from these authorities is plain and imperative: The assignee need not be the legal owner of the thing in action; if the legal owner, he must of course bring the action; but, if the assignee's right or ownership is for any reason or in any manner equitable, he is still the proper plaintiff, in most of the States the only plaintiff, although, in a few, the assignor should be joined as a plaintiff or as a defendant.1 The plain intent of the statute is to extend the equity doctrine and rule to all cases. 2

§ 66. *128. Effect of Statute in Case of Negotiable Instruments. Conflict in Opinion. As the statutory provision declares that "every action must be prosecuted in the name of the real party in interest," the defence that the plaintiff is not such real party in interest is, in general, a bar to the suit. This is certainly so when the plaintiff is the assignee of anything in action not negotiable, and the issue raised by an answer setting up such defence would be simply whether the plaintiff was, upon the proof, the real party in interest. If, however, the thing in action.

of the recovery. The court held that the action was properly brought, but also that the intervention was proper, and gave a judgment that the plaintiff recover onefourth and W. & B. three-fourths of the demand. Such an intervention and judgment would doubtless shock a lawyer bred in the old school; but it is convenient, sensible, and every way worthy of universal adoption. The common-law objection that a divided judgment is impossible is simply absurd; the thing is done, and is therefore possible. See also Allen v. Brown, 44 N. Y. 228, 231; Durgin v. Ireland, 14 N. Y. 322; Williams v. Brown, 2 Keyes, 486; Paddon v. Williams, 1 Robt. 340; Meeker v. Claghorn, 44 N. Y. 349, 353; Wetmore v. San Francisco, 44 Cal. 294, 300; Lapping v. Duffy, 47 Ind. 51; Boyle v. Robbins, 71 N. C. 130; Bartholomew Cy. Comm'rs v. Jameson, 86 Ind. 154 (where A receives money of B, and in consideration thereof agrees to assign to B any judgment he, A, may recover on a claim held by him against C, there is an equitable assignment of the claim, and C alone can sue thereon); Childs v. Alexander, 22 S. C. 169.

1 [Reynolds v. Louisville, etc. R. R. Co. (1895), 143 Ind. 579, 40 N. E. 410, quoting the text.]

2 McDonald v. Kneeland, 5 Minn. 352, 365.

[Iowa and Cal. Land Co. v. Hoag (1901), 132 Cal. 627, 64 Pac. 1073: "As was said by this court in Philbrook v. Superior Court, 111 Cal. 31, a defendant's right is to have a cause of action prosecuted against him by the real party in interest, but, as has been elsewhere pointed out (Giselman v. Starr, 106 Cal. 651), his concern ends when a judgment for or against the nominal plaintiff would protect him from any action upon the same demand by another, and when, as against the nominal plaintiff, he may assert all defences and counterclaims available to him, were the claim prosecuted by the real owner."

So in Sturgis v. Baker (1903), — Ore. 72 Pac. 744, and Lodge v. Lewis (1903), 32 Wash. 191, 72 Pac. 1009, it was held that a defendant could not raise the question whether or not the plaintiff was the real party in interest, unless some right of set-off or counterclaim was affected.

But see also Stewart v. Price (1902), 64 Kan. 191, 67 Pac. 553, and Brown v. Ginn (1902), 66 Ohio St. 316, 64 N. E. 123, set out at some length in note 1, p. 98.]

A

is an instrument negotiable in its nature, the subject is complicated by the special doctrines and rules of the law which relate to the quality of negotiability. It is elementary that possession of negotiable paper, payable to bearer, is at least prima facie evidence of ownership; and it is also settled that when such paper, payable to order, is indorsed and delivered to the indorsee, the legal title passes to him, and he may maintain an action thereon; while the maker, acceptor, or indorsers cannot question his title, at least in any manner short of impeaching its good faith. This legal title carried with it the right to sue, no matter what arrangements might be made between him and his immediate indorser concerning the use of the proceeds. The question then arises, Has the rule introduced by the code changed these established doctrines? Does the apparent and formal legal ownership resulting from the possession of a negotiable instrument payable to bearer, or from the indorsement and possession of similar paper payable to order, constitute the plaintiff the real party in interest within the meaning of the code? Or may the defendant go behind this formal title, and show that some other person is the real party in interest, and thus defeat the action? If the latter query must be answered affirmatively, it is evident that the statutory provision under consideration has made an important change in the law of negotiable paper. The question thus proposed has given rise to some conflict in opinion, and is not entirely free from doubt. On the one side it has been urged that the language of the section in all the State codes is most general and comprehensive, containing no exception in terms nor by implication, and that it is, in its highest degree imperative, "must be prosecuted in the name of the real party in interest,' except in the single case of "the trustee of an express trust,” and that the real party in interest is the person for whose immediate benefit the action is prosecuted, who controls the recovery, and not the person in whom the mere naked apparent legal title is vested. On the other side it is urged that the rule permitting such a holder or indorsee to prosecute the action is one of the elementary doctrines of the law relating to negotiable paper, a rule not of practice or procedure, but of the mercantile and commercial law, and that the legislature cannot have intended, by such a general clause of a statute concerning procedure, to abrogate well-settled principles of the law merchant. I will examine

and compare some of the cases in which the question has been discussed.

