
    George Carlisle v. James Wishart.
    Where a negotiable note has, before it fell due, been transferred in consideration of a pre-existing debt, the maker can not, as against the person receiving it, without notice, take advantage of any equities between himself and the payee.
    A pre-existing debt is a good consideration for the transfer of a negotiable note, and a bona fide indorsee, without notice, takes the note discharged of prior equities.
    This is a motion for a new trial, from the county of Belmont.
    The action was assumpsit, against the maker of the promissory note, for $666.66§, dated August 23, 1838, at six months, payable at the Franklin Bank of Cincinnati, to Joseph S. Benham, or order, and was indorsed, and transferred to the plaintiff, by Ben-ham, before maturity, in payment of a precedent debt. The plaintiff received the note in good faith, and without notice of the consideration, or of any defense as against Benham.
    *On the trial the defendant gave evidence of the consideration of the note, and that the same had failed, and other matters, tending to prove that, as against the defendant, Benham ought not to recover; to which evidence the plaintiff objected, but the objection was overruled, and the court charged the jury that, inasmuch as the note had been transferred in payment of a, pre-existing debt, the defendant could make any defense that hej might háve made in case Benham, the payee of the note, had sued the same.
    The jury found for the defendant, and the plaintiff then moved the court for a new trial.
    
      Daniel Peck, for plaintiff:
    The only question on this motion is, whether a pre-existing debt is such a consideration as will protect the holder of a negotiable note, transferred before due without.notice of any defense between the original or antecedent parties to the paper.
    I consider the question arising in this case of great importance, and well deserving the consideration of this court.
    The books and cases all agree that paper of this description, taken bona fide and for a valuable consideration, shall, in the hands of an innocent holder, be protected. But there has latterly arisen, in some courts, a difficulty as to the true meaning of the term valuable consideration, some holding it to be anything which would amount to a good consideration for ordinary purposes, while others contend that it moans a present consideration that is given, either in money or goods, at the time of the transfer, and that a pre-existing debt is not such a consideration.
    This court, in the case of Riley & Van Amringe v. Johnson et al., 8 Ohio, 526, held that a consideration of that character was not sufficient for such a purpose.
    That opinion, and the cases for and against it, I propose to review.
    The opinion in the case of Riley & Van Amringe v. Johnson et al., professedly rests, for authority, on the case of *Coddington et al. v. Bay, 20 Johns. 637, and other cases, having that as their foundation ; and, considering that it was to settle a point of such importance for the first time in this great state, it seems to me that it did not receive a very thorough investigation; and, for aught that I can see, the case may have been mainly, if not altogether, decided against the plaintiff on the ground of fraud, or notice of the defense as between the original parties to the note. It may have been decided correctly without touching this point.
    It seems to me that the case of Coddington et al. v. Bay has been strangely misunderstood by the Supreme Court of New York. In the original case, when decided by Chancellor Kent, he says : “ That the defendants (the Coddingtons) are not holders of those notes and securities for a valuable consideration. The notes were not negotiated to them in the usual course of business or trade, nor in payment of any antecedent or existing debt, nor for cash or property advanced, debt created, or responsibility incurred on the strength of the notes.” 5 Johns. Ch. 54.
    
