our States, as Massachusetts and Maine, the presumption is, that it is taken as absolute payment; but in England and in most of our States the presumption is, that it is taken as conditional payment. To what extent any of our courts would make a distinction between these two cases, holding that one who takes a note as absolute payment is a holder for value, and that one who takes it as conditional payment is not, is left in great doubt and obscurity by the cases. As to the second case stated in the text, namely, where negotiable paper is received as collateral security, of an antecedent debt, the authorities are much less harmonious. In England, it appears to be settled that such a holder is entitled to protection. (e) It has been so held, also, by the Supreme Court of the United States. (f) The same doctrine, it seems, is held in Massachusetts and in some other States.(g) In Vermont it has been held, that one to whom a bill of exchange is indorsed as collateral security for an antecedent debt, is entitled to recover against an accommodation acceptor, not known to him to be such when the bill was taken by him.(h) In other

(e) Percival v. Frampton, 2 Cromp. M. & R. 180; Poirier v. Morris, 2 Ellis & B. 89. See on this subject the chapter on Payment by Bill or Note.

(f) McCarty ". Roots, 21 How. 432. See dicta in Swift v. Tyson, 16 Pet. 1. In Goodman v. Simonds, 20 How. 343, at the time the note in suit was taken, collateral securities previously given were surrendered, and further time given. It was held, that, whatever the decision of the court might be on the general question, these facts constituted the assignee a holder for value.

(g) Chicopee Bank v. Chapin, 8 Met. 40; Blanchard v. Stevens, 3 Cush. 162; Gardner v. Gager, 1 Allen, 502; Le Breton v. Pierce, 2 Allen, 14; Gibson v. Conner, 3 Ga. 47; Savings Bank v. Bates, 8 Conn. 505; Bank of the Republic v. Carrington, 5 R. I. 515; Bank of Charleston v. Chambers, 11 Rich. 657; Smith v. Hiscocks, 14 Maine, 449; Valette v. Mason, 1 Smith, Ind. 89, 1 Cart. 288; and dicta in Payne v. Bensley, 8 Calif. 260; Allaire v. Hartshorne, 1 N. J. 665. The security must, however, be given for a debt which can be identified. Merriam v. Granite Bank, 8 Gray, 254.

(h) Atkinson v. Brooks, 26 Vt. 569. Redfield, C. J. stated the following exceptions as based upon good sense, and perhaps sustained by authority:-"1. A note or bill negotiated in security for a debt not yet due, is not upon sufficient consideration, ordinarily, unless the creditor wait in faith of the collateral after his debt becomes due. 2. If the debtor is notoriously insolvent before the note or bill is negotiated as collateral security, it is said the creditor can only stand upon the rights of his debtor. 3. If a note or bill is taken merely to collect for the debtor, to apply when collected, the creditor not becoming a party by indorsement, so as to be bound to pursue the rules of the law merchant in making demand of payment and giving notice back, the holder is merely the agent of the owner. De La Chaumette v. Bank of England, 9 B. & C. 208; Allen v. King, 4 McLean, 128. 4. So, too, probably, if it were shown positively that the holder gave no credit to the indorsed bill, and did in no sense conduct differently

States it is held that the taking of a note as collateral security for a pre-existing debt, without more, will not place the taker in the situation of a holder for value, so as to protect him against the equities subsisting between the original parties to the note; but it is otherwise if there is a new and distinct consideration, as if time was given, in consideration of obtaining the note as security for the debt. For the giving of time would be a present and a valuable consideration, and a pledge on these terms would be the same as a pledge for money paid down.(i) In the third case stated, namely, where one receives a bill or note as collateral security for a debt contracted at the time, it is quite well settled that he is entitled to protection against equities.(j)

on that account, he could not be regarded as a holder for value." This case is doubted in Austin v. Curtis, 31 Vt. 64.

