FAY V.

WITTE
262 N.Y. 215, 186 N.E. 678 (1933)
Crane, J.

SUMMARY: A promissory note was executed to pay to the order of Harry C. Witte. However, Witte
indorsed the note to Richard Fay by stating: "I hereby assign all my right and interest in this note to
Richard Fay in full." Later, the note was protested for non-payment, hence, Fay, being the holder, filed
a case against Witte. Witte argued that he was a qualified indorser due to the use of the word
“assign.”

The Court disagreed. For one to be considered a qualified indorser, the exclusion of liability must be
express and not implied from the transaction. Words such as "without recourse" or of same import
must be used.

DOCTRINE:
An indorser, by his indorsement, impliedly enters into two contracts:
(1) A contract of sale or assignment of the instrument; and
(2) A contract to pay the instrument if the maker is unable to pay on maturity.
If the indorser wants to relieve himself of either contract he must do so in clear and express terms
such as adding the words "without recourse," or "sans recourse" or "at indorsee's own risk" above his
signature. By doing the latter, he is expressly ridding himself of contract (2).

In the absence of clear and unmistakable language qualifying liability, an indorser will be liable on
both his contracts. His liability cannot be limited by implication.

Sec. 38. QUALIFIED INDORSEMENT. – A qualified indorsement constitutes the indorser a mere
assignor of title to the instrument. It may be made by adding to the indorser's signature the words
"without recourse" or any words of similar import. Such an indorsement.

Sec. 63. When a person deemed indorser. - A person placing his signature upon an instrument
otherwise than as maker, drawer, or acceptor, is deemed to be indorser unless he clearly indicates by
appropriate words his intention to be bound in some other capacity

FACTS
 Harry Witte was given a promissory note (Pay to the Order of Harry Witte) in the amount of
$2,500.00 at the Central Bank of Albany New York, with interest.

 Thereafter, Witte, for good and valuable consideration, indorsed the note to one Richard Fay:
o "I hereby assign all my right and interest in this note to Richard Fay in full."

 Then, the note was protested by Fay for non-payment, and due notice was given to Witte.

 Fay filed an action against Witte, ratiocinating that:

o Witte was an unqualified indorser.
o And that an indorsement implies the following:
 A transfer of the note
 A promise to pay if a maker fails to do so

1
  However, the Appellate Division ruled that:
o Witte rendered himself as an indorser without recourse, or a qualified indorser, since
Witte used the term "assign"
 It meant that he IMPLIEDLY excluded himself from the second implication – to
pay upon default of the maker.

 Hence, Fay appealed to the Supreme Court.

ISSUE:
1. W/N Witte was a qualified indorser --- NO. One cannot be considered a qualified indorser by mere
implication. The same must be expressed in clear and unmistakable language.

 The SC held that there is no justification in the NIL for an implied qualified indorsement
 For one to be a qualified indorser, the exclusion of liability must be express and not implied
from the transaction
o Words such as "without recourse" or of same import must be used
o Mere placement of the word "assign" is ambiguous
o A person placing his signature upon an instrument otherwise than as maker, drawer or
acceptor is deemed to be an indorser, unless he clearly indicates by appropriate words
his intention to be bound in some other capacity.
 His liability is implied without words expressly creating it.
o To be negatived, words should be used which negate the implication
RULING: Petition Granted

DISPOSITIVE PORTION
The judgment of the Appellate Division should be reversed and that of the County Court affirmed, with
costs in this court and in the Appellate Division.