frequently beyond the knowledge or reach of the defendant. These arguments upon either side apply with equal force, whatever may be the fundamental defense; but unfortunately the courts have drawn distinctions between defenses. The numerous decisions disclose a general tendency to cast the burden of bona fides upon the plaintiff, where illegality of consideration or fraud is alleged, and in other cases to cast the burden of showing notice or want of consideration upon the defendant. But even the test suggested by this general tendency of authorities is not trustworthy, for the classification thus resorted to has not been strictly recognized, and possibly it has not been absolutely observed, by the courts of any state. While this confusion of authorities is to be regretted, the distinctions referred to, whether well or ill founded, have been recognized everywhere, and our own decisions probably approach the general classification referred to as nearly as those of any state. Thus, it has been held that, where usury is established, the burden is upon the plaintiff to show bona fides. Wortendyke v. Meehan, 9 Neb. 221; Olmsted v. Security Co., 11 Neb. 487; Darst v. Backus, 18 Neb. 231; Sedgwick v. Dixon, 18 Neb. 545; Cheney v. Janssen, 20 Neb. 128; Knox v. Williams, 24 Neb. 630; Bank v. Davis, 25 Neb. 376; Blackwell v. Wright, 27 Neb. 269; Richardson v. Stone, 28 Neb. 137; Bank v. Miltonberger, 33 Neb. 847; Colby v. Parker, 34 Neb. 510. So, also, where the evidence established the theft of a note payable to bearer. Hooper v. Browning, 19 Neb. 420. So, too, where fraud in the inception of the note is proved. Haggland v. Stuart, 29 Neb. 69. On the other hand, where the defense was in the nature of failure of consideration, and the plaintiff, as a part of his case in chief, had introduced evidence tending to show a bona fide purchase, it was held that no testimony in support of the fundamental defense was proper unless the defendant introduced evidence tending to show that the plaintiff was not a bona fide purchaser. Organ Co. v. Boyle, 10 Neb. 409. In Cannon v. Canfield, 11 Neb. 506, the inference is that, where want of consideration is shown, the burden is also upon the maker to prove notice to the indorsee. The same inference is to be drawn, in case of failure of consideration, from Bank v. Ryman, 12 Neb. 541. But a contrary inference might be drawn from a closing paragraph of the opinion in Bank v. Edholm, 25 Neb. 741. In Coakley v. Christie, 20 Neb. 509, it was distinctly decided that, in the case of a note given in payment of a piano sold with a warranty, evidence of the fundamental defense was properly excluded, for the reason that there was no tender made of proof that the plaintiff was not an innocent purchaser.

It would seem, from this review of the authorities, that the defendant, where fraud is pleaded, makes out his case simply by proof of the fraud, and that the plaintiff must affirmatively establish bona fides; but that, where the defense is failure of consideration, the defendant

must establish both failure of consideration and mala fides on the part of the plaintiff, or the fact that he was not a purchaser for value.® Now, in the case before us, the defendant pleaded both fraud and failure of consideration. When he opened his case, the situation was this: Should he succeed in showing that the instrument of assignment, brought to him by McCurday, purporting to be signed by both McCurday and wife, did not in fact bear Mrs. McCurday's genuine signature, and that the note was procured through the representation that such signature was genuine, then fraud would be established, and it would lie with the plaintiff to show his bona fides in the purchase of the note. If, on the contrary, the proof of this defense should fail, but the defendant should succeed in showing that he failed to obtain the property in question because Mrs. McCurday refused or failed thereafter to acknowledge the instrument, then there would be merely a failure of consideration, and the defendant, to prevail, would be required to attack plaintiff's bona fides. The burden of proof, therefore, depended upon the evidence introduced upon these issues. The order of proof rests within the discretion of the trial court. Consaul v. Sheldon, 35 Neb. 247. The court, therefore, did not err in allowing evidence of the fundamental defense to be introduced before evidence was offered as to the good faith of the purchaser. The court instructed the jury that the burden of proof was upon the defendant upon this issue, so there was nothing in this procedure of which the plaintiff can complain."

