Gross negligence may be evidence of bad faith, but is not conclusive of it, and bad faith is now considered necessary to defeat a bona fide holder for value. (Goodman v. Harvey, 4 A. & E. at 876; Johnson v. Way, 27 O. St. 374.)*

When a bill is overdue, or has an irregularity appearing on its face the holder of it will be charged with notice. These are considered equivalent to notice of all defects relating to it. (McSherry v. Brooks, 46 Md.

118.)

A holder who takes a bill or note from a bona fide holder for value, without notice is subjected to all the rights of such former holder, though he himself gave no value and may have had notice, if he was not a party to the fraud. (Woodworth v. Huntoon, 40 Ill. 181.) But the paper will not be freed from the fraud of a party by being negotiated to an innocent party when it has come back to the hands of the wrong-doer. (Calhoun v. Albin, 48 Mo. 304.)

A defense available against an immediate party, as fraud, lack of consideration, etc., is available against a remote party who is in privity with such immediate party. Immediate parties are those in direct relation with each other, as the drawer and acceptor, indorser and indorsee; all other parties are remote. Privity be

*"Illustration: D, the holder of a bill indorsed in blank, transfers it to E for value. E suspects that D had obtained the bill by a false representation, and consequently makes no inquiries. As a fact D stole the bill. E is not a bona fide holder; he is affected with notice." (Benj.'s Chalmers, B. N. and Checks, Art. 86; Parsons v. Jones, 99 U. S. 434.)

tween the parties is created in all cases by want of consideration, sometimes by notice, and by agreement. Thus notice creates privity when it is notice of the defective title of him from whom the bill is taken. A holder of a bill who has given no consideration is deemed, as regards third parties, as the agent of the party from whom he took the bill, and he holds it subject to all the defenses against the person for whom he is regarded as an agent. (Benj.'s Chalmers, B. N. & Checks, Art. 88.)

Sec. 791. SAME SUBJECT-ACCOMMODATION PAPER.-An accommodation paper or bill indicates that the principal debtor, maker or acceptor, is lending his name for the benefit of some other person who may or may not be a party to the instrument. Thus A draws a bill on B. B accepts it to accommodate A, and it is then negotiated. This is an accommodation paper, and B is an accommodation party, or one who has signed without receiving value, and for the purpose of securing credit for the other party. It will be seen that as between the accommodating party and the party accommodated, there being no consideration no action could be maintained, and the paper is of no significance until negotiated. But the holder who has taken the accommodation paper for value can enforce it against all the parties to it. But if the holder had notice of the character of the paper the accommodation party may set up any defense which would avail the party accommodated, as to set off a debt due from the holder to the party accommodated. Until an accommodation

bill has been negotiated the accommodation party may rescind his obligation and demand the recall of the instrument or the cancellation of his signature. (Tiedeman, Com. Pap., Sec. 158.) The consideration given by a holder for value of accommodation paper makes the paper enforceable against all parties to it, and this is true where the paper has been negotiated after due. (Seyfert v. Edison, 16 Vroom 393.)

Sec. 792. EFFECT WHEN CONSIDERATION IS NOT GIVEN, OR FAILS, ETC.-It has been seen in the previous section, that the mere absence of consideration, as in accommodation paper, is only a defense as against an immediate party or a remote party who is not a holder for value, and is not a defense against a remote holder for value. Thus where a note is given to the holder as a gift, the holder cannot sue the giver. But if such a note were indorsed away for value, the indorsee could sue the maker.*

Total failure, as against an immediate party, is a good defense, but not as against a remote party who is a bona fide holder for value without notice. Thus where the consideration of the note was that the payee should act as executor for the maker, and the payee died

*"A draws a bill on B for $100. B accepts it to accommodate A. A discounts it with C, who knows that it is an accommodation bill. C can sue A or B for $100; but if C, instead of discounting it, merely advanced $50 on it, he can only recover $50. If C discount the bill, and pledge it with D for $50, D can recover $100 from B. and he will hold $50 thereof in trust for C." (Benj.'s Chalmers, B. N. and Checks, Art. 91; Hilton v. Smith, 5 Gray 402.)

first, the note could not be enforced against the maker. So where a bill is drawn by one party on another payable to his own order, and is accepted, if the consideration fails as between these two, an indorsee for value who knows that the consideration has failed cannot sue the acceptor. (Starr v. Torrey, 2 Zabr. 190.) Partial failure of consideration is a defense pro tanto against an immediate party when the failure is an ascertained and liquidated amount in money. But it is not a defense against a remote party holder for value. (Tiedeman, Com. Pap., Sec. 201; Stevens v. Campbell, 18 Wis. 419.) A few decisions hold that a partial failure of consideration will not constitute a good defense in any case whether definite or indefinite. (Fletcher v. Chase, 16 N. H. 38; Briggs v. Boyd, 137 Vt. 534.) Statutes in Colorado, Florida, Georgia, Illinois, Indiana, Iowa, New Hampshire and Vermont allow a partial failure of consideration to be set up as a defense as between the parties (2 Randolph Com. Pap. 540n),

Where the consideration is illegal in whole or in part it is a defense against the entire note while in the hands of an immediate party or one who is not a bona fide holder for value without notice. (Shirley v. Howard, 53 Ill. 455.) In general the consideration for a bill is illegal when it is wholly or in part immoral, contrary to public policy, or forbidden under penalties by statute.*

*Thus Tiedeman mentions among illegal considerations, the compounding of crimes and misdemeanors, contracts in aid of rebellion or an alien enemy, the bribing of a public officer,

A distinction is to be made between a consideration simply illegal and one which by statute expressly makes the bill void. In the former case a bona fide transferee may recover, though not in the latter. (Boughner v. Meyer, 5 Col. 71.)

Where a bill is given for a consideration which the statute expressly makes void, the party who gave the paper may set it up as a defense against all holders whether immediate or remote, but the holder can sue the indorser. (Eagle v. Cohen, 84 Ill. 292; Armstrong v. Gibson, 31 Wis. 66.) It is no longer customary by law to make notes expressly void by statute, and where such statutes do exist a clause frequently saves the rights of innocent holders. (Benj.'s Chalmers, B. N. & Checks, Art. 96n.) The holder of commercial paper is prima facie presumed to be an innocent holder for value, but where there is evidence affecting the bill or note with fraud or illegality, the burden of proof is shifted to the holder to show that he is an innocent holder for value. (Sperry v. Spalding, 45 Cal. 544; Bank v. Gilliland, 23 Wend. 311.) In case the holder can show that he paid full value, the defendant must then show that the holder haa notice of the fraud or illegality. So it is held that where the holder has in good faith given part value he may recover to a like amount. (Dresser v. Missouri, 93 U. S. 92.)

Sec. 793. FRAUD OR DURESS AS AFFECTING THE CONSIDERATION.-Where the con

wagers, options or "futures," restraint of trade, restraint of marriage, usury, etc. (Com. Paper, Secs. 183-196.)