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debt, could not be regarded as a bona fide holder for value in the usual course of business, even though he took it without notice of any defect in the title of the transferrer, or of any equities between the antecedent parties; but that erroneous rule of decision is abandoned and overruled. Bank of St. Albans v. Gilliland, 23 Wend. (N. Y.) 311; Small v. Smith, 1 Den. (N. Y.) 583, 586; Edwards, Bills and Notes (2d ed.), 322.

Reported cases also show that it was decided during that period in the courts of the same State that if a party in good faith took a negotiable security of a holder without due inquiry, or with knowledge of such facts and circumstances as would put a prudent man upon inquiry in making purchases of personal property, he would not acquire a good title to the instrument, if it appeared that equities existed between the antecedent parties, and that vigilant inquiry would have enabled the taker to have ascertained the true character of those equities; but the appellate tribunal of the State has exploded that legal heresy as applied to negotiable securities, and has in that respect adopted the true commercial rule as administered in the courts. of Westminster Hall. Pringle v. Phillips, 5 Sandf. (N. Y.) 157; Welch v. Sage, 47 N. Y. 143, 147.

Prior to the decision in the case of Gill v. Cubitt, the rule was that nothing short of proof of knowledge of the facts and circumstances constituting the equities between the antecedent parties would enable the maker to defend the suit of the holder; but the court in that case decided that the transferee could not recover if the circumstances under which the transfer took place were such as would naturally have excited the suspicion of a prudent and careful man. State court decisions in many cases followed that erroneous theory; but the case itself has been authoritatively overruled in the tribunal where it had its origin, and the old rule as re-established by the later adjudications has been in repeated instances adopted by this court and by the highest courts of the State where the present controversy arose. Goodman v. Harvey, 4 Ad. & E. 870; Goodman v. Simonds, 20 How. 343, 364; Seybel v. National Currency Bank, 54 N. Y. 288, 295; Dutchess Insurance Co. v. Hachfield, 73 id. 226. Much progress, it will be seen from the preceding observations, has been made within the last thirty years in securing

uniformity of decision in respect to mercantile controversies between the Federal and State courts, and the courts of this country and those of the parent country, from which most of our commercial rules and usages are derived. Howry v. Eppinger, 34 Mich. 29.

Concede all that, and still it is insisted by the defendant that the plaintiff took the note merely as a collateral security for a pre-existing debt, without any present consideration at the time of the transfer, and that a party who takes a negotiable security under such circumstances cannot be regarded as acquiring it in the usual course of business, and consequently that he takes it subject to prior equities. Many decisions of the courts of the State concur that if there is a present consideration at the time of the transfer, independent of the previous indebtedness, a party acquiring a negotiable bill of exchange or promissory note before maturity as a collateral security for a pre-existing debt, without knowledge of the facts which impeach the title as between the antecedent parties, thereby becomes a holder in the usual course of business, and that his title is complete, so that it will not be affected by any prior equities between other parties, at least to the extent of the debt for which it is so held. White v. Springfield Bank, 3 Sandf. (N. Y.) 222; New York Marbled Iron Works v. Smith, 4 Duer (N. Y.), 362.

When commercial paper is pledged by the apparent owner before it matures as collateral security for advances, the pledgee in good faith is entitled to hold it for the amount of such advances, though it turns out afterwards that the party making the pledge was a mere agent for the true owner, and that the transaction was a breach of duty to the principal. Belmont Branch Bank v. Hoge, 35 N. Y. 65; Murray v. Beckwith, 81 Ill. 43.

Where full value is paid by the pledgee, and the transfer is made before maturity, without notice of any prior equities between the antecedent parties, the title of the holder of the security is not subject to be defeated by proof that he might have obtained such notice by the exercise of active vigilance. Cash advances or the sale of goods or other property will constitute a good consideration for the transfer; nor is such a pay

ment or sale indispensable, as it is equally well settled that the actual discharge of a precedent debt, or the surrender of prior collaterals, or a binding agreement to give time for the payment of a debt then due, will have the same effect. Elting v. Vanderlyn, 4 Johns. (N. Y.) 237; Morton v. Burn, 7 Ad. & E. 19; Jennison v. Stafford, 1 Cush. (Mass.) 168; Baker v. Walker, 14 Mee. & W. 465; Walton v. Mascall, 13 id. 452; Wheeler v. Slocum, 16 Pick. (Mass.) 62; Kearslake v. Morgan, 5 T. R. 513.

Examples given by Mr. Justice Story show that the receiving a note as security for a debt, or forbearance to sue a present claim or debt, or an exchange of securities, or becoming a surety, or doing any otlfer act at the request or for the benefit of the maker or indorser, will constitute a sufficient consideration for a note as well as the payment of money, or the making of advances, or giving credit, or the discharge of a present debt, or the performance of work or labor at the request of the party. Story, Promissory Notes (7th ed.), sect. 186.

