the transferee in addition acquires the right to have the indorsement of the transferror."

The court dismissed the appeal.

The MASTER OF THE ROLLS 30 said that the appeal failed. The facts were a little unusual. Chapman was in want of a sum of money. He accordingly went to the defendant with the view of raising the money. The course adopted was that a bill was made, of which the defendant was the drawer and Chapman the drawee, and it was drawn payable to the defendant's order. Chapman accepted the bill. It was clear that as between the defendant and Chapman the bill was drawn to assist Chapman in raising the money. The transaction involved permission to Chapman to use the defendant's name on the bill for the purpose of raising money. Therefore when Chapman took the bill to the plaintiff and used it for the purpose of raising money he carried an authority from the defendant to request the plaintiff to advance money to Chapman upon it, Chapman, as the learned judge had found, took the bill to the plaintiff in the capacity of agent for the defendant, and in that capacity he handed the bill to the plaintiff, who gave him value for it. The defendant's indorsement was omitted by mistake. But he transferred the bill for value to the plaintiff. The plaintiff claimed to have the bill paid, and he was met with the difficulty that the bill was payable to the defendant's order, and that the defendant had not indorsed it. The question was whether the plaintiff was entitled in these circumstances to require the defendant to indorse the bill.

It was clear that he was so entitled. The case came exactly within the authority of Watkins v. Maule, 2 Jac. & W. 237. The plaintiff accordingly had a right to have the defendant's indorsement on the bill, and as soon as he obtained the indorsement he would become the holder for value, and he could then sue the accommodation drawer, though he knew when he took the bill that the drawer was merely an accommodation drawer. That was clear from section 28, subsec. 2, of the Bills of Exchange Act, 1882, which provided that "an accommodation party is liable on the bill to a holder for value; and it is immaterial whether, when such holder took the bill, he knew such party to be an accommodation party or not." It was said, however, that, though the plaintiff became the holder of the bill, he did not become the holder for value. The answer was that value was given by the plaintiff at the defendant's request to Chapman, and therefore the plaintiff became the holder for value. The judgment was therefore right.81

30 Sir Richard H. Collins. The opinions of Sterling and Matthews, L. JJ., are omitted.

31 See Seeley v. Reed, 28 Fed. 164 (1886).

SUBLETTE et al. v. BREWINGTON et al.

(Kansas City Court of Appeals, Missouri, 1909. 139 Mo. App. 410, 122 S. W. 1150.)

BROADDUS, P. J. This is a suit to restrain defendants from disposing of a certain promissory note, and asking for its cancellation. On January 8, 1906, the plaintiffs applied to E. L. Hilbert to procure for them a loan of $1,000, for the period of one year. For the purpose of obtaining the loan, they executed and delivered their promissory note for said sum of $1,000, due in one year, payable to the order of said Hilbert. Hilbert, with one of the plaintiffs, applied to several persons to get them to advance the money on the note, but failed to get such advance. The plaintiffs then went home. Afterwards communication by telephone was had between the plaintiffs and Hilbert as to whether the latter had succeeded in securing the loan. The matter was left in this condition until in April, when plaintiffs, according to their statements, saw Hilbert for the purpose of taking up the note when he informed them that he had destroyed it. Thereafter, on the 2d of October, 1906, several months before the maturity of the note, Hilbert borrowed from defendants $814, and executed his note to them for that amount and turned over to them the note in suit, without indorsement, as collateral security. The defendants took the note in good faith in the belief that Hilbert was its owner. The judgment of the court was for the defendants, and plaintiffs appealed.

The note in question was a negotiable instrument as defined in section 1, p. 243, Acts 1905 (Ann. St. 1906, § 463-1), entitled "Negotiable Instruments," and is such under the law merchant, and, being payable to order, it did not pass by the mere act of delivery. Section 30, pp. 247, 248, Acts 1905, is as follows: "An instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transferee holder thereof. If payable to bearer it is negotiated by delivery; if payable to order it is negotiated by the indorsement of the holder completed by delivery." Section 31: "The indorsement must be written on the instrument itself or upon a paper attached thereto. The signature of the indorser, without additional words, is a sufficient indorsement." If the case is to be determined by the law governing the transfer of negotiable instruments payable to order, the defendants are holders with notice of whatever equities plaintiff may have had.

The defendants' defense is based upon the ground that, as Hilbert was the agent of plaintiffs, the law merchant does not control, but the question is one of agency. With this view we coincide. That Hilbert was the agent of plaintiffs to negotiate a loan by means of the note is undeniable. His duty was to obtain a loan upon the credit of plaintiffs' note, which as a matter of course would necessarily become the property of whoever could be induced to advance the money on the se

curity offered. His authority was complete. In effect he was empowered to dispose of the paper as freely as if it had been his own. The face of the paper, in fact, was a notice to strangers that it was his property; and it was not issued in due course of business.