      This case was, by the Coddingtons, appealed to the court for the correction of errors, and it was upon such a case that some of the members of that court undertook to say that a pre-existing debt was not a valuable consideration for the purpose of protecting a bona fide holder without notice, a point not necessary to the decision of the case, nor, in fact, in it at all. The opinions then delivered on that point are more dicta, though, for some time afterterward, the Supreme Court of that state considered those opinions as the settled law of that state, and held accordingly.
    The next case which I will notice is Rosa v. Brotherson, 10 Wend. 85. The note was transferred by the payee to the plaintiff, before maturity, in payment of a precedent debt. As between the original parties the note was of no validity. The Supreme Court decided, on the authority of Coddington et al. v. Bay, that to protect such paper there must be a present consideration paid, and one who takes such a note for a precedent *debt, takes it subject to all the equities between the original parties.
    In the case of Ontario Bank v. Worthington, 12 Wend. 600, the same doctrine is held, the same reasoning adopted, upon the same authority alone.
    Afterward, the same court, in Smith v. Van Loan, 16 Wend. 659, take occasion to explain the case of Rosa v. Brotherson, and, by a reference to the original papers, it was found to be of that character that the plaintiff could not have recovered without any such rule.
    The case of Coddington et al. v. Bay has been much weakened, if not entirely overruled, by some late cases in the Supremo Court of New York. The case of Bank of Salina v. Babcock, 21 Wend. 499, was a note indorsed and transferred in payment of an old debt, the securities for which were canceled. The court held that the cancellation was a sufficient consideration.
    So, in Bank of Sandusky v. Scoville, 24 Wend. 115, the court held that the discounting of the note, and applying the proceeds to the payment of a pre-existing debt, was a sufficient consideration to support such a note in the hands of an innocent holder; and in the case of Mohawk Bank v. Corey, 1 Hill, 512, the court overruled the defense that the note was transferred for a pre-existing debt, because the plaintiff not only took the note in payment, but gave up the old securities. It would seem that the Supreme Court of New York now only hold the rule applicable to notes transferred in security, and not as payment. See Manhattan Co. v. Reynolds, 2 Hill, 140.
    It is probable that if the highest court in the State of New York was now called upon to decide this distinct proposition, it would decide it in accordance with the general decisions on that subject, adopted by other courts, and not adhere to the opinion delivered in the case of Coddington et al. v. Bay.
    The Supreme Court of Connecticut, in the case of Brush v. Scribner, 11 Conn. 388, decide that a pre-existing debt is a valuable *consideration, and will protect an innocent holder of such paper.
    That suit was founded on a note made in New York, by Brush and Cook, for $320.50, payable to A. S. Scribner, or his order, and was indorsed in blank.
    The defendant claimed that this note had been made and indorsed for the purpose of being discounted in the Fairfield Bank, for the benefit of the makers, and, for that purpose, had been delivered to one Stevens, who had no right to it at all; and that he had fraudulently negotiated it in part payment of an antecedent debt, and partly for goods. The plaintiff had no notice of any objection to Stevens’ title to the note. The plaintiff had a verdict, and the defendant moved for .a new trial, because the court charged the jury that the previous indebtedness of Stevens was a sufficient valuable consideration. The case of Coddington et al. v. Bay was cited and relied on; the more so, as the cause of action accrued in the State of New York ; and it was insisted, for the defendant, that the laws of New York, and the decision of her courts, ought to govern the case.
    Chief Justice "Williams delivered the opinion of the court. He first lays it down as a well-established elementary rule of law, that “if the assignment of a note is a fraud upon the indorsor or maker, yet a bona fide holder, for a valuable consideration, without notice, will be protected in receiving the paper in the usual course of business.”
    “Negotiable notes, bills of exchange, and bank notes, are all placed on the same footing, and for the same reason; because these principles would, alone, secure their free circulation.”
    “ If one puts it in the power of a servant, or any one else, to make himself appear the owner, he shall suffer, if any one does, for his misplaced confidence.”
    
