
    Farmers Bank of Lyons, appellee, v. Argo N. Dixon et al., appellants.
    Filed June 12, 1912.
    No. 16,747.
    Bills and. Notes: Bosta Fide Holder. If a negotiable promissory note is transferred to a bank as collateral security to an indebtedness to the bank substantially equal to the amount of the note, and the note is so taken by the bank in the regular course of business and without notice of any defense thereto, the bank becomes an innocent holder, and the note is not subject to defenses that may' have existed as against the original payee.
    Appeal from the district, court for Dixon county: Gey T. Graves, Judge.
    
      Affirmed.
    
    
      Kingsbury & Hendrickson, for appellants.
    
      J. J. McCarthy, contra.
    
   Sedgwick, J.

The plaintiff began this action in the county court of Dixon county against these defendants upon a promissory note. Tbe case was tried several times in the county court and finally appealed to the district court. In' that court the plaintiff moved to strike out several paragraphs of the defendant’s answer upon the ground that they raised a new issue not presented in the county court. The defense attempted to be alleged in these paragraphs so stricken out was that the note in suit was given for a horse upori a warranty, and that the horse was not as warranted, and was of no value. It is not at all clear that the rulings of the court in striking out these paragraphs were justified in the condition the record then was, but it does not appear to be necessary to go into a detailed examination of that question because the defense failed upon other ground.

The bank claimed to be an innocent purchaser of the note in the regular course of business, and the defendants alleged in their answer that the note was first transferred to the bank by the payee as collateral security, and that it was afterwards purchased by the bank. There was no allegation that the bank had any notice of any existing defense to the note at the time it was received by the bank as collateral security, and by so receiving it without notice of any defense the bank became an innocent purchaser of the note to that extent, Lashmett v. Prall, 2 Neb. (Unof.) 284. It appears to have been taken as collateral to an indebtedness of the payee of the note, and if this indebtedness was afterwards canceled and the note, which was collateral thereto, was taken in payment of the principal debt, the bank would still be an innocent purchaser. One of the .defendants testified that he wrote a letter to the bank in which he informed the bank that he had given a note to the payee for a horse, and that the horse was of no value, but this, by his own evidence, was after the bank had taken the note from the payee as collateral to the indebtedness to the bank, and had so become an innocent purchaser of the note. The district court instructed the jury to find a verdict for the plaintiff for the amount of the note and interest, and this was the only verdict possible under the defendants’ answer and evidence.

The judgment of the district court is

Affirmed.  