III. Defenses to negotiable instruments.

$94

CLARK v. PEASE.

41 NEW HAMPSHIRE, 414. - 1860.

ACTION by indorsee against maker on a promissory note. Defenses: duress by imprisonment; illegality because given to compromise a crime. The defendant offered evidence to substantiate the defenses. The plaintiff excepted to this evidence, as no defense against the indorsee, without proof that he was not the bona fide holder of the note. But the court ruled that if the note was obtained by duress, it was void in the hands of an innocent indorsee, and thereupon the

This was also held to be the rule under the Negotiable Instruments Law in Cole Banking Co. v. Sinclair, 34 Utah, 454, where the court, after quoting sections numbered in New York 91, 98, 94, and 96, says that "the defense pleaded was not illegal, but merely partial failure of consideration. Failure or want of consideration does not constitute a defective title within the meaning of the foregoing provisions." P. 456.- C.

7 The above case was approved in Norwood v. Bank of Commerce of Lincoln, 77 Neb. 205. — C.

plaintiff, admitting for the purposes of this trial that the defendant's witnesses would testify to the facts stated, a verdict for the defendant was taken by consent, subject to the opinion of the court; and the questions thus raised were reserved, and assigned to the determination of the whole court.

SARGENT, J. That the case presented is clearly one of duress, there can be no question. The abuse of any process, either civil or criminal, to compel a party, by imprisonment, to do any act against his will except to pay the debt for which he is arrested, is entirely illegal, and the act may be avoided on the ground of duress. (Richardson v. Duncan, 3 N. H. 508; Severance v. Kimball, 8 N. H. 386; Shaw v. Spooner, 9 N. H. 197; Burnham v. Spooner, 10 N. H. 523; Beck v. Blanchard, 22 N. H. 303.) Here the arrest was without any warrant or lawful authority. Such duress is a perfect defense, upon all the authorities, to an action between the original parties.

The note in this case was not only void as between the original parties, on the ground of duress, but was given to compromise a charge of crime, and was wholly illegal upon that ground. (Plumer v. Smith, 5 N. H. 553.)

But the principal question raised here by the ruling of the court is, whether such a note is absolutely void in the hands of any holder; and if not, then another question arises upon the exception which was taken by the plaintiff, which is this: After an indorsee has made out a prima facie case by proving the indorsement, etc., and the defendant has shown that the note was obtained from him by duress, upon whom rests the burden of proof? Must the defendant prove that the plaintiff was not the bona fide holder, and that he did not pay a valid consideration for it, as the plaintiff claimed? or, the duress being proved, does that throw the burden of proof upon the plaintiff, to prove how he came by the note, and the consideration he paid, etc., as the defendant claims? We will examine these questions in the order in which we have stated them.

I. Is this note absolutely void in the hands of any holder, however innocent, who has paid a valid consideration for it before it was due? [The court here discusses the grounds for avoiding contracts generally.]

Now bills and notes stand upon the same foundation as all other contracts do, in all the above respects, so long as they remain in the hands of the original payce. But bills and notes have another attribute, which other contracts ordinarily do not possess - that is, negotiability. Where a bill or note has been negotiated, and passed into the hands of a bona fide holder before it is due, and for a valuable consideration, in such case the holder acquires rights which did not belong to the pavee. He stands in a different relation to the promisor. These aditional rights and privileges have been conferred upon such holder by law, for good and sufficient reasons, too well known and understood

to need to be stated, but which are incident to, and dependent upon, the attribute of negotiability, which these instruments possess.

And it may be laid down as the general rule, as the general principle applying to this class of cases, that such a note, thus negotiated and in the hands of such a holder, is not liable to any defense which the maker had as against the original payee. To this general rule there are some exceptions, among which are

1. When a statute not only prohibits the making of a contract, but provides that the same shall be void to all intents and purposes; or where the law provides that any contract made or securities given upon any illegal consideration shall be absolutely void, then the note which embodies such contract, or is based upon such consideration, is held void everywhere and in the hands of every holder. In England, and in most of the United States, there are or have been laws against usury, which not only, by a general prohibition of usury, made that an illegal consideration for a note, but also provided that all bills or notes founded upon such a consideration should be absolutely void. Such, however, is not the law in this state on that subject, and it is believed that we have no statutes with similar provisions. Hence, here usury may be a good defense to a note as against the original party, but not as against an innocent indorsee, for value, etc. 2. When the note is a forgery, it is void everywhere.