      “It is denied that a, pre-existing debt is a valuable consideration spoken of in the books ; it is true that in those cases there was a present consideration passing, but then there is no distinction made ; it is laid down in broad terms ; and if such paper can not be safely taken in payment of a pre-existing debt, *it can not be said to have a free circulation, and thus the groat object is defeated.”
    “ The more exceptions that are introduced, the more will be the embarrassments of the circulation; and the injury to the circulation of bills and notes must be nearly as great, if they can not be passed in payment of antecedent debts, as if they could not be passed for goods.”
    “ The amount of such paper, passed to the custom houses, banks, etc., is so great, that the court will not make any such rule, unless the law requires it. No case is cited to show that the term valuable consideration means in a limited sense.”
    He then reviews the American cases, and cites Payson v. Coolidge, 2 Gallison, 233, where Justice Story says, “there is no foundation for the distinction, asserted by the defendant’s counsel, as to receiving such a draft for a pre-existing debt. Although a debt be already due, the party who receives such a draft, in part payment, thereby as much gives credit to the drawer and acceptor, as a party who advances his money upon the draft.” In the same case, appealed, 2 Wheat. 66, 73, Chief Justice Marshall says, “that, in all cases, the person who receives such a bill, in payment of a debt, will'be prevented from taking other means to obtain the money duo him; and the mere circumstance that the bill was taken for a pre-existing debt had not been thought sufficient to do away the promise to accept.”
    He then cites the case of Townley v. Sumrall, 2 Pet. 170, 182, in which Story, J., says, “it can make no difference in law, whether the debt, for which the bill is taken, is & pre-existing debt, or money then paid for the bill. In each case there is a substantial credit given by the party, to the drawer, upon the bill, and the party parts with his present right at the instance of the promisee.” Such he decides to be the law of Connecticut.
    He then reviews the cases of Coddington et al. v. Bay, and Bay v. Coddington et al., and although he admits the correctness of the decision of those cases, upon the case made, yet he does not think it was necessary to decide this point in those *cases, and thinks the cases subsequently decided, being only of the Supreme Court of that state, ought not to be considered of very great authority in other courts, for, even in that state, the court of errors might, if the point really arose, adjudge otherwise. The motion for a new trial was overruled.
    The court will recollect, that, in the agreed case of Riley & Van Amringe v. Johnson et al. there were two notes, of $1,500 each. The first one sued on was lost in this court. The plaintiffs, finding that they had such bad luck in the slate courts, sued on the other note in the United States Circuit Court, and, at the December term, 1841, obtained a verdict, under the charge of Justice McLean, that the payment of a pre-existing debt was a sufficient valuable consideration to protect the holder, without fraud or notice. The defendant moved the court for a new trial, on account of such instruction; the court divided in opinion, and the motion was certified to the Supreme Court, and the motion failed.
    The case of John Swift v. George W. Tyson was tried in the southern district of the United States court for New York.
    This action was instituted on a bill of exchange, dated at Portland, Maine, on May 1, 1836, for $1,536 30, at six months, drawn by Nathaniel Norton and J. S. Keith, upon, and accepted by, the defendant; the bill having been drawn to the order of N. Norton, and by him indorsed, before it became due, to the plaintiff. The bill had been received from the drawer, N. Norton, in payment of a note made by Norton and Keith, which had been protested at the Bank of Maine. The acceptor resided in the State of New York, and the defense was, that the same, with acceptance of other bills, had been given for lands in Maine, the title to which was imperfect, of which lands the drawers represented themselves to be the owners, and, also, that the lands were falsely and fraudulently represented to be of good quality, and of great value. The plaintiff had received the bill without any knowledge of the consideration for which it was accepted. The defendant offered evidence of the bad quality of the land, and the want of *title to the same in the drawers of the bill, and that the representations of the drawers, as to the land, were false and fraudulent. Whereupon the plaintiff objected to the admission of such testimony, or any testimony as against the plaintiff, impeaching or showing the failure of the consideration on which the said bill was accepted. And the judges divided in opinion on the point of law, whether, under the facts, the defendant was entitled to the same defense to the action as if the suit was between the original parties to the bill; whether such evidence was admissible as against the plaintiff; which division and point of law was certified up to the Supreme Court, to be there finally decided.
    At the January term of the Supreme Court for 1842, this case was hoard, and is reported in 16 Pet. 1.
    The court decide;
    1. That there is no doubt that a bona fide holder of a negotiable instrument, for a valuable consideration, without any notice of the facts which implicate its validity, as between the antecedent parties, if he takes it under an indorsement, made before the same became due, holds the title unaffected by those facts, and may recover thereon, although, as between the antecedent parties, the transaction may be without any legal validity.
    2. The holder of negotiable paper, before it is due', is not bound to prove that he is a bona fide holder, for a valuable consideration, without notice; for the law will presume that in the absence of all rebutting proof; and, therefore, it is incumbent on a defendant to establish, by way of defense, satisfactory proof of the Contrary, and thus to overcome the prima facie title of the plaintiff.
    3. That section 34 of the judiciary act of 1789, which declares, “that the laws of the several states, except where the constitution, treaties, and statutes of the United States require, or otherwise provide, shall be regarded as rules of decision, in trials at common law, in the courts of the United States, where they apply,” has uniformly been supposed, *by the Supreme Court, to be limited in its application to state laws, strictly local; that is to say, to the positive statutes of the state, and the construction thereof, adopted by the local tribunals, and to rights and titles to things having a permanent locality; such as the rights and titles to real estate, and other matters immovable, and infra territorial in their nature and character. The section does not extendto contracts, or other instruments of a commercial nature; the true interpretation and effect of which are to be sought, not in the local tribunals, but in the general principles and doctrines of commercial jurisprudence'.
    Mr. Justice Story, delivering the opinion of the court in this case, says; “We have no hesitation in saying, that a pre-existing 
