this note never was transferred to the plaintiff, within the rule of mercantile law, so as to transfer the legal title, and that therefore the equities between the original parties may still be shown in defense. This position is based entirely upon the mode of transfer, which was as follows: The® company executed to the plaintiff its own negotiably bond, payable to him or bearer, and attached the note to it, reciting in the bond .that they thereby transferred the note and mortgage to the plaintiff as security, and that both should be transferrable in connection with the bond, and not otherwise.
The sole question is, whether this was a sufficient endorsement of the note within the law merchant, to pass the legal title.
It must be admitted that the company did not assume the liability of endorsers. Rut this is clearly not necessary to transfer the note. Thus, a payee may endorse without recourse, which transfers the note, though he assumes no liability whatever. So he may transfer the title, by signing on the back or attached to the note, a guaranty of the payment or collection, which is an entirely a different contract from that of an indorser. And even though he shall fail to bind himself as guarantor, by not complying with the statute of frands, there is no room for doubt that the title to the note would pass. In every case of a sale of negotiable paper, there are two objects to be accomplished: first, to pass the title to the purchaser; and second, to fix the relation of the vendor to the paper after the sale. The latter may release him from any liability, or charge him with the ordinary liability of indorser, or with the unconditional liability of a guarantor of collection. But it is immaterial which, so far as the accomplishment of the first object is [625]*625concerned. In either case, the name of the payee on the paper, with the intent to pass the title, has that effect, whatever may be the nature or fate of the balance of the contract. Judge BRONSON, in Miller vs. Graston, 2 Hill, 192, states the fact incidentally, that “ a guaranty, as well as an indorsement, may have the effect of transferring the legal title to the note.” There are but few authorities directly in point, and those are somewhat in conflict. They are all mentioned in Parsons on Notes and Bills, vol. 2, p. 185, note a. The author gives it as his opinion, that on principle, a note transferred by guaranty remains negotiable; and those cases which sustain that conclusion seem founded upon the better reasoning. If an indorsement without recourse transfers the title, because the parties so intended, an indorsement with guaranty should have the same effect, and that whether the guaranty, as such, stand or fall.
It being established,.then, that it is not necessary to a transfer of title, that the vendor should assume the technical liability of indorser, but that the parties may contract on that subject as they please, can there be any room for doubt, that if the bond of the railroad company had been actually written on the back of the note, it would have been a sufficient in-dorsement to transfer the title, within the law merchant ? I can see none whatever. Stronger language could not be used, showing an intent to pass the title to the note, to be held as collateral security for the bond, and that it was designed to circulate as negotiable paper, transferrable by delivery with the bond, which the company must be assumed to have known could not have been done without being first indorsed by it. The intent, then, to pass the title and make the note transfer-rable by delivery afterwards, as a note payable to order and duly indorsed by the payee, is beyond question. And this contract, like all others, must take effect according to the intent of the parties, if it is sufficient in law to express that intent. And the fact that the-parties contracted for an absolute liability by the vendor, evidenced by a distinct negotiable [626]*626instrument on the back of the one transferred, cannot, upon any rational principle, be bold to distinguish the case so far as tbe mere question of a transfer is concerned, from a case where they contract for no liability, or for tbe conditional liability of an indorser, or the absolute liability, of a guarantor. I conclude, then, that if tbe bond bad- been written on tbe back of the note, it would have been fully sufficient to pass tbe legal title within the law merchant.
The only question remaining is, whether the fact that it was on another paper attached to the note,, prevents this effect. This must depend upon the question whether there is any inflexible rule of the mercantile law, requiring the indorsement to be on the identical paper on which the note was originally written. That there is any such, certainly cannot be maintained. All the cases where the question is raised, and, all elementary writers, concur iu saying that an indorsement may be on another paper attached to and made a part of the note. Such paper is called an allonge. And it is true that the usual reason stated for using such a paper, is that there is no longer room on the note to make the indorsement. But this does not mean that there must be an actual physical impossibility to write the indorsers name on the original paper. On the contrary, the usage of the mercantile law is, as chief justice MARSHALL says, “founded in convenience.” And all that its spirit or its letter requires is, that when it is inconvenient to write on the back of the note the real contract between the vendor and the vendee, and which if so written would pass the title, it may be written on another paper and attached to it with like effect. Thus, suppose the consideration for the ordinary indorsement was a sale of real estate, and the parties desired to express the consideration. It might be wholly unnecessary, yet no one could question their right to do so. Suppose the description of the real estate was too long to be written on the back of the note, and they should write the in-dorsement on an other paper containing the full description, [627]*627and attach it to the note, could it be for a moment contended that it would not pass the title ? I think not. Yet if not, it must be because the spirit of the mercantile rule is as above stated. And if such is its spirit, the particular reason which makes the contract too long to be written on the note is wholly immaterial. All that can be material is, that it would be a contract which, if on the note would pass the title, and that for some reason it is inconvenient to write it on the note. When this is true, the transfer may be effected by writing it on another paper attached to the note.
All that is shown by the authorities relied on by the appellant is, that where a note payable to order has never been indorsed by the payee, within the meaning of the law merchant, the legal title has not passed, and the equities between the original parties are not cut off. But no case was cited, and I think none can be found, to show that the name of the payee on another paper attached to the note and plainly intended to operate as an indorsement so far as to transfer the title, would not have that effect.
There are cases showing that an assignment of a number of notes at once, by a separate paper never attached to either of the notes or intended to be, is not an indorsement in the law merchant. French vs. Turner, 15 Ind., 59; Hopkirk vs. Page, 2 Brockenbrough, 41. But such a transfer is so widely different from the present, and there was really so little ground to claim it was an indorsement, that while the correctness of those decis ions is unquestioned, it is equally clear that they are not applicable here. On the contrary, Chief Justice MARSHALL based his conclusion upon the fact that the mode of transfer there in question, separated the “ evidence of ownership from the bill itselfimplying plainly, that the same conclusion would not be true where this evidence was attached to the note so far as to travel with it wherever it might go.
I have not deemed it necessary to enter into any detailed [628]*628examination of authorities. I have stated the principles which seem fairly to be derived from them; and although no casé is ' found where a contract precisely like this has been passed on, it seems to me fully within those principles. The rules of the mercantile law are based upon convenience. For this very reason they do not harden, so as to impose upon one age the mere shapes and forms of business which may have been in vogue in another. This would be extremely inconvenient. Those rules are therefore flexible, and adapt themselves to the changes of progress and experience, so as to be always founded on convenience. No better illustration of this can be given, than is furnished by the history of negotiable bonds like the one in connection with which this note was transferred. Bonds and other sealed instruments were not negotiable within the law merchant. They were always open to any defense existing between the original parties. But-in the great increase of corporations, who became borrowers in the money markets of the world, it was found that their bonds were performing the same functions as negotiable paper, and that the interest and convenience of the mercantile public required that they be governed substantially by the same rule. This rule has accordingly been established. See opinion of Justice Cole, in Clark vs. Janesville, 10 Wis., 188, aud.cases cited. It would be an extraordinary departure from the spirit of those decisions which held that these bonds, though in form'not within the law merchant, were yet within its reason and should be entitled to its protection, if we should now hold that by connecting one of them with a note which vas negotiable within the law merchant, the latter should be taken out of it.
I think the judgment should be affirmed.