
    JOHN J. PHILBRICK, Plaintiff, v. HENRY DALLETT and Others, Defendants.
    The draft or bill which was''the subject of this action against the ceptors of the same was drawn by the firm of Requebne & Co., a delivered to plaintiff with written directions of said firm to coll the same and hold the proceeds subject to the order of M. 1 quelme. In the absence of proof showing an appropriation M. Requelme of the said proceeds to plaintiffs use, the plaintiff appears in the character, and held the position of, a mere holder possessing authority to collect the draft, and hold the proceeds for the benefit of the true owner, and does not establish that plaintiff was a bona fide holder of commercial paper for value paid on the faith thereof.
    And-in such a case evidence offered by the defendants, the acceptors, as to a failure of consideration between them and the drawers, and as to a fraud being practiced upon them by the drawers, by means of which they were induced to accept the draft, was clearly admissible, and its exclusion by the court below was clearly an error.
    Even upon plaintiff’s theory, claimed and based upon the evidence, that he took the draft before acceptance for the prior debt of M. Requelme, this evidence was admissible. From the evidence, as it stood, when the proposed evidence was offered by defendants, it appeared that plaintiff took the draft before acceptance for an antecedent debt, and. without parting with any value upon the faith of either the draft or its acceptance, and, therefore, evidence offered by defendants to show that their subsequent acceptance was procured wholly by the fraud of the drawers, and was in fact wholly without consideration, should have been received.
    The respective positions and obligations of the drawers, acceptors and bona fide holders of commercial paper, and the cases and adjudications thereupon in the State of New York, fully reviewed.
    The doctrine that when a note has been taken for a pre-existing debt, that it is held bona fide, & c., as held in Swift ®. Tyson (16 Pet. 1), has not been followed in this State. A contrary rule has been firmly maintained, both at law and in equity, by a long and uninterrupted series of adjudications and is beyond question the law of the State (See the opinion of the court for the numerous decisions, post).
    
    Review of the following decisions, of a comparatively recent date, upon this question: McBride v. Farmers’ Bank, 26 N. Y. 450 ; Commercial Bank of Clyde v. Marine Bank, 6 Abb. Pr. N. S. 33, and 3 Keyes, 337; Bright v. Judson, 47 Barb. 29; Farmers’ & Mechanics’ Bank v. Empire State Stone Dressing Co., 5 Bosw. 289.
    Before Barbour, Ch. J., and Freedman, and Sedgwick, JJ.
    
      Decided May 4, 1872.
    Case and exceptions to be heard in the first instance at general term.
    
      The plaintiff, a resident of Key West, Fla., sues upon a draft of ten thousand dollars, drawn by Requelme & Co., of Havana, upon and accepted by the defendants, composing the firm of Dallett & Son, at Philadelphia, Pa., to the order of the plaintiff, and dated February 36, 1869.
    The answer contains a general denial of each and every allegation of the complaint, except such as thereinafter specifically admitted, and then set's forth :
    1. That the drawers obtained the acceptance by fraudulent misrepresentations, upon which defendants relied and of which the plaintiff was cognizant before such acceptance was made.
    3. That there was a failure of consideration between the drawers and defendants, of which also the plaintiff knew before acceptance, and
    3. That the plaintiff never owned the. bill or acceptance at all; that he never parted with any value or consideration for it, and that it had always remained the property of Requelme & Co., so far as any property in it could be said to exist.
    Upon the trial before the court and a jury, plaintiff, as a witness on his own behalf, produced the draft, which was read in evidence, and proved its acceptance by defendants on March 18, 1869, and the interest due thereon.
    The question put to him, ‘ ‘ Are you the owner of tha1 i note ?” the court excluded as unnecessary, as possession of the draft was sufficient.
    The court also declared it unnecessary for the plaintiff to prove the consideration of the draft in question,
    Plaintiff thereupon rested.
    The defendants, to maintain the issue on their part, called the plaintiff as a witness on their side, and iron his testimony it appeared that some time in February 1869, Mr. Requelme came to Key West, and, while there, purchased from plaintiff a sunken steamer callee the Ruby, for which he promised to send plaintiff either a draft or the cash within ninety days ; that no bill of sale was made of the vessel, nor any record concerning her in the custom house or any other office of the United States government; that Mr. Requelme thereupon left for Havana, and thence remitted the draft in question, which had not yet been accepted ; that the draft came accompanied by a letter which read as follows
    “Havana, 26thFebruary,’69.
    • “John Jay Philbbiok, Esq.,
    “Key West.
    “ Bear Sir :
    
    “ Herewith,
    $10.000 in cy. 60 days, on
    “Dallétt & Son, Phila.,
    which you will please collect and hold at the disposal of-our Señor Don Manl. Requelme.
    “ We are, dr. sir,
    “ Yours, very truly,
    “M. Requelme & Co.”
    That plaintiff kept the draft on hand for about two weeks, and then sent it to a Hew York house for acceptance and collection; that the steamer so sold was never moved, that she remained sunk, and at the time of the commencement of this action was in the same state that she was sold in, and that no storm had occurred to hurt or injure her. Plaintiff insisted, however, that he had delivered her over to M. Requelme at the time of the sale.
    The defendants next called Henry C. Dallétt as a witness, and offered to prove by him the real nature of the transaction between the firm of M. Requelme & Co. and defendants, with a view of showing that the draft was a fraud upon the defendants.
    The court excluded the proposed evidence, and defendants excepted.
    