      debt does constitute a valuable consideration, in the sense of the general rule already stated, as applicable to negotiable instruments.”
    And again : “It is for the benefit and convenience of tho commercial world to give as wide an extent as practicable to the credit and circulation of negotiable paper, that it may pass, not only as security for new purchases and advantages, made upon the transfer thereof, but also in payment of, and as security for, pre-existing debts. The creditor is thereby enabled to realize, or to secure his debt, and thus may safely give a prolonged credit, or forbear from taking any legal steps to enforce his rights. The debtor, also, has the advantage of making his negotiable securities of equivalent value to cash. But establish the opposite conclusion, that negotiable paper can not be applied in payment of, or as security for, a pre-existing debt, without letting in all the equities between the original and antecedent parties, and the value and' circulation of such securities must be essentially diminished, and the debtor driven to the embarrassment of making a sale thereof, often at a ruinous discount, to some third person, and then, by circuity, to apply the proceeds to the payment of his debts.”
    The very question, in this case, has been, as above, fully settled by a respectable state court, and by the Supreme Court *of the United States. Inasmuch as the Supreme Court follows the state courts in the decision of all local questions, it is but right, so far as the general principles of the common law are concerned,, especially commercial law, that the state courts should be governed by tho Supreme Court; and this should be done, if not as a matter 'of absolute authority, at least good policy would require it. Otherwise, we will have the same question decided differently in the different courts, in the same state, and it will lead to various shifts and devices to sue in that court which will give the most favorable judgment. This would lead to injustice and confusion.
    And where can we look for tho rule of decision on such questions, with the same satisfaction, as to the Supreme Court of our own country? Good policy would require this, but does this question rest upon that ground alone ? I think not.
    At this time, bills of exchange and notes, in some form, constitute, in a great measure, the currency of the country, and, in various ways, represent the wealth of the land. Those instruments being indispensable in trade, ought not to be embarrassed in any respect; and, so long as the present mode of doing business is continued, it seems to me, that the negotiable paper, in the usual course of business, should pass as freely as bank notes, and, whether taken for a past debt, or a present consideration, should make no difference, or be inquired into. The object of such instruments is to supply the place of money, and that can not bo carried out fully only by putting them on the same footing.
    The only real argument attempted to be set up for the rule, as laid down in Coddington v. Bay, is this: that the party, taking the paper for a pre-existing debt, loses nothing if he (ails, and makes that a clear gain if ho succeeds; and this reasoning assumes, that the original cause of action remains, in every respect, unaffected ; and that the party may, and can, proceed upon that in the same manner as though he had not taken the new paper.
    *We can suppose a case of that sort,, but would it be the ordinary kind of case? I presume not; if taken in payment, the original debt is satisfied, at least until the security fails; if taken in payment, or renewal of an old debt, the old note is generally given up or canceled; and this last is the ordinary case of such paper.
    Undoubtedly there will be some hard cases; but it is better that some imjtrudent men, who put it in the power of any one else to appear to be the owner of paper, who, in fact, is not entitled to it, should suffer, than that the whole system of bills and notes should be embarrassed by exceptions in their favor. Besides, the consideration of paying an old debt it seems to me, ought to be as much favored as the contracting a now debt, or submitting to the operation of having the paper shaved.
    Will the court undertake to say, that it is not in the ordinary course of business to pay an old debt ? It is well observed, by the counsel for the plaintiff, in Swift v. Tyson, “that it was once the ordinary course of trade to pay debts, and should be yet.”
    Taking the weight of authority into the account, and the ground on which it rests, I think that this court should not hesitate to follow the rule laid down by the Supremo Court of the United States. In doing this, no one is injured, for it is only enforcing a good rule, that has, in some instances, been departed from; it is not adopting any rule which is to change any rights of property; and if it has a tendency to prevent one from parting with his name in a negotiable shape, it might, in that respect, operate beneficially.
    If the rule, as contended for, as laid down in Coddington v. Bay, be established by this court, where will the effect of it cease? If the holder of a negotiable bill or note can be met with the same defense that could be made to the original payee, from whom ho received it, what becomes of all that class of bills and notes made for the accommodation of some of the parties? None of the original parties to such paper could maintain any action on it.
    ^Shannon & Alexander, and Thomas Alexander, for defendant:
    The question arising in this case is whether the indorsement of a negotiable note, before due, and without notice, but on aceount of a precedent debt, will subject the indorsee to all the equities existing between the original parties.
    It is not denied that, as between indorser and indorsee, a precedent debt is a valid consideration; nor is it urged that the fact of the taking a negotiable note, by indorsement, for a precedent debt, constitutes a defense for the maker, at the suit of the indorsee; but it is claimed that this circumstance throws the indorsee back on the title of the indorser, and affects him by all the equitable circumstances existing between maker and payee.
    “ The liabilities of parties to negotiable paper have been fixed on certain principles which are,” or at least have been supposed to be, “ essential to the credit and circulation of such paper, and these principles originated in the convenience of commercial transactions.” 6 Pet. 59.
    The law was founded on commercial policy, and the liabilities of the parties on the law.
    It was supposed to be necessary, for the advancement of trade, that the most free circulation should be given to bills and notes, and by protecting third persons, who might receive such evidences of debt for a valuable consideration, and without notice, that free circulation was to be obtained. Then, going on the hypothesis that the foregoing principles are true, it is thought that the following propositions can be amply sustained :
    1. That the indorsement of a negotiable promissory note, before maturity, without notice, but on account of a precedent debt, is not such a transfer as ought to be favored in law, on the grounds of commercial policy.
    
