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subject into harmony with the general law as administered by the federal and by the greater number of the state courts. We prefer to hold, in accordance with the weight of authority, that an indorsee of negotiable paper taken as security for a pre-existing debt is a holder for value and in due course of business, and therefore, in the absence of any circumstances charging him with notice, is protected against a claim of payment made to the original payee.

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The judgment is reversed, and the cause remanded for a new trial. All the justices concurring.18

III. Holder for value.

§ 52

HUNTER v. WILSON.

4 EXCHEQUER REPORTS, 489. - 1849.

THIS was an action by the plaintiff, as indorsee of a bill of exchange, against the defendant, as acceptor. The defendant pleaded (in substance), that the bill of exchange was drawn by one McLean, at the request and for the accommodation of the defendant, and without any consideration or value whatever, and that the bill was indorsed by the said McLean without any consideration or value given by the plaintiff for such indorsement, to the defendant, or to the said McLean, or to any other person whomsoever. The plaintiff had signed interlocutory judgment upon this plea, the defendant being under terms of pleading issuably. A rule nisi was subsequently obtained, on the part of the defendant, to set this judgment aside, but without any affidavit of merits.

Willes now showed cause. -The plaintiff was clearly entitled to sign judgment, for the plea is not issuable. It is quite consistent with the plea that there was a good consideration given for the bill. It may have passed through many hands, each party having given consideration. [ROLFE, B.- It may have been indorsed to A. B., who made a present of it to the plaintiff.] Or the defendant may have owed a debt to some third party. The allegation that the bill was drawn for the accommodation of the defendant is absurd. [ROLfe, B. - The plaintiff may be the executor of a person who gave full value for it.] He was then stopped by the court, who called upon

Barnard, in support of the rule, who contended that the plea was good upon general demurrer.

PARKE, B. The plea is clearly not issuable, and the plaintiff was entitled to sign judgment. There is not even an allegation in the plea, that none of the previous parties to the bill had given value

18 See this case reported with exhaustove note in 1 A. & E. Ann. Cas. 272.-C.

for the indorsement. The rule, therefore, ought to be discharged, and with costs, as the defendant is not prepared with an affidavit of

merits.

POLLOCK, C. B., ALDERSON, B., and ROLFE, B., concurred.

§ 52

Rule discharged, with costs.1

ARPIN v. OWENS.

140 MASSACHUSETTS, 144. 1885.

JUDGMENT for defendant and plaintiff alleged exceptions. W. ALLEN, J. This was an action by the payee of a foreign bill of exchange against the acceptor. The bill was dated February 23rd, payable in thirty days after date, and was accepted March 1st. There was evidence that the plaintiff took the bill from the drawer on the day of date, for value, in the regular course of business. The court ruled that the burden was on the plaintiff to prove that the defendant had received a consideration for the draft, and that, if the jury should find that he received no consideration, they should find for the defendant. There was evidence of want of consideration between the drawer and the defendant, and evidence bearing upon other grounds of defense, which is not material, as the ruling presented but one question for the jury. For the purposes of the ruling the plaintiff must be taken to be a bona fide purchaser of the bill for value, and without notice of want of consideration; and the question presented is whether, in an action by the payee of a bill, who took it before acceptance, against the acceptor, want of consideration between the drawer and acceptor is a defense; in other words, whether in such an action the rule to be applied as to want of consideration as a defense is that which obtains between the maker and payee of a note or that between the maker and indorsee. The rule is stated thus in Byles on Bills (6th Amer. Ed.) 206:

"Between immediate parties that is, between the drawer and acceptor, between the payee and drawer, between the payee and maker of a note, between the indorsee and indorser- the only consideration. is that which moved from the plaintiff to the defendant, and the absence or failure of this is a good defense to an action. But between the remote parties for example, between the payee and the acceptor, between the indorsee and acceptor, between indorsee and remote indorser two distinct considerations, at least, must come in question: First, that which the defendant received for his liability; and, secondly, that which the plaintiff gave for his title. An action between remote

1 Accord: Hoffman v. Bank, 12 Wall. (U. S.) 181. — C.

parties will not fail unless there be absence or failure of both these considerations."

