
    Case 85 — PETITION ORDINARY
    February 9.
    Frank, &c., v. Quast, &c.
    APPEAL FROM BRECKINRIDGE CIRCUIT COURT.
    Negotiable Instruments — Accommodation Drawers. — Where a "bill of exchange is drawn and indorsed for the accommodation of the acceptors, upon the condition that it shall he discounted at a particular hank, a purchaser of the hill before maturity, without notice of the secret agreement, is not affected hy it, although he may have taken the hill in payment of a pre-existing debt; and he may, therefore, recover upon the hill in an action against the drawers.
    LEWIS & FAIRLEIGH for appellants.
    An agreement between an accommodation drawer and the drawee of a. hill of exchange that it should he discounted at a particular hank may ' he shown in defense hy the drawer, where the hill is in the hands of a holder for value, and the holder knew, or could have known hy the exercise of ordinary care, of the restriction as to place of discount.
    JAMES G. HASWELL & M. A. MASON por appellees.
    It is immaterial that the hill was discounted at a different place, or the proceeds applied to a different purpose from that agreed upon with the drawer, if such agreement was unknown to the one receiving and discounting the hill. (Daniels on Negotiable Instruments, volume 1, page 742.)
   CHIEF JUSTICE PRYOR

delivered the opinion op the court.

Frank & Sons were merchants, doing business in Breckinridge county. They desired to raise money, and induced the appellants to become the drawers of' a bill payable to themselves, addressed to Frank & Sons, who accepted it. The bill was then indorsed in blank by the drawers, and delivered to the acceptors, Frank & Sons, to be presented for discount to the Breckinridge Bank, where it was agreed, at the time the accommodation paper was drawn, it should be negotiated. This agreement was between the drawers. and the acceptors, and it is alleged by the defense here that it was on this express condition that the paper was executed by the drawers. The bill was made payable at the Breckinridge Bank, but when presented the bank declined to discount it, the bill remaining in the possession of the acceptors, Prank & Sons. The drawers, ascertaining that Prank & Sons were embarrassed, notified the bank not to discount the paper, and one of the drawers went to the house of Prank & Sons to obtain the paper, but failed to do so.

Frank & Sons had been purchasing goods in the city of Louisville, and while in that city, and being indebted to the appellees, Quast & Schulten, they induced the latter to accept the bill in payment of a debt due them, and made purchases of goods with the balance raised. The paper was discounted by one of the Louisville banks, and sent by that bank to the Breckinridge Bank for collection, where it was protested. The appellees, Quast & Schulten, having indorsed the paper, took it up, and now bring this suit against the drawers, who make the defense that one of the conditions of its execution was, that it should be discounted at the bank in Breckinridge county at a particular time. It appears that when the paper was presented' to the appellees, or when the appellees aslced Prank & Sons, or the member representing the firm at the time, for payment of their debt, that Prank replied he had been making efforts to raise the money, and had failed to get it, saying further that he had a bill drawn for his accommodation payable at the Breckinridge Bank, and that bank had declined to discount it. Then it was the appellees said to Prank that it could be discounted in tbe city of Louisville, to which Prank readily assented, and delivering tbe bill to tbe appellees, they had it discounted in tbe manner and for tbe purposes already stated.

Tbe paper bad not matured when discounted, and there is no evidence conducing to show bad faith on tbe part of tbe appellees in discounting tbe paper, or that they bad any notice of tbe agreement between tbe parties to tbe bill that it should be negotiated at tbe Breckinridge Bank and nowhere else. Tbe appellees bad no reason to suspect tbe honesty of its debtors, and took tbe paper as innocent holders for value.

This defense is based on the idea that tbe party for whose benefit it was made Was tbe agent of tbe drawers, and that tbe agent, having no more power than that given him by tbe principal, bis acts beyond that authority are void. If Prank bad notice of tbe restriction, or was placed on inquiry in regard to tbe manner in which this paper was to be disposed of by tbe acceptors, there might be some plausibility in tbe defense. The fact that tbe proceeds of the bill were applied to tbe payment of a pre-existing debt was not evidence of notice, nor did it destroy the bona fides of tbe transaction. In fact, tbe very purpose of tbe drawers and acceptors in making tbe paper was to enable these debtors to pay their debts, the drawers knowing that they were bard pressed for money; and being assured by Prank & Sons that as soon as they sold their tobacco tbe money would be replaced, they drew tbe bill. Prank & Sons bad tbe right to transfer tbe paper; it was indorsed by tbe appellants and delivered to Prank that be might transfer it, and obtain the money. It may have been that the money raised was intended to be applied to the payment of these Louisville debts, and the appellees being dona fide holders of the paper, the court will not inquire into the question of agency for the purpose of relieving parties who have placed it in the power of others to discount such paper. There was no defect in the title, and the right to transfer the paper was unrestricted by any of its stipulations.

The paper was made for the accommodation and use of Prank & Sons, and no restriction as to the application to be made by them of the money. Mr. Daniels, in his work on Negotiable Instruments, says: “It is. immaterial that paper executed or indorsed for accommodation is not used in precise conformity with agreement, when it does not appear that the accommodation party had any interest in the manner in which the paper was to be applied. No change in the mere mode or plan of raising the money, though not applied to the purpose intended by the accommodation party, will constitute a misappropriation.” (Volume 1, page 742.) Again: “The accommodation party must have some interest in the application of the money, otherwise he is in no condition to contend there has been a misappropriation of it, or of the security on which it was 1». be raised.” This doctrine was applied to a case where the party had applied the proceeds to a pre-existingdebt. “It is now well-settled'that where a note is-indorsed for the accommodation of the maker, to be. discounted at a particular bank, it is no fraudulent misappropriation of the note if it is discounted at another bank, or used in the payment of a debt or otherwise for the credit of the maker.” (Daniels on Negotiable Instruments, volume 1, p. 742.)

Here the drawers and indorsers gave to Frank & Sons the nse of their names to raise money in any way beneficial to that firm, without restriction or condition, except, as they say, the money was to be obtained from a particular bank. Such a condition, unknown to a bona fide holder, can not affect the validity of the bill in his hands, and from the facts before us we perceive no merit in the defense.

Judgment affirmed.  