    
      2. That such a transfer is not a taking for a valuable consideration, and in the usual course of trade, within the meaning of those terms, as applicable to this class of cases.
    *The rule of law is, that an indorsee, who receives a negotiable note, bona fide, before due, without notice, and for a valuable consideration, shall not be affected by the equities existing between the original parties to the note.
    The reason of this rule, as all the authorities agree, is, that the indorsee, in such case, having parted with his property, or money, on the faith of the maker’s promise to pay, and having incurred loss thereby, is entitled to protection; and, when one of two innocent persons must suffer, by the fraud of a third person, it is but just that he should sustain the loss who gave his name to the negotiable security, and permitted it to go into circulation. Chitty on Bills, 90 (9 Am. ed).
    In this ease, tested by the reason and spirit of the rule, it can not be difficult to come to a just conclusion, and we would have supposed that, were it not for some recent dicta of courts, the case would be plainly with the defendant in error.
    In the case of De La Chaumette v. Bank of England, 9 B. & C. 208, the plaintiff brought trover for a bank note, which had been presented to the bank, and by it detained, on the ground that it had been stolen. The court held, that the bank, having proven the note to have been stolen, it was incumbent on the plaintiff to prove that he gave full value for it.
    The principle on which this case was decided can be seen at a glance. Suppose the plaintiff to have been the thief, it is very evident, is it not, that he could not recover under any circumstances? Well, suppose him to have been the indorsee of the thief, and that he had not given a valuable consideration for the bill, the question then turns on the equities of the parties, and the question, 11 Did the indorsee part with his money or his property, and did he incur loss, or create'new responsibility ? ” naturally arises, and is determined in the negative; and, from this state of facts, it is adjudged that the plaintiff can not recover. Thus, the plaintiff was thrown back on the title of the indorser, as it were, and the onus prdbandi lay on the plaintiff to prove a full value paid; and unless he done so, that he had no superior equity. Then, it may be asked, has the plaintiff in error proved that he paid full value for this *note ? If he took the note for a precedent debt, he has paid no value. Tie has parted with no money, or other property ; and, it was no discharge of the precedent debt, Unless tho note was not only taken in its payment, but at the time it was expressly agreed between him and Benham that it should be an absolute discharge of the debt. Tho taking of this note, then, leaving tho precedent debt precisely as it stood before, so far as the record shows, the plaintiff in error is not within the reason or protection of the rule of law in question.
    A bill of exchange, or promissory note, either of the debtor or any other person, is not payment of any precedent debt, unless it be so expressly agreed. 5 Johns. 68; 7 Johns. 311; 9 Johns. 310; 8 Johns. 389; 11 Johns. 513; 12 Johns. 409; 6 Cranch, 264; 12 Pet. 57; 1 Salk. 124; 8 Ohio, 528; 8 Conn. 472.
    The record in this case shows no such agreement, therefore tho plaintiff in error is not an indorsee for a valuable consideration, within the reason of the rule ; and we wish it to be borne in mind by the court, that a note in such case, according to the authorities, although taken in payment of a precedent debt, is not payment unless so expressly agreed at the time, and then only on the principle that an individual has a right to “discharge his debtor without any consideration.” 6 Cranch, 254.
    “ A distinction is also taken between a third person, who takes a note or bill from another, and has actually advanced goods or money on the credit of tho bill or note, and where he has not done so, but is merely a creditor on a former account. In the latter case, he is frequently to be considered merely as an agent, and .not a holder for value, and must therefore prove his debtor’s right to the security, where it has been unduly obtained, or lost or stolen.” Chit. Bills, 92, 9 Am, ed.
    The jury having found that the note in question was fraudulently obtained, is not the last quotation from Chitty directly in point ? It most certainly is, if law ought to settle this ^question, for this is the identical kind of a case contemplated by the learned author.
    The statute (Swan’s Stat. 589) enacts, “ that no bill of exchange, or promissory note, that shall be drawn or made after the passing of this act, shall, though it may have been given for a usurious consideration, or upon a usurious contract, be void in the hands of an indorsee, for evaluable consideration, unless such indorsee had, at the time of indorsement, actual notice of such usurious consideration,” etc.
    This statute, the court will perceive, was passed to alter the common law on that subject; and after its passage, in an action on a bill or note drawn or made after it was passed, by an indorsee against the maker, if the defendant should succeed in showing that such bill or note was founded on a usurious consideration, then the plaintiff was required to show that he gave value for it. Chit. Bills, 110, 9 Am. ed.
    In the case of Vallance v. Siddell, 2 N. & P. 98, the precise question was raised, whether an antecedent debt was a valuable consideration within the meaning of the term as used in the statute (p. 589, 3, C. 93), and the court there decided that the statute only protected bona fide holders of bills or notes tainted with usury, who have discounted such bills or paid valuable consideration for them at the time of indorsement, “and does not include a bona fide holder who has taken such bill in payment of an antecedent debt." See also Chit. Bills, 111, a, note at the bottom, 9 Am. ed.
    Hero, then, this identical question has been settled by the highest judicial tribunal of England, a country of all others in the world the most famed for its legislation and its judicial decisions in favor of commercial advantage; and in accordance with this principle, cases have been decided in the English courts for more than two hundred years.
    In Heath v. Samson, 2 B. & Ad. 291, it was held that in all cases where, from a defect of consideration, the original payee can not recover, the indorsee, to recover, must prove on the trial that ho gave value for the bill or note. The same is held in 4 B. & C. 325. *The case of Patterson v. Hardover, 4 Taunt. 115, was an action by an indorsee on a bill of exchange, which, or the proceeds of which, had been embezzled, and for which the defendant had received no value. In this case Judge Heath says: “That even in this case of simple loss consideration must be shown, as in Samson v. Weston. In the case of Miller v. Race, Grant v. Vaughen, etc., there was proof that a valuable consideration had been paid by the holder, but not so in this case. If it were in no case necessary to prove consideration paid, all the banking houses in London would be converted into receptacles for stolen bills."
    