Differences of opinion, however, still exist where the transfer is made as a collateral security for a pre-existing debt, without any other consideration than what flows from the nature of the contract at the time the instrument is delivered, and such as may be inferred from the relation of debtor and creditor in respect to the pre-existing debt.

Further argument to show that where negotiable paper is received in payment and extinguishment of a pre-existing debt the holder is entitled to protection is quite unnecessary, as the authorities in support of the proposition, even in this country, are quite too numerous for citation. Townsley v. Gamrall, 2 Pet. 170, 182; Parsons, Bills and Notes, 221.

Nor is it necessary to add anything to prove that the title of the holder is good if he took the note outright for goods or other property sold and delivered to the transferrer of the note at the time the transfer was made. All this is admitted, or if not admitted is so fully established by authority as not to require any further argument in its support. Substantial uniformity of judicial opinion exists both in this country and in England to that extent, but there is still some diversity of decision in this country upon the question whether the same

conclusion will follow where the negotiable security is transferred a collateral security, without any other consideration than the delay of payment incident to the transaction and what flows from the relation of debtor and creditor in respect to the existing debt and the obligation which the transferee assumes by the reception of the negotiable instrument before maturity. Standard decisions of the State courts are referred to by the defendant where it is held that the title of the holder under such circumstances is not good. Bay v. Coddington, 5 Johns. (N. Y.) Ch. 54, 59; Coddington v. Bay, 20 Johns. (N. Y.) 637, 644; Stalker v. Mc Donald, 6 Hill (N. Y.) 93, 95.

Sixty years have elapsed since the commercial rule adopted and enforced by that series of decisions was first promulgated, and yet it does not and never has commanded the slightest countenance from any court sitting in Westminster Hall. Earnest differences of opinion existed in that country among judicial men in respect to the extent of the protection. which the commercial law afforded to a bona fide holder of a negotiable security against the equities between the antecedent parties, but there is no authentic evidence that any substantial diversity of opinion ever arose in the courts of that country touching the question under consideration.

Partners engaged in business being in want of available means, the senior member gave his note to a bank to enable the firm to overdraw their account, and the junior member gave his note to the maker of the first note for half the amount. In the course of subsequent transactions the payee of the last note indorsed it to his creditors as collateral security for a preexisting debt. Payment of the note being refused, the holders sued the maker, who made defence that the plaintiffs were not bona fide holders; but the court held otherwise, and rendered judgment in favor of the plaintiffs, separate opinions being given by all the justices of the court. Heywood v. Watson, 1 M. & P. 268; s. c. 4 Bing. 496.

Consideration was given for the note in the case of Percival V. Frampton (2 C., M. & R. 180), but the court unanimously held that, if the note had been transferred merely as a collateral security for a previous debt, the plaintiffs might properly be described as holders for a valuable consideration.

Holders of a negotiable security transferred before maturity as a collateral security for a pre-existing debt become parties to the instrument to such an extent that they assume the responsibility of making demand and giving the required notice to fix the liability of the indorser; and it is held that where a creditor received such a security from the debtor and failed to make seasonable demand of payment, that his laches as between himself and his debtor were equivalent to the payment of the collateral. Peacock v. Purcell, 14 C. B. N. s. 728; Taylor v. Williams, 11 Metc. (Mass.) 44.

Proof of fraud may defeat the right of the holder in such a case, but where there is no such proof the settled rule in England is that a party taking a negotiable instrument as a collateral security takes it for a sufficient consideration and is entitled to recover. Poirier v. Morris, 22 Law J. Rep. N. S. Q. B. 313; s. c. 2 El. & Bl. 89, 104.

Securities of the kind were deposited by the defendant with the plaintiffs as collaterals for a pre-existing debt, among which was the check in controversy, and it appeared that the defendants having failed to pay the debt the plaintiffs brought an action on the check, the defence being the want of consideration and that the plaintiffs were not holders for value; but the Court of Exchequer ruled otherwise, and rendered judgment in favor of the plaintiffs, from which the defendant appealed to the Exchequer Chamber. Both parties were fully heard in the appellate tribunal, and the court decided that the title of a creditor to a negotiable security transferred to him on account of a pre-existing debt, if received bona fide, without notice of any infirmity in the title of the debtor, is indefeasible, whether the instrument is payable at a future time or on demand. Currie v. Misa, Law Rep. 10 Ex. 153.

Questions of various kinds, it seems, were discussed in the subordinate court; but the statement of the justice who gave the opinion of the court in the appellate tribunal is, that the argument was addressed almost entirely to the question whether an existing debt formed of itself a sufficient consideration for a negotiable security payable on demand, so as to constitute the creditor to whom it was paid a holder for value; and the court, Justice Lush giving the opinion, decided that question in the

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