lien, a holder for value to the extent of the balance due from such customer. So, any person to whom negotiable securities are pledged as collateral would be a holder for value to the extent of the amount due to him. Wilkins v. Usher, 123 Ky. 696; Fifth Nat. Bank v. McCrory, 177 S. W. Rep. (Mo. App.) 1058. But if such securities should be sold to pay such balance or debt, the purchaser, if a holder in due course within section 52, though he should pay less than their face value for them, could enforce them for the full amount thereof. See section 57.

Right to sue. Under sections 27 and 51 a person who holds a note or bill as collateral security may sue thereon. Mersick v. Alderman, 77 Conn. 634; American Nat. Bank v. Hill, 85 S. E. Rep. (N. C.) 209.

Amount of recovery.-Ordinarily the pledgee is entitled to recover the full amount due on the instrument, with liability to account for the surplus to the pledgor. Camden Nat. Bank v. FriesBreslin Co., 214 Pa. St. 395. But if the pledgor could not recover upon the instrument, then the extent of the recovery will be limited to the amount of the debt due to the pledgee. Benton v. Likyta, 84 Neb. 808; Elk Valley Coal Co. v. Third Nat. Bank, 157 Ky. 617. See also Stoddard v. Kimball, 6 Cush. 469; Fisher v. Fisher, 98 Mass. 303; Chicopee Bank v. Chapin, 8 Metc. 40. The principle upon which the rule is founded is that, in such case, the pledgee would hold the surplus for the pledgor, and as the paper in the hands of the pledgor is void, all that ought to be recovered by the pledgee is the amount due him. Burner v. New Universal Fertilizer Co., 218 Mass. 300.

Where principal debt not due.-The fact that the principal obligation was not due at the time of bringing the suit is no defense; for the pledgee has the right to enforce the collection of a collateral note, even though the principal debt is not yet due. Elk Valley Coal Co. v. Third Nat. Bank, 157 Ky. 617.

§ 28. Failure of consideration-partial failure.Absence or failure of consideration is matter of defense as against any person not a holder in due course; and partial failure of consideration is a defense pro tanto, whether the failure is an ascertained and liquidated amount or otherwise.

Where plaintiff not holder in due course.-As against any person not a holder in due course, while the paper itself is prima facie evidence of the consideration, the question of consideration is always open; and it is competent for the defendant to show by parol that there was no sufficient consideration, or that the consideration has failed. Hermann v. Combs, 119 Md. 41; Tatum v. Commercial Bank, 185 Ala. 249; Batterman v. Dutcher, 95 App. Div. (N. Y.) 213; Ferguson v. Netter, 141 Id. 274; Cowee v. Cornell, 75 N. Y. 91, 98; Anthony v. Valentine, 130 Mass. 119; Ingersoll v. Martin, 58 Md. 67; Corlies v. Howe, 11 Gray, 125; Brenneman v. Furniss, 90 Pa. St. 186. But under the express terms of the statute failure of consideration is not a defense as against a holder in due course. Franz v. Schiro, 136 La. 842; Interstate Finance Co. v. Schroder, 74 W. Va. 67.

Burden of proof.-Under the statute, the burden of proving failure of consideration is on the party alleging it. Piner v. Brittain, 165 N. C. 401; Bank of Gresham v. Walch, 157 Pac. Rep. (Ore.) 534; Bringman v. Von Glahn, 71 App. Div. (N. Y.) 537; Carter v. Butler, 264 Mo. 306, 330. And this was the rule prior to the adoption of the statute. Jennison v. Stafford, 1 Cush. 168. Total failure of consideration does not impose upon an innocent holder the burden of proving that he gave value for the paper. Wilson v. Lazier, 11 Gratt. 477; Albrecht v. Atrimpler, 7 Pa. St. 476.

Negotiability. The failure of consideration does not affect the negotiability of the instrument. Dingman v. Amsink, 77 Pa. St.

114.

Renewal. If at the maturity of a negotiable promissory note which was without consideration, the maker makes a partial payment thereon and gives a new note for the balance, the new note is without consideration,) and no action can be maintained thereon by the payee against the maker. Seager v. Drayton, 218 Mass. 571.

Estoppel. The maker of a note who induces another to purchase it from the payee, assuring him that it is valid and will be paid, cannot set up the illegality of the consideration against the assignee. Holzbog v. Bakrow, 156 Ky. 161.

Where instrument is past due.-The mere fact that an accommodation note was transferred by the party accommodated after

due to a holder for value, does not permit the maker to defeat recovery upon the ground that the note was for accommodation and without consideration moving to him. Marling v. Jones, 138 Wis. 82, 90.

Exchange of notes.-Upon an exchange of promissory notes, each note is a valid consideration for the other, and is fully available in the hands of the holder; and the fact that one of the notes is not paid at maturity does not sustain a defense of failure of consideration in an action upon the other. Rice v. Grange, 131 N. Y. 149; Woman v. Frost, 52 N. Y. 422.

Partial failure of consideration.-See Black v. Rigway, 131 Mass. 80; Cline v. Miller, 8 Md. 274; Davis v. Wait, 12 Oregon, 425.