    And Mansfield, in the course of the argument (in the same case), said it had been ruled over and over again that consideration must be shown.” And Judge Heath said: “ The law had been so settled these one hundred and fifty years.”
    In the case of Fancourt v. Bull, 1 Bing. N. C., 27 Eng. C. L. 543, 681, the court say that a lawful possession and indorsement,, unless the indorsement was for value and without notice, would give the indorsee no better title than this indorser had, and not a title against the world. In this case, it will be observed, that the bill was given for a pre-existing debt.
    In Chitty on Bills, 937, 938, the author says that “in an action on a bill of exchange, by an indorsee, if it appear that the defendant was defrauded out of it, or made it under duress, or received no value for it, the plaintiff must be prepared to prove for what, value he became the holder.”
    In Collins v. Martin, Chief Justice Eyre says that “if it can be proved that the holder gave no value for the bill, then, indeed, he is in privity with the first holder, and would be affected by everything which would affect the first holder. This is saying, ‘You have the title, but you shall not be heard in a court of justice to enforce it against good conscience.’ ”
    
    Numerous other cases might be referred to in the English reports, but it is unnecessary.
    It would appear, then, that if this cause were pending in “judicial tribunals ” of that country, the plaintiff in error would ^certainly fail. A precedent debt is not a valuable consideration, within the meaning of that term, there.
    Then why should we, in Ohio, extend a law founded on commercial policy further than England? Their interests are, in the-main, commercial, ours agricultural. It is from England that Ohio and her sister-states derive their notions of commercial law, and is it reasonable, or can it be good policy for us to go further in that direction than England ?
    In consonance with this view of the case, New York, one of the greatest and most commercial of our sister states, has regulated her policy. That a precedent debt is not a valuable consideration, within the meaning of the term, as applicable to this class of cases, has been decided and approved again and again in the highest court of that state. 3 Johns. Ch. 260, 263; 6 Wend. 622; 9 Ib. 172; 10 Ib. 85; 12 Ib. 600; 13 Ib. 606; 16 Ib. 661; 21 Ib. 499, 500.
    