§ 67. *129. New York Decisions. In Edwards v. Campbell, which was an action upon a note payable to bearer, the plaintiff had the note in his possession; but a judgment in his favor was reversed on the ground that he was not the real party in interest. Killmore v. Culver 2 was an action upon a promissory note payable to Tanner or bearer. The answer denied the plaintiff's ownership, and alleged that Tanner was the real owner. It was sufficiently established by the evidence that the plaintiff was acting simply as agent for Tanner, and would be immediately accountable to the latter for all the money recovered. These facts were held to constitute a complete defence on the ground that Tanner was the real party in interest, and should have been the plaintiff. In James v. Chalmers, it was said by one of the judges of the New York Court of Appeals, in reference to actions upon negotiable paper: "Under the code of procedure, if it appears that the plaintiff is not the real party in interest, it is a bar to the action, and no further defence is necessary." The question was very elaborately discussed by the courts of New York in Eaton v. Alger, which was an action by the indorsee of a note. The Supreme Court held that the defendants might prove that the plaintiff had no interest in the note, but was a mere agent of the payee, and was bound to account to him, on demand, for the proceeds, and that these facts would constitute a complete defence to the action.

§ 68. * 130. The Rule in New York. Cases of higher authority, because decided by the New York Court of Appeals, have established the other rule for that State. In City Bank of New Haven v. Perkins, the rule which prevailed prior to the code was reaffirmed and applied to the facts before the court,

1 Edwards v. Campbell, 23 Barb. 423.

2 Killmore v. Culver, 24 Barb. 656, 657. James v. Chalmers, 6 N. Y. 209, 215, per Welles J.

Eaton v. Alger, 57 Barb. 179, 189.

5 City Bank of New Haven v. Perkins, 29 N. Y. 554, 568, per Johnson J. The learned judge also said: "It will be time enough to determine whether any other person has a better title when such person shall come before the court to claim the

bills in question, or their proceeds, from the plaintiff." The doctrine of City Bank v. Perkins is declared to be the settled general rule, but its operation explained and limited in Hays v. Hathorne, 74 N. Y. 486. As sustaining the general rule, see also Devol v. Barnes, 7 Hun, 342; Green v. Niagara Ins. Co., 6 Hun, 128; Davis v. Rowlands, 5 Hun, 651. But see Iselin v. Reynolds, 30 Hun, 488.

1

although no allusion was made in its opinion to the provisions of § 111 (1501, 449, 1909, 1910). The doctrine was stated as follows: "Nothing short of mala fides or notice thereof will enable a maker or indorser of such paper to defeat an action brought upon it by one who is apparently a regular indorsee or holder, especially when there is no defence to the indebtedness. As to anything beyond the bona fides of the holder, the defendant, who owes the debt, has no interest." The same rule was repeated in Brown v. Penfield; but in this case also there was no reference made to the provision of the code relating to the real party in interest. It might be considered doubtful whether the question had been put to rest by these two decisions, but all doubt has been removed. The case of Eaton v. Alger was carried to the Court of Appeals; the opinion of the Supreme Court was overruled; and the original rule of the law in reference to suits upon negotiable paper was expressly held not to have been changed by the code. In this conflict among the decisions, the judgment of the court of last resort of course prevails; and the question is thus settled in New York by the force of authority, whatever may be thought of the comparative weight of the argument in support of either rule.

§ 69. *131. Rule in Other States. The doctrine which prevails in Iowa seems to be the same as that now established in New York. The same doctrine appears to be established in Minnesota; in Missouri; in Nebraska; 6 in Washington;7 in California. The construction given to the statutory provision

4

1 Brown v. Penfield, 36 N. Y. 473. The remarks of Davies C. J., in which this doctrine was reasserted, were, however, mere obiter dicta.