(i) Petrie v. Clark, 11 S. & R. 377; Kirkpatrick v Muirhead, 16 Penn. State, 117; Clark . Ely, 2 Sandf. Ch. 166; Bank of Poughkeepsie v. Hasbrouck, 2 Seld. 216, 230; Prentiss v. Graves, 33 Barb. 621; Ontario Bank v. Worthington, 12 Wend. 593; Wardell v. Howell, 9 Wend. 170; Stalker v. M'Donald, 6 Hill, 93; Bertrand v. Barkman, 8 Eng. Ark. 150; Jenness v. Bean, 10 N. H. 266; Prentice v. Zane, 2 Grat. 262; Cullum v. Branch Bank, 4 Ala. 21; Roxborough v. Messick, 6 Ohio State, 448; Cook v. Helms, 5 Wisc. 107; Goodman v. Simonds, 19 Misso. 106. In Fenouille v. Hamilton, 35 Ala. 319, it was also held, that the fact that the holder afterwards grants indulgence or forbears to enforce his remedies for the collection of his debt, when it is not shown that such indulgence or forbearance was an element of the contract by which he acquired the paper, does not render him a holder for value. In the following cases the giving up other security was held sufficient to enable the holder to recover. Goodman. Simonds, 20 How. 343; Fenby v. Pritchard, 2 Sandf. 151; Payne v. Bensley, 8 Calif. 260; Allaire v. Hartshorne, 1 N. J. 665; Robbins v. Richardson, 2 Bosw. 248; Depeau . Waddington, 6 Whart. 220. If a person takes a note as collateral, and not only does not give any other consideration, but retains other security which he before held for the debt, it has been held that he is not a bona fide holder for value. Mickles v. Colvin, 4 Barb. 304.

(j) Thus, in Collins v. Martin, 1 B. & P. 648, where A deposited bills indorsed in blank with B, his banker, to be received when due, and the latter raised money upon them by pledging them with C, another banker, and afterwards became bankrupt; it was held, that A could not maintain trover against C for the bills. So in Munn v. M'Donald, 10 Watts, 270, it was held, that if the payee of a promissory note, indorsed by himself and subsequent indorsers, delivers it to his creditor as collateral security for a debt then created on the faith of such indorsements, without notice of any equity between the maker and payee, such maker cannot defend himself by showing failure of consideration as between him and the payee. And see, to the same effect, Watson v. Cabot Bank, 5 Sandf. 423; Williams v. Smith, 2 Hill, 301; Griswold v. Davis, 31 Vt. 390; Ferdon v. Jones, 2 E. D. Smith, 106. So if it be taken for advances to be made. Bancroft v. McKnight, 11 Rich. 663. In Fenby v. Pritchard, 2 Sandf. 151, it was held, that on a sale on credit, to be secured by notes as collateral, not

To the general rules which we have just stated, there are undoubtedly exceptions, and among them are such cases as on their own facts and merits come under the influence of a different principle. The inquiry in every case is whether the particular transaction is within what is properly meant by the negotiation of negotiable paper.(k)

If a note be indorsed and delivered for the purpose of collection, with directions to apply the proceeds, when collected, in payment of a debt due to the indorsee from the indorser, it seems that the indorsee will be subject to the same defences as his in

yet due, the receipt of the collaterals five days after the delivery of the goods makes the seller a bona fide holder of the notes for a valuable consideration, so as to protect him against any defence which the maker of the notes had against the buyer of the goods. The only cases opposed to this view are Jenness v. Bean, 10 N. H. 266, and Williams v. Little, 11 N. H. 66, in which it is held, that, where a note is indorsed as collateral security, the general property remaining in the indorser, the indorsee takes it like a chose in action not negotiable, subject to all defences to which it would be subject in the hands of the indorser at the time when notice is given of the indorsement; and it makes no difference whether it is indorsed as security for an existing debt, or value received at the time. But in the later case of Clement v. Leverett, 12 N. H. 317, where a principal accepted bills of exchange, drawn on him by his agent, payable to the order of the agent, who agreed to get them discounted for the benefit of the principal; and the agent, assuming to be the owner of the bills, pledged them to a bona fide holder, to secure money borrowed for his own use, it was held, that the principal, having enabled the agent to hold himself out as owner, was bound by the pledge. We are not able to see very clearly how this case can be reconciled with the two former.

