« PreviousContinue »
the maker, he was required (without previous notice) to prove the consideration. Heath v. Sansom &c. 2 Barn. & Adol. 291; 22 Eng. Com. Law Rep. 78.
At this stage of the decisions, Parke, J. observed that it was difficult to reconcile the recent practice with principle; for the simple fact of want of consideration between the acceptor and drawer, or maker and payee, affords no inference. that the holder received the bill or note mala fide, or without consideration. He admitted, that when the note or acceptance has been obtained by felony, by fraud, or by duress, it has been usual to require proof of valuable consideration on the part of the endorsee; and he did not dispute the propriety of that usage, as any of those facts raises some suspicion of the title of the holder. But he was by no means satisfied that the same rule can be applied to all cases where an acceptance or note has been given without consideration. However, he thought the circumstances in Heath v. Sansom were in themselves such as required the plaintiff to prove that value was given for the endorsement. S. C.
The subject has been further considered in England, in French v. Archer, 2 Dowl. Pr. R. 130; Stein v. Yglesias, Id. 252; Lowe v. Chifney, 5 Moore & Scott 95; Bassett v. Dodgen, 10 Bingh. 40, 25 Eng. Com. Law Rep. 21; Bramah &c. v. Roberts &c. 1 Bingh. N. C. 469, 27 Eng. Com. Law Rep. 460.
The settling this question having become much more important than the particular manner in which it should be settled, the court of exchequer consulted the court of king's bench, and Littledale and Patteson, J's. withdrew the opinions they expressed in the case of Heath v. Sansom. 1 M. & W. 431. The change by Patteson, J. of his opinion, was also expressed in a case before him.
After stating that in Heath v. Sansom there were circumstances raising a suspicion of fraud, he said: "If I added on that occasion, that even independently of these circumstances of suspicion, the holder would have been bound to shew the consideration which he gave for the bill, merely because there was an absence of consideration as between the previous parties to the bill, I am now decidedly of opinion that such doctrine was incorrect." Whittaker v. Edmunds, 1 Moo. & Rob. 366. What Lord Abinger said in Simpson v. Clarke, 2 C. M. & R. 342, was also explained by him in Mills v. Barber, 1 M. & W. 431.
Thus the other judges came to the opinion of Parke, B. that the mere fact of an endorsement being made for the accommodation of the maker, does not raise any inference that
the holder has not given value for the note; the inference, he observes, is the other way-that the holder has given valuebecause that is the very object for which the note is given. Percival &c. v. Frampton, 2 C. M. & R. 180, 5 Tyrwh. 579. When, therefore, the defendant shews the simple fact that the defendant received no consideration for his acceptance, the plaintiff is not called upon to prove that he gave value for the bill; the onus probandi lays on the defendant, and he ought to go further. Mills v. Barber, 1 M. & W. 431, 2. But if a suspicion of a fraud be raised from its being shewn that something has been done with the bill of an illegal nature, as that it has been clandestinely taken away, or has been lost or stolen, then the holder must shew that he gave value for it. Lord Abinger, S. C.; Bingham v. Stanley, 2 Adol. & El. N. S. 127, 42 Eng. Com. Law Rep. 602.
Where it has been proved that the note was obtained by fraud, or affected by illegality, that affords a presumption that the person who had been guilty of the illegality would dispose of it, and would place it in the hands of another person to sue upon it; such proof casts upon the plaintiff the burden of shewing that he was a bona fide endorsee for value. That, says Parke, has been considered in later times as settled. Bailey v. Bidwell, 13 M. & W. 76. Brown v. Philpot, 2 M. & Rob. 285, is not now considered an authority. Smith v. Braine, 16 Adol. & El. N. S. 253, 71 Eng. Com. Law Rep. 253.
