Furbee v.

Furbee
117 W. Va. 722 – 29 Sep 1936
Hatcher, President

Topic: Transfer – Unindorsed Instruments

Doctrine: If a note payable to order is negotiated for value without indorsement, the transferee does not
become a holder in due course but a holder subject to the existing equities against the transferor. The
transferee for value of an unendorsed note payable to order can maintain an action thereon in his own
name if the transferor had legal title.

Petitioners: the name of the party was not specified

Respondents: the name of the party was not specified

Case Summary:
The payee of a note payable to order transferred such to a transferee for value without indorsing it.
Transferee now wants to maintain legal action against the maker of the note. Maker argues that since
the note was not indorsed, there was not transfer of rights to the transferee as per Sec 30 of the NIL.
The Court held that following Sec 49 of the NIL, legal action can be maintained by the transferee for
value as he stepped into the shoes of the transferor and acquired the latter’s rights.

Facts:
 It is alleged that the payee transferred a note payable to order for value without indorsing it
 The maker of the note said that since the note was not indorsed, the transfer did not pass onto the
transferee the right of legal action citing decisions under the law merchant and Sec 30 of the NIL.
 Sec 30 Negotiable Instruments Law provides: “An instrument is negotiated when it is transferred from
one person to another in such manner as to constitute the transferee the holder thereof. If payable to
bearer, it is negotiated by delivery, if payable to order, it is negotiated by the indorsement of the
holder, completed by delivery.”

Issues + Held:
1. W/N legal action can be maintained against the maker of a note, by one to whom the payee allegedly
transferred the note for value but without indorsement – YES
 The first sentence of Sec 30 defines negotiation.
 2nd sentence of Sec 30 should not be read to exclude other means of negotiation such as the one
mentioned in Sec 49 which in part states that “where the holder of an instrument payable to his order
transfers it for value without indorsing it, the transfer vests in the transferee such title as the transferor
had therein.” This vests the transferee with the entire title of the transferor whether legal or equitable,
or both.
o When this happens, the transferee becomes a “holder” of the instrument but not a “holder in due
course” since his title is subject to all the equities against the transferor
 In this case, the transferor had legal title to the note in question. Such was acquired by the transferee,
the holder, and has the right to maintain legal action thereon.
 Instead of taking equitable title only, the transferee, if for value, now acquires “such title as his
transferor had therein.” This includes the right to maintain and action against the maker/acceptor or
other party liable to the transferor.
 Basically, when an instrument payable to order is not indorsed when it is delivered to the transferee for
value, the rights acquired by the transferee are no greater than that of the transferor. It doesn’t mean no
right was transferred at all. There is an implied negotiation of such note by the transferor
Ruling: Petition GRANTED/DENIED.

Dissent – (J. xxx):