      In 8 Ohio, 528, the court decide similarly the same question.
    In the case of 11 Conn. 388, the note was indorsed to the plaintiff, in part, for the payment of a precedent debt, and in part for goods delivered at the time. Consequently, the question now under consideration was not properly before that court. And in 5 Conn. 521, that court having made what we claim, at least as would seem, a decision in favor of the doctrine we advocate, the case in 11 Conn, ought not even to be considered as the judgment of that court on the question at issue here. The case in 11 Conn, was decided correctly, from the facts presented, because the plaintiff had parted with his goods on the faith of the defendant’s promise, and thus had given value for the note. The dictum in 11 Conn, is based principally on the cases of Payson v. Coolidge, and Townly v. Sumrall. The court will perceive that, in the first of these cases, founded in 2 Wheat. 66, 73, that the defendant had no defense, either as against the payee or indorser, and no such question thought of, as presented to the court in this case. And, in the latter case, found in 2 Pet. 170, 182, a full and valuable consideration was given at the *time for the bill. And if the question did arise, in either of these cases, it was improperly up; but it would seem that the court had no idea of deciding this question.
    ' Just so in the case of 16 Pet. 1. The bill was, by Norton, indorsed to the plaintiff, in payment of a note made by Norton and Kei'h, and not in payment of a note made by Norton alone. Thus the court will at once perceive, that the plaintiff incurred risk, Norton alone being liable on the indorsement. And it also appears, that the note of Norton & Keith, for which the bill indorsed by Norton was taken in payment, was canceled, thus bringing even this case within that of the Bank of Salina v. Babcock, 21 Wend. 499. “ Such cancellation is equivalent to paying value at the time, and precludes all defense as between the original parties.” 21 Wend. 499. And, for anything that appears, this was what was meant by the court, in the case in 16 Pet. 1. But, if in this we are mistaken, all that we will venture to say, is, that the opinion of the court is against good conscience, and not reconcilable with adjudged cases, and that the supreme court of no state ought even to be asked to make any decision, inequitable in itself, and against well-established principles of law, merely for the purpose =of having them coincide with the federal courts, much less to reverse a decision correctly made for such purpose. This court decided the case of Riley et al. v. Johnson, in 8 Ohio, strictly according to the reason and spirit, as well as the very terms of the rule of law governing this class of cases; and, by applying the only proper test, it was adjudged that a precedent debt alone was not such a consideration as would make the equity of the indorsee superior to the maker.
    “ There are but two cases in which a bill or note is void in the hands of an innocent indorsee, for valuable consideration, and these cases are, when the consideration in the instrument is money won at play, or it be given for a usurious debt." 3 Kent’s Com. 79, 3 ed.; 1 Strange, 155; Doug. 636, 736; 3 Johns. 206, 1 Bay, 223. However, this principle has been modified in England and New York, by statutory provisions ; but would, no *doubt, be the law of this state, in the absence of statutory enactments, if we had here usury laws.
    Here, then, we have a class of cases in which a defense may be made, even against an innocent indorsee, who has paid full value, and that, too, by the maker who has received a full value for the .security, less the excess beyond legal interest, and who'is a party to the usurious contract, made in violation of the law. If this class of cases should be favored as an exception to the general rule, much more should be favored that class where the indorsee receives the security in payment of a precedent debt, and consequently without paying any consideration whatever, with notice, at least of the law, and where the maker has been entirely defrauded out of it — he therefore making his defense. And with what justice can it be claimed that commercial interests are more injuriously affected in this latter case than in the former?
   Wood, J.

