BANKRUPTCY-Continued.

out of escrow is not an act of bankruptcy; adoption of a resolution authorizing the treasurer to convert the assets into cash to be deposited for the creditors' benefit, if not executed, not an act of bankruptcy under the Act. Page 6a, No. 1392. Bankruptcy Act July 1, 1898, c. 541, § 60a, which provides that where the preference consists of a transfer, the period of four months shall not expire until four months after the record of the transfer, as required by law, extends the time within which a transfer may be attacked as a preference, and where a transfer is one which is required to be recorded, the four months' period does not begin to run until the conveyance is recorded, but where the transfer, when made, was based on a present consideration, delay in recording does not warrant the court in treating the conveyance as if made as security for an antecedent debt, and a transfer given as security for a present loan is not a voidable preference, though the transfer is not recorded until within four months of the adjudication in bankruptcy of the transferror.

Rev. St. Mo. 1899, § 925, provides that no instrument shall be valid except between the parties and such as have actual notice, until deposited for record. Bankr. Act. July 1, 1898, c. 541, §§ 67a, 67e, 70e, confer on trustees the right to avoid transfers, voidable as fraudulent conveyances, or which may be avoided by creditors under the State law for want of record. A grantor, a corporation, conveyed its land to a grantee, a corporation, which on the same day executed a deed of trust to secure the purchase money notes. The grantor borrowed money from a bank and pledged as collateral the notes and deed of trust. Neither of the deeds were then recorded, but the bank later returned the deed of trust to the president of the grantor with instructions to record it, which was not done for nearly five years, and until within four months of the adjudication of the bankruptcy of the grantor. Before the record of the deed the grantor incurred debts to persons who relied on its ownership of the property. Held, that the deed of trust was constructively fraudulent as to creditors extending credit to the bankrupt, and the lien of the bank must be treated as invalid as

against the trustee as a representative of the creditors. Page 65a, No. 1428.

In an action by a trustee to compel an accounting for a bankrupt's money wrongfully appropriated in fraud of its creditors, evidence held to sustain a finding that certain funds of the bankrupt were used to pay the debts of its president in fraud of creditors. Page 000a, No. 1422. A trustee in bankruptcy has no other or greater rights than the bankrupt had when he became a bankrupt; and when a third person had at that time a right as against the bankrupt to a credit, he is entitled to assert such right in a suit by the trustee against him for an accounting. Page 61a, No. 1426.

Where a trustee is in possession of real estate incumbered by a deed of trust, deposited as collateral security with a creditor of the bankrupt, and the creditor voluntarily appears before the referee and presents his claim for allowance as a secured claim by virtue of the deed of trust, the referee has jurisdiction to summarily determine the validity of the lien. Page 65a, No. 1428. Claimant directed bankrupts, who were brokers, through a branch office, to sell certain stocks, which the bankrupts did, delivering stock of their own and receiving payment therefor. On being advised of the sale, elaimant delivered her stock to the manager of the branch office, and received from him a check in payment therefor. There were no funds in the drawee bank to meet the check at the time it was drawn. The bankrupts' insolvency followed, and it was not paid. Held, that the claimant had the right to recover the proceeds of her stock from the bankrupts' trustee, if they had not been dissipated, and, if they had been, she had the right to rescind the delivery and reclaim her stock, subject, however, to the right of the trustee to retain it by paying her the amount for which it was sold, and that it was therefore practically immaterial whether or not the bankrupts had converted the proceeds. Page 55a, No. 1423.

BILLS AND NOTES:

The contract of indorsers for transfer
is that, if the note is presented for
payment at the time and place of
maturity, and payment demanded
and refused, and proper notice given
thereof, they will pay the note to
the holder.

Notice to indorsers of dishonor, when
sent by mail, may be placed in the
post office on the day after dishonor,
allowing a sufficient time after the
commencement of business hours on
that day for the preparation of no-
tice. Page 44a, No. 1419.
Under

the Negotiable Instruments
Law, which by section 130 makes
the presentment of a note necessary
to charge the indorsers, and by sec-
tion 134 requires the notes to be ex-
hibited to the person from whom
payment is demanded, a mere in-
formal talk asking payment of a
note, not accompanied with a pre-
sentment of it or intended as
formal presentment and demand, is
not sufficient to put the note in dis-
honor. No. 1443.

a

Under Negotiable Instruments Law, §
138, requiring that where there are
several persons primarily liable on
a note, and no place of payment is
specified, presentment shall be made
to all of them, an informal demand
on one of two joint makers is not
a basis for charging indorsers. No.
1443.

In an action on a note, where its pre-
sentment in a reasonable time is in
issue, evidence that it was the cus-
tom of banks to hold demand paper
with an indorser for years, if the
parties were good and the bank did
not require the fund, is admissible.
No. 1443.