(k) See Bay v. Coddington, 5 Johns. Ch. 54, 20 Johns. 637. In this case, one R. having, as agent of B., received negotiable notes to be remitted to B., delivered them to C. as security against responsibilities as indorser of certain accommodation notes of R., who had then stopped payment and become insolvent, but on which notes of R., C. had not then become chargeable. Held, that though C. had no knowledge that the notes so deposited with him belonged to B., but believed R. to be the true owner of them, yet he was not entitled to hold them, as against B., the lawful owner, but was accountable to him for the amount, with interest. Kent, C. said: "The notes were not negotiated to them in the usual course of business or trade, nor in payment of any antecedent and existing debt, nor for cash or property advanced, debt created, or responsibility incurred, on the strength and credit of the notes. They were received from R. & S., and after they had stopped payment and had become insolvent within the knowledge of J. & C. C., and were seized upon by the Coddingtons, as tabula in naufragio, to secure themselves against contingent engagements previously made for R. & S., and on which they had not then become chargeable. There is no case that entitles such a nolder to the paper, in opposition to the title of the true owner. They were not holders for a valuable consideration, within the meaning or within the policy of the law." We are not aware that this decision has ever been questioned. And see, to the same effect, Bank of Mobile v. Hall, 6 Ala. 639; Andrews v. McCoy, 8 Ala. 920; Bertrand v. Barkman, 8 Eng. Ark. 150.

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dorser For until the note is collected, he holds it merely as agent or trustee of his indorser.(1)

It is universally conceded that the holder of an accommodation note, without restriction as to the mode of using it, may transfer it, either in payment, or as collateral security for an antecedent debt, and the maker will have no defence.(m)

In this chapter we have treated specifically only of negotiable paper. But what has been said applies equally to a promissory note not payable to order or bearer, and therefore not negotiable, with only those qualifications and exceptions which are made necessary by the fact, that a non-negotiable note cannot be indorsed, and therefore no person can acquire the rights of an indorsee.

Whether the presumption of consideration extends to a note or bill which is not negotiable, cannot be positively stated from the authorities. If the words "value received," or any similar or equivalent words, are used, they would undoubtedly be regarded as evidence of consideration. But it is a different question, whether, if no such words are used in a bill or note which is not payable to order or to bearer, a presumption of considera

(1) Solomons v. Bank of England, 13 East, 135; De La Chaumette v. Bank of England, 9 B. & C. 208; Johnson v. Barney, 1 Iowa, 531; Atkinson v. Brooks, 26 Vt. 584, cited supra. See Allen v. King, 4 McLean, 128.

(m) Rutland Bank v. Buck, 5 Wend. 66; Grandin v. Le Roy, 2 Paige, 509; Lathrop v. Morris, 5 Sandf. 7; Mohawk Bank v Corey, 1 Hill, 513; Matthews v. Rutherford, 7 La. Ann. 225; Appleton v. Donaldson, 3 Penn. State, 386; Boyd v. Cummings, 17 N. Y. 101; De Zeng v. Fyfe, 1 Bosw. 335; Robbins v. Richardson, 2 Bosw. 248. In Kimbro ". Lytle, 10 Yerg. 417, A left blank indorsements with B, with a view to aid B in his business and to sustain his credit. No restriction was imposed as to the use to be made of them. B filled up a note with A's indorsement thereon, and passed it to C as security for an existing liability of B. Held, that A was liable to C upon such indorsement. Where an indorsement in blank is left with A generally, and without restriction, it is an assent on the part of the indorser, that A may pledge it as security for his existing liabilities, or use it in any other way lawful and necessary for his accommodation and credit. In Lord v. The Occan Bank, 20 Penn. State, 384, Black, C. J. said: "The maker of an accommodation note cannot set up the want of consideration as a defence against it in the hands of third person, though it be there as collateral security merely. He who chooses to put himself in the front of a negotiable instrument for the benefit of his friend, must abide the consequence (12 S. & R. 382), and has no more right to complain, if his friend accommodates himself by pledging it for an old debt, than if he had used it in any other way. This was decided, 3 Barr. 381, in a case strongly resembling the present one. Accommodation paper is a loan of the maker's credit, without restriction as to the manner of its use."