The payee of an accepted bill holds the same relation to the acceptor that an indorsee of a note holds to the maker. There is a very close resemblance between an accepted bill and an indorsed note. The indorsed note is evidence of a debt originally due from the maker to the payee, and assigned and made due to the endorsee. The bill is evidence of a debt originally due from the drawee to the drawer, assigned and made due to payee; and the rule that the title of the assignee cannot be impeached by showing want of consideration for the original debt is applicable equally to the indorsee of a note, and to the payee and to the indorsee of an accepted bill. The reason, applicable alike to payee and indorsee, is tersely stated by VAUGHAN, J., in Low v. Chifney, 1 Bing. (N. C.) 267: "How was he to know what had passed between the drawer and acceptor." See Davis v. Randall, 115 Mass. 547.

It is contended by the defendant that the rule does not apply to the case at bar, because the acceptance was after the bill was purchased by the payee, and that, therefore, it was not taken by him on the faith of the acceptance. There is no ground for this distinction. It is immaterial when an acceptance is made; it may be made at any time, and the rights of the payee and of indorsees are the same after it is made whether they were acquired in anticipation of it or subsequent to it. It is held in this state that, upon the question whether a promise to accept made by the drawee to the drawer is an acceptance as to other parties, the knowledge of the promise, and presumed reliance upon it in becoming parties, is material. Exchange Bank of St. Louis v. Rice, 98 Mass. 288. But where, as in the case at bar, there is an acceptance upon the bill, it makes no difference in the rights of payees or indorsees whether they become such before or after the acceptance. See Grant v. Hunt, 1 C. B. 44; Wynne v. Raikes, 5 East, 514; Powell v. Monnier, 1 Atk. 611.

The instrument is negotiable before acceptance, and the acceptance. is an acknowledgment of the debt it represents, and an absolute promise to pay it to the person who is or shall become the holder of the bill; and to allow a want of consideration for the acceptance to defeat the right of a bona fide holder, whether he became such before or after the acceptance, would be contrary to the nature and purpose of bills of exchange, and to the uniform usage in regard to them. Exceptions sustained.2

2 In Heuertematte v. Morris, 101 N. Y. 63, 70, the court says: "If a party becomes a bona fide holder for value of a bill before its acceptance, it is not essential to his right to enforce it against a subsequent acceptor, that an additional consideration should proceed from him to the drawee. The bill itself implies a representation by the drawer that the drawee is already in receipt of funds to pay, and his contract is that the drawee shall accept and pay according to the terms of the draft. (Parsons on Bills, 323, 544; Arpin v.

§ 53

STODDARD v. KIMBALL.

6 CUSHING (Mass.) 469. — 1850.

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SHAW, C. J. In the present case, it appearing that the note was negotiated to the plaintiffs before it was due, for a valuable consideration, and the jury having found that they took it without notice of the misapplication by the maker, it is clear that they have a right to recover; and the only remaining question is, for what amount they may recover. In general, the holder of an indorsed note will be entitled to recover the whole amount of the face of the note, because the presumption of fact, in the absence of counter proof, is, that he gave the full value for it, or that he took it from some other holder for value, to collect the amount, receive a certain part to his own use, and account to the party from whom he took it for the surplus. Having taken it to secure a pre-existing debt, of a less amount, he is a holder for value in his own right, only to the amount of the debt due him. If, therefore, it appears in proof, that the plaintiff is not accountable to any third person for any surplus, then there is no reason why he should recover any more than the balance of the debt, for which he is a bona fide holder for value. Here, it appears that the plaintiff received this note of the maker, for whose accommodation the defendant indorsed it. It being obvious that the plaintiff can recover nothing as trustee for the party from whom he received it, he is liable over to nobody for the surplus, and therefore can have judgment only for the amount due to himself, for his own use and in his own right which is so much of the note

Chapin, 140 Mass. 144.) The drawee can, of course, upon presentment refuse to accept a bill, and in that event the only recourse of the holder is against the prior parties thereto; but in case the drawee does accept a bill, he becomes primarily liable for its payment, not only to its indorsees but also to the drawer himself.