Evidence in an action on a note as to
whether it had been presented with-
in a reasonable time, held sufficient
to sustain a verdict for plaintiff.

No. 1443.
An instrument which acknowledges an
indebtedness from the maker to a
person named, and which promises
to pay a specified sum to such per-

BILLS AND NOTES- Continued.

son, "and in the event of any
(maker's) death, I hereby authorize
and direct payment of the same out
of the funds of my estate," is a
promissory note payable on demand,
within Negotiable Instruments Law,
§§ 26, 29, declaring that an instru-
ment is payable on demand when no
time for payment is expressed, etc.;
the quoted clause being surplusage.
Page 105a, No. 1452.

If the payee of a note of a corporation
offered to renew it for a new note
signed by the corporation and by its
directors personally, and sent a note
so drawn to the corporation to be
executed and returned, and the di-
rectors so executed it that it bound
only the corporation and themselves
in their official capacity without
calling the payee's attention to the
changes therein, and the payee with-
out noticing such change surren-
dered the old note, such surrender
and acceptance of the renewal note
would not bind the payee, being un-
der a mistake of fact as to the
identity of the instrument. Page
124a, No. 1463.

Under L. O. L. (Oreg.), § 5834, which
provides that an instrument to be
negotiable must contain an uncon-
ditional promise or order to pay a
sum certain in money, a note which
upon its face states that it is given
as a part of the purchase price of
real property, and is secured by
mortgage of an even date herewith,
and is subject to all the terms and
conditions of said mortgage," the
mortgage referred to giving the
maker of the note an option to pay
it, or to have it canceled within one
year, is not a negotiable instrument.
Under the express provision of L. O.
L. (Oreg.), § 5885, defining a
"holder in due course," one who
does not take a note in good faith,
or for value, is not such a holder,
and, as provided by L. O. L. (Oreg.),
§ 5891, a note in the hands of such
holder is subject to the same de-
fenses as if it were non-negotiable.
Page 114a, No. 1458.

That one of the makers of a note drew
ink lines through the signatures of
three other makers without the con-
sent of the payee did not constitute
a cancellation of the note as to
them. Page 149a, No. 1477.

BILLS AND NOTES- Continued. Where the holder of a negotiable note acquired the same after maturity, from one who became a bona fide holder for value and without notice before maturity, he is protected by the strength of his transferror's title.

One who takes negotiable papers be

fore maturity in payment of or as security for an antecedent debt, without notice of any defect, receives it in due course of business and is a bona fide holder.

One who purchased a negotiable note after maturity and from the transferee of a partnership which acquired the note in good faith and for value before maturity was protected as a bona fide purchaser, though he was a member of the partnership. Page 148a, No. 1476.

A petition filed November, 1910, alleging that defendant guaranteed payment of a series of vendor's lien notes held by plaintiff, does not show that the action was prematurely brought before the debt had matured, but contains allegations sufficient to indicate that such note was one of a series payable monthly thereafter, and that payment of the annual interest on all of the notes had been refused. Page 165a, No.

1489.

Where a maker sued on a note by the

payee bank's receiver claimed that the note was given for the bank's accommodation, and the receiver claimed that it was given for the benefit of another corporation in which the maker was interested, it was error to refuse to permit him to show the amount of the company's stock for comparison with his holdings. Page 150a, No. 1478.

Where a note executed in Missouri

was payable in Michigan, it was governed by the law of Michigan as to the obligations and duties of the maker. Page 155a, No. 1482.

BILLS AND NOTES-BONA FIDE PURCHASERS:

Though the deposit by the business manager of a corporation of a check to the corporation indorsed by the manager to the credit of his private account in a bank is a transaction which would put the bank on inquiry, yet, where inquiry would have shown a power of attorney to him authorizing the opening of a bank account for the use of the corporation, the deposit of checks, etc., the withdrawal of the proceeds, the pledging of the corporation's credit, and for such purposes the signing, indorsing, accepting, making, execution, and delivery of checks, notes, drafts, and bills of exchange, and would also have shown a resolution of the corporate directors, empowering him to use the checks of the company until he had reimbursed himself for moneys he had personally advanced for the corporation in an amount not exceeding $2,000, the bank would be justified in crediting the manager personally with the proceeds of the check, and the corporation cannot maintain an action to recover such proceeds. Page 96a, No. 1448.

Where a note was made on a printed

blank giving the name of a bank as the place of payment, which bank to the knowledge of most, if not all, of the makers, had previously changed from a State to a national bank, changing its name, but continuing in business in the same building, the

fact that the name of such bank
was correspondently changed in the
note after its execution, without the
knowledge of the makers, did not
constitute a material alteration,
which invalidated the note in the
hands of a bona fide holder.