The reasons assigned for the motion are :

1. That it was proved, on the trial, that the note on which the suit was brought, was assigned by Benham, the payee, to the plaintiff, before due, and without notice of any matter of defense.

2. That the court instructed the jury, if the note were so assigned, and in payment of a pre-existing debt, the defendant would be entitled to make any defense against the note in the hands of the plaintiff, that he could make if the suit were in the name of the payee.

This motion, it will be seen, therefore, presents the question for the consideration of the court, whether the transfer of a negotiable note, before due, and without notice, and the consideration of the transfer a precedent debt, subjects the indorsee to all the equities existing between the original parties ?

The identical question was before this court in 1838, in the case of Riley & Van Amringe v. Johnson et al., 8 Ohio, 526. It was then hold, that to protect the indorsee against the equities of the maker, the consideration must be actual; the holder must have incurred loss, by giving credit to the paper, or by paying a fair equivalent for it. If neither was done, while the condition of the holder was improved, if a recovery was had, and the note taken merely for a pre-existing debt, by a failure to recover, nothing was lost, the condition of the plaintiff remained without change. The same question had been decided in the same way by the Supreme Court of New York, 10 Wend. 86. And in the court of errors, in the same state. 20 Johns. 637. And the rule-there was considered as settled upon a safe and unanswerable foundation. Several adjudications followed in that state, in which the same doctrine was unequivocally maintained. 12 Wend. 600; 13 Ib. 605. Judge Story, however, thinks it questionable whether the above authorities carry the principle to the extent which has been claimed, though he says, from that period, for a series of years, it seems to have been held by the Supreme Court of that state, that a pre-existing debt was not a sufficient consideration to shut out the equities of the original parties, in favor of the holder. Recent cases, however, in the same tribunal, have shaken in a measure the authorities to which I have referred. 21 Wend. 490; 24 Ib. 115; 1 Hill, 512; 2 Ib. 140.

In 16 Pet. 1, the question was decided by the Supreme Court of the United States at the January term, 1842. The authorities, English and American, are critically and ably examined ; and, in giving the opinion of the court, Mr. Justice Story remarks : We have no hesitation in saying that a pre-existing debt does constitute a valuable consideration, in the sense of the general rule, as applicable to negotiable instruments. That it is for the benefit of the commercial world to give as wide an extent as practicable to the credit and circulation of negotiable paper, that it may pass, not only as security for new purchases, and advance made upon the transfer thereof, but also in payment of, and as security for, pre-existing debts.”

It is believed that the law, as thus settled by the highest judicial tribunal in the country, will become the uniform rule of *all, as it now is of most of the states. And, in a country like ours, where so much communication and interchange exists between the different members of the confederacy, to preserve uniformity in the great principles of commercial law, is of much interest to the mercantile world.

In the case of Riley et al. v. Johnson et al., 3 Ohio, 526, the plaintiffs were not entitled to recover, aside from the principle which I have before stated, as laid down in that case. The evidence was irresistible, that the notes on which the suit was founded, were not received by the plaintiffs, bona fide, but that the entire transaction was founded in fraud.

The point, however, being made and decided that a precedent debt was not a sufficient consideration to protect the holder, without notice, against the equities of the original parties, that decision is overruled, and the reverse now holden to be the law.

In the instructions given to the jury, in the case at bar, the court, in our opinion, erred, and a new trial must be awarded, with costs to abide the event of the suit.

New trial awarded.  