There is no question better settled than that the acts of the agent (within the scope or apparent scope of his authority) are binding upon the principal. We cannot escape the conclusion that the case falls within the rule governing the relation of agent and principal, and that the law merchant does not apply. Furthermore, we are of the opinion that the plaintiffs have no equity as against defendants, and that the transfer to defendants was for a sufficient valuable consideration. It does not lie in the mouth of a party to plead want of consideration where his agent in the exercise of his authority as such deals with a stranger to his prejudice.

We believe the judgment of the court was for the right party, and it is therefore affirmed. All concur.

82 Accord: Marling v. Fitzgerald, 138 Wis. 93, 120 N. W. 388, 23 L. R. A. (N. S.) 177 (1909). See Fidelity Trust Co. v. Fowler (Tex. Civ. App.) 217 S. W. 953 (1920).

CHAPTER II

HOLDER IN DUE COURSE

SECTION 1.—VALUE

BAY v. CODDINGTON et al.

(Court of Chancery of New York, 1821. 5 Johns. Ch. 54, 9 Am. Dec. 268.) The plaintiff being owner of a vessel, employed Randolph & Savage, defendants, who were copartners, to sell her on a credit, and take good notes in payment, and transmit the same to him, with an account of their charges, which he would pay. Randolph & Savage sold the vessel for $3,875, and on the 3d of June, 1819, received the notes of the purchasers, payable in two, three, and four months; some of them being made payable to, and indorsed by, P. Aymar & Co., and the others by J. R. Stewart. On the 12th of June, 1819, Randolph & Savage delivered the notes so indorsed to the defendants, J. & I. Coddington, who were, at that time, as they stated in their answer, under heavy responsibilities for Randolph & Savage, as indorsers of notes for their accommodation, payable at different times, but all subsequent to the 12th of June, 1819, and which they were afterwards obliged to take up, as they fell due, amounting to above $17,000. The answers admitted that Randolph & Savage had stopped payment, when the notes so held by them were to be delivered to J. & I. Coddington.

The defendants, J. & I. Coddington, denied all knowledge of the manner in which the notes had come to the hands of Randolph & Savage, and alleged that they believed that they were the bona fide. and exclusive property of Randolph & Savage, that they received these. notes with others, as a guaranty and indemnity, as far as they would. avail, for their responsibilities, and three days after disposed of some of the notes for cash, and did not know, until several days afterwards, that the notes belonged to the plaintiffs, as stated in the bill. They admitted that, when they so received the notes, Randolph & Savage were not, in a strict, legal sense, indebted to them, but that they were under large gratuitous responsibilities for them.

1

THE CHANCELLOR. It is admitted that Randolph & Savage held the notes belonging to the plaintiff, and which they transferred to the defendants J. & I. Coddington on the 12th of June, 1819, as agents or

1 James Kent. The arguments of counsel and part of the opinion are omitted.

trustees for the plaintiff, and that they had no authority to pass them away. It was a gross and fraudulent abuse of trust on the part of Randolph & Savage. The only question now is whether J. & I. Coddington are entitled, under the circumstances disclosed, to hold the notes, and retain the amount of them as against the plaintiff.

Negotiable paper can be assigned or transferred by an agent or factor, or by any other person, fraudulently, so as to bind the true owner as against the holder, provided it be taken in the usual course of trade, and for a fair and valuable consideration, without notice of the fraud. But the defendants J. & I. Coddington, have not entitled, themselves to the protection of holders of that description. 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 Randolph & Savage, and after they had stopped payment and had become insolvent within the knowledge of J. & I. Coddington and were seized upon by the Coddingtons as tabula in naufragio, to secure themselves against contingent engagements previously made for Randolph & Savage and on which they had not then become chargeable. There is no case that entitles such a holder 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.

In Miller v. Race, 1 Burr. 452, a bank note was stolen and came to the hands of the plaintiff, and he was held entitled to it. But the Court of King's Bench considered bank notes as cash, which passed as money in the way of business; and the holder, in that case, came by the note, for a full and valuable consideration, by giving money in exchange for it, in the usual course of his business, and without notice of the robbery, and on those considerations he was entitled to the amount of the note. So, in Grant v. Vaughan, 3 Burr. 1516, 1 Black. Rep. 785, a bill of exchange payable to bearer was lost, and the finder paid it to a grocer, for teas, and took the change. There the court laid stress on the facts that the holder came by the bill bona fide, and in the course of trade, and for a full and fair consideration, and that, though he and the real owner were equally innocent, yet he was to be preferred, for the sake of commerce and confidence in negotiable paper. Again, in Peacock v. Rhodes, 1 Doug. 633, a bill of exchange, with a blank indorsement, was stolen and negotiated to a person who took it in the way of his trade, for cloth sold and cash for the balance, and he was held entitled to hold it. Lord Mansfield placed reliance on the circumstance that it was received in the course of trade. It was "by reason of the course of trade, which creates a property in the assignee or bearer," that Holt, C. J. (1 Salk. 126, Anon.), held that the owner of a bank bill, which was lost and transferred by the finder to C., for a valuable consideration, could not maintain an action against C.