Unliquidated claims.-The rule, both in this country and in England, has been that whenever the defendant is entitled to go into the question of consideration he may set up the partial, as well as the total, want of consideration. Daniel on Negotiable Instruments, 210. But it has been held in some cases that the part alleged to have failed must be distinct and definite, for only a total failure or the failure or a specific and ascertained part can be availed of by way of defense; and in the case of an unliquidated claim the party must resort to his cross action. Pulsifer v. Hotchkiss, 12 Conn. 234; Drew v. Towle, 7 Fost. 412; Moggridge v. Jones, 14 East. 485; Trickey v. Larne, 6 M. & W. 278. In other cases it is held that the defendant may recoup his damages though they be unliquidated. Davis v. Wait, 12 Oregon, 425; Wyckhoff v. Runyon, 33 N. J. Law, 107. As to what is necessary to constitute one a holder in due course, see sections 53-57.

By what law governed.-The right to interpose the defense of want of consideration is governed by the lex loci. Herdic v. Roessler, 109 N. Y. 127, 133.

§ 29. Accommodation party - definition - liability. -An accommodation party is one who has signed the instrument as maker, drawer, acceptor or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, not

withstanding such holder at the time of taking the instrument knew him to be only an accommodation party.

Variant reading.-In Illinois the words without receiving value therefor, and," after the word " indorser" are omitted, and the following is added at the end of the section: "And in case a transfer after maturity was intended by the accommodating party notwithstanding such holder acquired title after maturity."

Meaning of terms.-The words "without receiving value therefor" in section fifty-five refer to the instrument itself, and not to the loan of the name by way of accommodation. Morris County Brick Co. v. Austin, 79 N. J. Law, 273.

Basis of the rule.-An accommodation note, in the strict sense, is a loan of the maker's credit, without instructions as to the manner of its use. Lenheim v. Wilmarding, 55 Pa. St. 73; Bankers' Iowa State Bank v. Mason Hand Lathe Co., 121 Iowa, 570, 572. He cannot set up as a defense that it was given without consideration; for this would defeat the very purpose for which it was made. Carpenter v. National Bank of the Republic, 106 Pa. St. 170, 172. In respect to third persons, the law considers him in the character he has assumed, and will not permit him to allege that the paper to which he gave his name was an imposition, nor to gainsay its reality by proof that it was a fiction. It shall be taken pro veritate that he was the maker, for de veritate that was the very thing he was intended to be. Bank of Montgomery County v. Walker, 9 S. & R. 229; Stephen v. Monongahela National Bank, 88 Pa. St. 157, 162-3. And this is the rule though the note be pledged merely as collateral security for the debt of the payee. Lord v. Ocean Bank, 20 Pa. St. 384.

Right to retract.-An accommodation indorser has the right to retract his indorsement at any time before the paper is negotiated. His consent to be indorser is necessary to make him such. He cannot be compelled to indorse whether he will or no; and as the instrument is a mere blank piece of paper until it passes into other hands for valuable consideration, it follows that he has the same right to retract the indorsement already made as he had to refuse his indorsement in the first instance; that is, his indorsement and his continuing to be so are alike voluntary until rights arise by the

negotiation to third parties. Berkely v. Tinsley, 88 Vt. 1001, 1004. And the purchaser of an accommodation note, after its maturity, gets no better nor greater right to enforce it against the maker or indorser than if it were ordinary negotiable paper given for value. Cottrell v. Watkins, 89 Va. 801.

Exchange of notes.-A mutual exchange of notes will amount to a sufficient consideration, so that the notes will not be regarded as accommodation paper. Williams v. Banks, 11 Md. 198; Rice v. Grange, 131 N. Y. 149; Woman v. Frost, 52 N. Y. 422.

Married woman as accommodation party.-The statute does not change the law of New Jersey so as to validate the contract of a married woman obligating her as surety for her husband or to pay the debt of another person. People's Nat. Bank v. Schepflin, 73 N. J. Law, 29, 38. In Massachusetts, on the other hand, since the Negotiable Instruments Act, as well as before, if a married woman indorses for accommodation the note of a partnership of which her husband is a member payable to him and indorsed also by him, she is liable on her contract of indorsement to a bank to which her husband acting for the partnership negotiates the note. Middleborough National Bank v. Cole, 191 Mass. 168.

Corporations as accommodation parties.-The provision of the statute does not apply to corporations, which, as a general rule, are without power to bind themselves as accommodation parties. A national bank has no such power, National Bank of Commerce v. Atkinson, 55 Fed. Rep. 465, 27 U. S. App. 88; nor has a state bank, The Bank of Genesee v. The Patchin Bank, 13 N. Y. 309; Farmers' & Mechanics' Bank v. Butchers' & Drovers' Bank, 16 N. Y. 125, 128; Morford v. The Farmers' Bank of Saratoga County, 26 Barb. 568; nor a manufacturing corporation, Jacobus v. Jamestown Mantel Co., 211 N. Y. 154; The Central Bank v. The Empire Stone Dressing Co., 26 Barb. 23; The Bridgeport City Bank v. The Empire Stone Dressing Co., 30 Barb. 421; The Farmers' & Mechanics' Bank v. The Empire Stone Dressing Co., 4 Bosw. 275; Wahlig v. The Standard Pump Manufacturing Co., 25 N. Y. St. Rep. 864; Filon v. The Miller Brewing Co., 38 N. Y. St. Rep. 602; National Bank of Newport v. Snyder Manufacturing Co., 117 App. Div. (N. Y.) 371; Monument National Bank v. Globe Works, 101 Mass. 57; nor a railroad company, Davis v. Old Colony Railroad Company, 131 Mass. 258; J. G. Brill Co. v. Norton & Taunton St.