Bailey v. Bidwell and Smith v. Braine are the decisions of eight judges that if a bill be once infected with fraud or illegality, the consideration becomes a subject matter to be proved by the plaintiff. The rule of these cases was recognized and acted on in Harvey v. Towers, 6 W. H. & G. 660, and Bury v. Alderman, 14 Com. Bench (5 J. Scott) 95, 78 Eng. Com. Law Rep. 95. Nor is it enough always to shew that the holder gave a valuable consideration. The bill should appear to have been taken bona fide, and as Bayley, J. said, it is parcel of the bona fide whether the plaintiff had asked all those questions which in the ordinary and proper manner in which trade is conducted, a party ought to ask. Gill v. Corbitt &c. 3 Barn. & Cress. 466, 10 Eng. Com. Law Rep. 157. In this case Lawson v. Weston, 4 Esp. 66, is disapproved.
In the United States decisions have been made in several of the states in accordance with the rules now established in England: In New York, in Morton v. Rogers, 14 Wend. 582; in Pennsylvania, in Bellzhoover v. Blackstock, 3 Watts 27; Knight v. Pugh, 4 W. & S. 448; Brown v. Street, 6 W. & S. 221; Albricht v. Strempler, 7 Barr 476; in Virginia, in Vather v. Zane, 6 Grat. 265.
16. Condition of holder who is shewn not to be a bona fide endorsee for value.
A party takes a bill subject to the equities and disabilities attaching on it in the hands of the person from whom he took it, if he takes it without consideration, Wilson v. Holmes, 5 Mass. 543; or with full knowledge of all the facts, Herrick v. Carman, 11 Johns. 160.
Actual notice of fraud in obtaining a note, or of bad faith in putting it in circulation, being brought home to the knowledge of the endorsee at the time he took the note, this shews that he is not a bona fide holder, and gives the defendant the same ground of defence as he would have had against the endorser. Fisher v. Leland &c. 4 Cush. 456; Brown v. Taber, 5 Wend. 566.
If it appear that the note sued on was delivered to the plaintiffs, in violation of the agreement on which the defendant endorsed it, the plaintiffs are not entitled to recover unless they received it bona fide and upon a valuable consideration. Both are necessary. It must have been received in good faith, without notice of the arrangement on which the endorsement had been made, and the transfer must have been upon what the law regards as a valuable consideration. Small &c. v. Smith, 1 Denio 586.
A plaintiff took a bill, with notice that it was drawn by if not upon one of those institutions which came into existence under the New York general banking act of 1838. Sess. Acts, p. 245. There was enough on the face of the bill to put him on enquiry. If he took the bill in good faith, it was considered at least necessary to shew the fact. As it was, the plaintiff could not escape the character of a mala fide holder of paper issued contrary to public policy. Safford v. Wyckoff,
1 Hill 11.
17. Right of one who is a bona fide endorsee for value.
By the law-merchant, every person having possession of a bill has (notwithstanding any fraud on his part, either in acquiring or transferring it) full authority to transfer such bill, but with this limitation, that to make such transfer valid, there must be a delivery, either by him or some subsequent holder of the bill, to some one who receives such bill bona fide and for value, and who is either himself the holder of it or a person through whom the holder claims. Peacock v. Rhodes, Dougl. 632. Anything, therefore, which shews that this restriction applies, shews that the party making the transfer
had no authority, and that the transfer is not valid.
B. in Marston v. Allen, 8 M. & W. 503, 4; Barber v. Richards, 6 W. H. & G. 62, 1 Eng. Law & Eq. 529.
A promissory note, like a bill of exchange, is a contract of a peculiar nature; a party who has himself no good title may transfer a good title to another. Masters v. Ibberson, 8 Man. Gr. & Scott 111, 65 Eng. Com. Law Rep. 111.
If the holder of negotiable paper has obtained it for value in the course of business, and with perfect fairness, then he cannot be affected by fraud or collusion between the drawer and endorser of which he had no notice. Ridgway v. Farmers Bank, 12 S. & R. 266.