3. When the maker belongs to a class of persons who are ordinarily, and as a general rule, on grounds of public policy, held incompetent to contract at all, such as infants, married women, alien enemies, and insane persons, including spendthrifts and others under guardianship, who have been by some statute declared incompetent to contract. 4. Notes signed by agents without authority.

In none of these cases (except the first, which, as we have seen, does not apply in this State), is a note valid in the hands of anyone; and the party who discounts such paper is bound to inquire, at his peril, whether the note offered to him is signed by a party capable and competent in law to bind himself, or by an agent duly authorized to bind his principal. Besides this, he is bound to inquire whether the party from whom he receives it is competent to make such transfer in his own right, or is authorized to do it for his principal, for whom he assumes to act.

If there is a failure in either of these points of capacity or authority, it will not avail the party that he is a bona fide holder, for value, without notice. He must look to his indorser if he has one, and if he has not he must suffer loss.

8 These exceptions constitute what are known as real or absolute defenses. See Bigelow, Bills, Notes and Checks (Students' ed.), pp. 174-205. — H.

9 See Walker v. Winn, 142 Ala. 560, reported in 4 A. & E. Ann. Cas. 537, with note entitled “Validity and effect of negotiable paper signed or indorsed by lunatic."- C.

5. Another case might be mentioned, which has been made an exception to the general rule above stated by express provisions of the statute, as where a note is attached by the trustee process. There, by operation of the statute, the maker of a note may have a perfect defense against an indorsee, for value, without notice, and before due. So notes discharged by operation of insolvent laws might afterwards be transferred, by possibility, so as to form another exception, where the indorsee, holding the note bona fide, etc., might be met with a perfect defense on the part of the maker. But these last cases throw no light upon the question we are considering.

These are the principal, perhaps all the exceptions to the general rule stated above, that no defense is available against an innocent indorsee, for value paid before due.' But where the contract was illegal, being prohibited by law, or the consideration was illegal, as usury, wagers, compounding a felony, restraint of trade or of marriage, etc., or where there was a want or failure of consideration, and even where the note has been paid, - all these defenses," and many more, cannot be made against the note in the hands of such a holder. And the question here raised is, whether, in case of duress, or fraud, where there is mala fides, but it is all on one side, and the other party to the note has been induced to sign it by force or by fraud, and is in every respect an innocent party, such defense shall avail him as against such a holder, for value, etc., who seeks to collect it.

And we think such a defense cannot avail the maker against such an indorsee of the note. The authorities favor this view. *

Suppose an individual, then, were about to purchase a note payable to bearer, before it was due, and pay a fair equivalent for it, with a view of collecting it of the maker, and where he is to have no indorser to rely upon, what would be his duty in order to proceed safely? First, he must assure himself of the genuineness of the signature, or, if it purported to be signed by an agent, he must

1 To these should be added the extinguishment of the instrument by cancellation or alteration. See Neg. Inst. L., §§ 204-206, post. The case of want of delivery, or want of delivery as and for a negotiable instrument, calls for special comment and may or may not be an absolute defense according as the maker is or is not estopped to set up the defense. See 1 Daniel on Neg. Inst., §§ 847-853. See post, pp. 387–399. — H.

2 These defenses are known as personal, conditional, or "equitable" defenses. See Bigelow, Bills, Notes and Checks (Students' ed.), pp. 172, 206. These defenses are fraud, duress, illegality, want or failure of consideration, release or payment, discharge of party primarily liable, etc. Whether a right of set-off existing at the time of the transfer is an 'equity" is in dispute. 2 Daniel on Neg. Inst., §§ 1435a-1437. In New York it is an equity in case of the transfer of an overdue note. N. Y. Code Civ. Proc., § 502.-H. [On this last point, see ante, pp. 321-322. — C.