"The delivery of a bill or check by one person to another for value implies a representation on the part of the drawer that the drawee is in funds for its payment, and the subsequent acceptance of such check or bill constitutes an admission of the truth of the representation, which the drawee is not allowed to retract. (Daniel on Neg. Inst., 534; Parsons on Bills, 323, 544, 545.) By such acceptance the drawee admits the truth of the representation, and having obtained a suspension of the holder's remedies against the drawer, and an extension of credit by his admission, is not afterwards at liberty to controvert the fact as against a bona fide holder for value of the bill.

"The payment to the drawer of the purchase price furnishes a good consideration for the acceptance which he then undertakes shall be made, and its subsequent performance by the drawee is only the fulfillment of the contract which the drawer represents he is authorized by the drawee to make.

"The rule that it is not competent for an acceptor to allege as a defense to an action on a bill that it was done without consideration, or for accommodation, as against a bona fide holder for value of such paper, flows logically from the conclusive force given to his admission of funds, and is elementary."-C.

as may be necessary to satisfy the balance of the debt, for the security of which he received it.

Judgment on the verdict for the plaintiff for the smaller sum.

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CONTRACT upon a promissory note. Defense, partial failure of consideration in that plaintiff, having agreed not to peddle milk in H., had continued to do so, etc. The trial court held evidence of this inadmissible. Plaintiff alleges exceptions.

CHAPMAN, J., [after disposing of another question]. It was competent to the defendant to prove that the note was given as well in consideration of a sale of the good will of the milk route, and an agreement not to go into business which should interfere with it, as

3 In Mersick v. Alderman, 77 Conn. 634, 637, the court said: "The defendants claim that the complaint was inappropriate, in that it was in the ordinary form of one on behalf of an indorsee of a negotiable note against the maker, and that the judgment did not conform to the complaint in that it was rendered for the amount of the indebtedness which it was given to secure. It is well settled that the payee or indorsee of a note held as collateral may sue upon it, and such is the plain implication of our statutes. Gen. St. 1902, §§ 4222-4227 [N. Y.. §§ 91-96]; Daniels on Negotiable Instruments, § 833; Hodges v. Nash, 141 Ill. 391; Whittaker v. Charleston Gas Co., 16 W. Va. 717; Reed v. First National Bank, 23 Colo. 380. The fact that judgment is not in such cases rendered for the full amount of the note, but for the amount of the indebtedness secured thereby, does not establish that the recovery is not upon the note. True it is that, generally speaking, a holder in due course of negotiable instruments is entitled to recover the full amount thereof. Gen. St. 1902, § 4227 [N. Y., § 96]. But it has long been an accepted principle limiting the operation of the general rule, but not repugnant to it, that one who takes such paper as collateral security for a debt will be limited in his recovery to the amount of that debt. Cromwell v. County of Sac, 96 U. S. 60; Duncan v. Gilbert, 29 N. J. Law, 521; Fisher v. Fisher, 98 Mass. 303; Youngs v. Lee, 12 N. Y. 551. The recovery, however, is none the less upon the paper. The plaintiff was justified in confining his allegations to such as disclosed his right prima facie to recover the amount of the note, and in leaving to the defendants to set up in their answer, as they did, the facts which served to limit that right. Vanliew v. Bank, 21 Ill. App. 126; Curtis v. Mohr, 18 Wis. 615; Duncan v. Gilbert, 29 N. J. Law, 521. The exceptions to the finding need not be considered." — C.

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