2 Eaton v. Alger, 47 N. Y. 345; s. c. 2 Keyes, 41.

3 Cottle v. Cole, 20 Iowa, 481, 485, per Dillon J. followed in Abell Note, etc. Co. v. Hurd (Iowa, 1892), 52 N. W. 488: "The course of decision in this State establishes this rule; viz., that the party holding the legal title of a note or instrument may sue on it, though he be an agent or trustee, and liable to account to another for the proceeds of the recovery; but he is open in such case to any defence which may exist against the person beneficially interested."

4 Minnesota Thresher Manuf. Co. v.

Heipler (Minn.), 52 N. W. 33; Elmquist v. Markoe, 45 Minn. 305; Vanstream v. Liljengren, 37 Minn. 191; [Struckmeyer v. Lamb (1896), 64 Minn. 57, 65 N. W. 930.] 5 Young v. Hudson, 99 Mo. 102.

6 Herron v. Cole, 25 Neb. 692; [Meeker v. Waldron (1901), 62 Neb. 689, 87 N. W. 539; Commercial State Bank v. Rowley (1902), Neb., 89. N. W. 765.]

7 McDaniel v. Pressler, 3 Wash. 636; Davis v. Erickson, 3 Wash. 654; [Riddell v. Prichard (1895), 12 Wash. 601, 41 Pac. 905.]

8 McPherson v. Weston, 64 Cal. 275; Curtis v. Sprague, 51 Cal. 239; [Cortelyou r. Jones (1901), 132 Cal. 131, 64 Pac. 119; Toby v. Oregon Pac. Ry. Co. (1893), 98 Cal. 490, 33 Pac. 550.

The same doctrine prevails in North

by the court of Indiana is entirely different, as it is held to include the indorsee and holder of negotiable paper as well as the assignee of any other thing in action. Such indorsee or holder, although possessed of the naked legal title, is not the real party in interest, and is not authorized to sue, if the beneficial interest and the whole right to the proceeds of the recovery are in another party. It is, however, a settled rule of pleading in Indiana, that an answer merely averring that the plaintiff is not the real party in interest, but that some other person named is the real party, without alleging any facts from which these conclusions would arise, presents no issue.2 In Kentucky, also, the defence that the plaintiff is not the real party in interest may be set up in an action upon a promissory note or other negotiable instrument, brought by the person who is the apparent holder, or who has the naked legal title, although in that State, by virtue of an express provision of the code, the person having the legal title must also be made a party, either plaintiff or defendant.3 In an action by the assignee of a note against the maker thereof, it is no defence to show that the assignment was made with intent to defraud certain creditors of the assignor. This does not make the plaintiff any the less the real party in interest. As the assignor participates in the fraud, he could not repudiate his transfer, and has parted with all possible interest in the note.1 Whenever the defence that the plaintiff is not the real party in interest is allowable, it must be pleaded in the answer; if not, it will be regarded as waived.5

Dakota. Seybold v. Bank (1896), 5 N. D. 460, 67 N. W. 682; Commercial Bank v. Red River Bank (1899), 8 N. D. 382, 79 N. W. 859. Also in Montana. Meadowcraft v. Walsh (1895), 15 Mont. 544, 39 Pac. 914.]

1 Swift v. Ellsworth, 10 Ind. 205. See also Gillispie v. Fort Wayne & So. R. Co., 12 Ind. 398; Deuel v. Newlin (Ind. Sup. 1892), 30 N. E. 795; Bartholomew Cy. Comm'rs r. Jameson, 86 Ind. 154.

* Lamson v. Falls, 6 Ind. 309; Mewherter v. Price, 11 Ind. 199; Garrison v. Clark, 11 Ind. 369; Swift . Ellsworth, 10 Ind. 205; Hereth v. Smith, 33 Ind. 514, and cases cited; Hardin v. Helton, 50 Ind. 319.

3 Carpenter v. Miles, 17 B. Mon. 598, 602. See Palmer v. Mt. Sterling Nat.

Bank (Ky. 1892), 18 S. W. 234. [See Power v. Hambrick (1903), Ky., 74 S. W. 660, where it was held that the assignee of a note may sue upon it in his own name, whether the assignment was absolute or merely as collateral security.]

4 Rohrer v. Turrill, 4 Minn. 407.

5 Savage v. Corn Exch. Ins. Co., 4 Bosw. 2; Giraldin v. Howard, 103 Mo. 40; see also post, § *711, and cases cited in note. [Lesh v. Meyer (1901), 63 Kan. 524, 66 Pac. 245; Bank of Stockham v. Alter (1901), 61 Neb. 359, 85 N. W. 300. An averment in an answer that the plaintiff is not the real party in interest is a mere conclusion of law, and insufficient: Esch v. White (1901), 82 Minn. 462, 85 N. W. 238, 718. But an allegation that prior to the commencement of the suit the plaintiff