tion would exist. The only conclusion to which we are led by the authorities is, that in some of our States this presumption would be denied, and in others, perhaps, admitted.(n)

It is, however, certain that any holder of a non-negotiable note, however numerous may be the transferrers intermediate between himself and the promisee, stands only in the place of the promisee, and has only his rights. Therefore, the presumption of a

(n) The text-books and the cases say comparatively little about promissory notes not negotiable Selwyn's Nisi Prius, vol. 1, p. 400, defines a promissory note as a promise in writing to pay "A or order, or A or bearer." The 3 and 4 Anne, ch. 9, speaks only of notes in writing, whereby the promisor promises "to pay unto any other person or his order." This statute was passed in 1704. Twenty-four years after, the precise question came before the Common Bench, on demurrer, whether a note, omitting the words "to order," was a promissory note within the statute; and the court held it to be "clearly within the statute." Burchell v. Slocock, 2 Ld. Raym. 1545. In Smith v. Kendall, 6 T. R. 123, the question of allowing three days' grace on such a note came before the King's Bench, and the counsel for the plaintiff cited many authorities to the point that this was a promissory note within the statute. But Lord Kenyon, in giving his decision, refers only to Burchell v. Slocock, but fully confirms that case. Story, in his work on Promissory Notes, sect. 9, says: "But if the promise be in writing, and it has all the other requisites, it is not essential to its character as a promissory note that it should be negotiable." And in section 3 he says: "A promissory note is, in contemplation of law, entitled to all the privileges belonging to such an instrument by the Commercial Law as well as by Common Law, without being negotiable." In sections 7 and 181 he states that "promissory notes" import a consideration; but in section 7 he enumerates this presumption as one of the "privileges, benefits, and advantages" given to them "to insure their circulation as a medium of pecuniary commercial transactions." But this reason certainly does not apply to notes not negotiable, because they cannot circulate by indorsement. In Mandeville . Welch, 5 Wheat. 282, Story, J., giving the opinion of the court, says: In this respect, bills of exchange and negotiable notes are distinguished from all other parol contracts by anthorities which are not now to be questioned." He referred to the presumption of consideration; but as it was presented by the case as a question between third parties. this may explain his use of the word negotiable. Generally, when the rule is stated, either in text-books or in adjudged cases, it is said of bills of exchange and promissory notes, without using the word negotiable; and when this word is used, it seems to be a case where only a negotiable note was under discussion. In Meredith v. Chute, 2 Ld. Raym. 760, (nom Meredith . Short, 1 Salk. 25,) Lord Holt applies the rule to a note, of which it is not stated expressly whether it was negotiable or not; but as the note is said in both reports to have been "delivered" to the defendant as the ground of his assumpsit, it may perhaps be inferred, both from this word and from other parts of the case, that the note was not indorsed or negotiable. In Ridout v. Bristow, Cromp. & J. 231, the action was on a promissory note "expressed to be payable to the testator twelve months after date," and turned upon the consideration. There is no intimation throughout the case, which is a long one, that the note was ne gotiable, unless it be implied in the remark of Vaughan, B., that the note was in the usual form, and like all other notes." But he says this in reference to an attempt by defendant to make it a “mere indemnity note." Through the case, all the counsel and