That a note was blank as to the name
of the payee when signed, and was
filled in by the person to whom it
was delivered, does not impeach its
validity in the hands of a bona fide
purchaser without notice. Page 98a,
No. 1449.

In an action on a promissory note by
one claiming to be an innocent pur-
chaser, the production of the note
by the plaintiff, properly indorsed
by the payee, makes out a prima
facie case that plaintiff had become
its holder for value, before matur-
ity, in the usual course of business,
and without notice of anything to
impeach the title.

Under the rule of the federal courts,
a transfer of a negotiable note by
indorsement before maturity as se-
curity for an antecedent debt is a
transfer for value in due course of
business.

A bona fide holder of a negotiable in-
strument, who, for a valuable con-
sideration, without notice of facts
which impeach its validity between
antecedent parties, took it by in-
dorsement before maturity, holds
the title unaffected by these facts,
and may recover thereon, although
as between the antecedent parties
the transaction may be without
legal validity. Page 98a, No. 1449.
Where a note given for an illegal
consideration was purchased by
plaintiff before maturity, it was en-
forceable on proof that plaintiff was
an innocent holder.

Persons dealing in commercial paper

are bound to use reasonable dili-
gence to ascertain the nature of the
transaction in which the notes were
given, if the circumstances under
which the paper is offered for sale
are calculated to excite suspicion of
a reasonably cautious person.
Where the circumstances surrounding
the transfer of a note show that the
purchaser has refrained from mak-
ing inquiries lest he become ac-
quainted with the transaction out
of which the note originated, which
would have shown illegality of con-
sideration, the purchaser is not a
bona fide holder.

BONA FIDE HOLDERS:
One receiving the check of a corpora-
tion in payment of a personal debt
of an officer is prima facie charged
with notice that the officer is not
authorized to use the corporate
funds for such purpose, and hence
is bound at his peril to inquire as
to the truth of the situation.
Evidence held to sustain a finding that
defendant acted in bad faith in ac-
cepting a check from the president
of a corporation, drawn on the cor-
porate funds for his personal debt,
in that he knew facts suggesting the
defect in the officer's title to the
funds. Page 55a, No. 1422.

Payee's signature on the face of a note under the signature of the maker, held to be a good indorsement.

The holder of a negotiable note is presumed to be such, bona fide and for value, and unless defendant negatives one or both facts, his defense fails; proof of fraud in the procurement of the note negatives such presumption. Page 15a, No. 1398. Indorsement, sale and delivery of a note to another authorizes the latter to sue thereon in his own name. Page 13a, No. 1397. The

indorsement" of a bill or note is not merely a transfer, but it is a new contract, by which the indorser engages that the bill or note will be accepted or paid as the case may be; this engagement being conditional upon presentment of demand and notice, and that the bill is a genuine and valid instrument. As between the indorser and indorsee,

it is immaterial whether the indorsement is made before or after maturity, save that, when the indorsement is made before maturity, the time of payment is fixed by the terms of the instrument, and, when made after maturity, payment must be demanded within a reasonable time, and notice of a refusal be given to the indorser in order to charge him.

Where an indorsement is made after maturity, the question of what is a reasonable time for a demand for payment may, when the facts are ascertained, be determined by the court as a matter of law; and where they are few and simple it may likewise be determined by the court.

Where the payee of notes, who, for the purpose of using them as col

A provision in a note that, in case of non-payment at maturity, the holder may extend it, does not make it nonnegotiable. Page 000a, No. 1389. An instrument that the maker borrowed and received a sum "payable April 1st, 1904, with interest," held to be a promissory note, but nonnegotiable. Page 11a, No. 1395. A letter promising to pay the general agent of an insurance company the first annual premiums, being conditional on the agent performing his part of the contract, held not to be negotiable. Page 11a, No. 1396.

A promissory note, otherwise negotiable, due six months after date, with interest from maturity until paid at the rate of six per cent. per annum, contained a recital that certain collateral security, was attached thereto, the market value of which was stated to be $6,250, and contained in addition the following stipulation: "If, in the judgment of the holder of this note, said collateral depreciates in value, the undersigned agrees to deliver, when demanded, additional security to the satisfaction of the holder; otherwise this note shall mature at once." Held, that the instrument is nonnegotiable (1) because it contains a promise to do an act in addition to the payment of money; (2) because the date when it is to become due is uncertain. Page 50a, No. 1420.

Unless an instrument is negotiable, action cannot be maintained on an indorsement for transfer.

Where a note was made in California prior to Act April 4, 1902, and was transferred by indorsement in New Jersey after said enactment, its negotiability was not governed by said act, but by the pre-existing law, as section 195 of the act expressly declares that it does not apply to ne