An endorsee for value recovered, notwithstanding the fraud on the maker, in Thurston v. McKown, 6 Mass. 428, and notwithstanding the fraud on the maker and first endorser in Robertson &c. v. Williams &c. 5 Munf. 381. In this case the note was originally signed in blank, and endorsed in blank by the first endorser, and was sent to the second endorser to be filled up for a given sum, and discounted at bank for the accommodation of the maker. The second endorser having failed to obtain the desired accommodation, filled up the note with a larger amount than was intended, then obtained a third endorser upon it and got a broker to discount the note for his own use. The note was protested as to the drawer, and two first endorsers and was retired from bank by the third endorser. He had endorsed it without consideration, paid the full amount of the note when he retired it from bank, and had no knowledge of the fraud of the second endorser until after it was so retired. It was held, that he might recover against the drawer and previous endorsers.
If a party make or endorse a note, for the purpose of its being used in a particular way, he takes the risk of its being used in a different way, and cannot refuse to pay it to any bona fide holder into whose hands it may come. Byles on Bills, 2d Am. edi. 143 (113); Sweetser v. French &c. 2 Cush. 313; Stoddard &c. v. Kimball, 6 Id. 470.
When negotiable paper is endorsed before it is payable, with intent to make it the absolute property of the endorsee, and the endorsee is a bona fide holder for full and valuable consideration, he will not be affected by any equity of the acceptor or maker against the other parties of which he, the endorsee, was without notice at the time of becoming such holder. McNiel &c. v. Baird, 6 Munf. 316; Lomax v. Picot, 2 Rand. 247. It matters not that the endorsee purchased with notice of the consideration for which the note was given, and that, after the purchase, the consideration failed. S. C. He may
have known, at the time he took the bill, that it was given as part of the price for a mill, and that the mill had been defectively constructed; yet if he knew that the defendant, on the promise of the builders to make the necessary repairs, had agreed to accept the bill unconditionally, and had accepted it accordingly, he had a right to conclude that the defendant looked to this undertaking for indemnity and not to any conditional liability upon the acceptance. Arthurs &c. v. Hart, 17 How. 16.
If the promiser makes a payment which is not endorsed on the note, and the note is afterwards transferred to an endorsee for value without notice, the payment will not avail the promiser against the endorsee unless the note appear to have been transferred after it became due. Wilbour v. Turner, 5 Pick. 526; Pinkerton v. Bailey, 8 Wend. 600.
Still less can the endorsee be affected by a payment made to the endorser after the endorsement. Even though there were no consideration for the endorsement, yet if it was made before the paper became due, the endorsee may, notwithstanding payment afterwards to the endorser, sue the acceptor in like manner as if that payment had not been made. Milnes
v. Dawson, 5 W. H. & G. 948, 3 Eng. Law & Eq. 530.
18. Whether if negotiable paper be received by a person to pay or secure a pre-existing debt, he may nevertheless be regarded a holder for value.
It has been the doctrine in New York, that where the holder of a negotiable note received it for an antecedent debt, either as a nominal payment or as a security for payment, without giving up any security for such debt which he previously had, or paying any money or giving any new consideration, he is not a holder of the note for a valuable consideration so as to give him any equitable right to detain it from its lawful owner. Bay v. Coddington, 5 Johns. C. R. 54; Coddington v. Bay, 20 Johns. 637. The cases of Wardell v. Howell, 9 Wend. 170, Rosa v. Brotherson, 10 Id. 85, Ontario Bank v. Worthington, 12 Id. 593, Payne v. Cutler, 13 Id. 605, and Francia v. Joseph, 3 Edw. Ch. Rep. 182, follow the decision in Coddington v. Bay This strong column of decisions, Mr. Justice Story thought, was greatly shaken, if not entirely overthrown, by the cases of the Bank of Salina v. Babcock, 21 Wend. 499, and Bank of Sandusky v. Scoville, 24 Id. 115. But the judges of New York take a different view of these cases. On a re-examination of the doctrine of Coddington v. Bay, they have again affirmed that doctrine. Stalker v. McDonald &c. 6 Hill 93.