      The defendants then offered to prove that there was no consideration between the drawers and acceptors, claiming to have laid the foundation for such proof by showing that the alleged consideration between the plaintiff and the drawers of the draft was prior to the acceptance of the draft by the defendants, and was not on the faith thereof.
    The court excluded the evidence, holding, that it would assume that the proof offered would establish the facts sought to be proven, but that they were not sufficient, as„ the case stood, to defeat a recovery on the draft. Defendants excepted.
    Defendants finally asked permission to go to the jury on the question whether Philbrick, the plaintiff, ever parted with any value for the draft.
    The court denied such request, and defendants excepted.
    The court directed a verdict for the the plaintiff for the full amount of the draft, with interest—eleven thousand seven hundred and eighty-five dollars—to which direction defendants excepted.
    The court ordered defendants’ exceptions to be heard in the first instance at the general term, and the entry of judgment on the verdict to be suspended in the mean time.
    
      Wm. W. Goodrich, of counsel for plaintiff, argued:
    I. The main question in the case is that raised by the exception, whether the receipt of the draft by the plaintiff for value before its acceptance, and its subsequent acceptance by the defendants, render the plaintiff an innocent holder for value as against the defendants. The only case which I have found that in any degree makes this questionable, is the case of Farmers’ and Mechanics’ Bank v. Empire Stone Dressing Company, 5 Bosw. 275 (1859), but the ■ remarks of the court uuon the subject here involved are obiter dicta, the court having already decided that the acceptances were made by the secretary of the defendants without authority. The court stated that the holders of a bill, who had received it from the drawer before its acceptance and given value for it, after which it was accepted by the drawee, could not recover against the drawee, because he had not parted with value upon the faith of such acceptance. Mo authorities are cited in support of this proposition. In the note it seems that on a second trial it appeared that the draft was received from the drawers and passed through the form of a discount, yet this was done under an agreement that the money should not be and was not paid over till the bill was accepted, and on this ground the holder obtained a judgment.
    II. The case at bar differs in material particulars from this case. The draft was sent to the plaintiff in payment for the steamer, and was taken in the faith that the defendants would accept it. Mow, while it is indeed true that the plaintiff could not have recovered from the defendants upon this faith, if the defendants had not accepted, yet it is equally true that the instant the defendants did accept the draft, it became binding upon them, and they cannot dispute its validity.
    III. This dictum, of the court in 5 Bom., is at variance with the law as laid down before and since that time. Where a person discounts a draft before its acceptance, its subsequent acceptance before maturity binds the acceptor in the same manner as if he had accepted it before the discount (Mechanics’ Bank v. Livingston, 33 Barb. 458, 1861). This case is exactiyin point with the case at bar, and is subsequent to the case in 5 Bosw. The court say: “In case of nonacceptance, the drawers would be immediately liable. But by accepting the draft, the bank is postponed and a forbearance is necessarily grab ted, which is a sufr ficient consideration for the acceptances” (see also Burns v. Rowland, 40 Barb. 368, 374).
    IV. An agreement to forbear for a time, is a valid consideration for a promissory note (1 Pars, on Cont. 366, 367, and note, and numerous cases cited ; 1 Pars, on Bills, 198; Jennison v. Stafford, 1 Cush. 168; Watson v. Randall, 20 Wend. 201; Meade v. Merchants’ Bank, 25 N. Y. 149). So also the waiver of any legal right (1 Pars, on Cont. 369, and cases cited).
    V. The payee is a stranger to the acceptor, and if the acceptance be absolute in its terms, and the bill is received by the payee in good faith and for value, it is no answer to an action by him that the acceptor received no consideration, or that there is a failure of consideration. “And it is immaterial for this purpose whether the bill is accepted while in the hands of the drawer, and at his request, or has passed into the hands of the payee before acceptance and is accepted at his request” (1 Pars. on Notes .and Bills, 180; Robinson v. Reynolds, 2 Q. B. 196). So, if A., for a consideration moving from B. to him, authorizes B. to draw upon C., to a certain amount, and B. draws accordingly, and C. accepts, C. will be as absolutely bound by his acceptance to B., the/drawer, as to any subsequent bona fide holder for value (1 Pars. Notes and Bills, 183 ; Pillans v. Van Meisop, 3 Burr. 1663).
    YI. The plaintiff would have had the right, on the presenting and non-acceptance of the draft, to have taken immediate proceedings against the drawer for ¿ damages for non-acceptance, or to recover on the draft. But the acceptance forms a new contract between the acceptor and the holder, by which all remedies against the drawer were suspended for sixty days. This was a new and sufficient consideration between the acceptor and the holder (Mechanics’ Bank v. Livingston, ante; Burns v. Rowland, ante). This question was not decided in the case in the 5th Bosworth. The court stated that “the defendants are not to be held by the unauthorized act of their secretary, merely because the plaintiff, bat for such act, would have sought earlier redress.”
    VII. The defendants would not be entitled to show a failure of consideration between themselves and Requelme & Co. in any event. They proved that the plaintiff received this draft from Requelme in payment for the Ruby. This was such a, consideration as makes the plaintiff an innocent holder for value. It is difficult to see how this holding can be defeated by the fact that the defendants did not accept till several days afterwards. They did accept; and even if fraud had been shown on the part of Requelme, the plaintiff, in that case, would only have been required to prove that he gave value, and this the defendants’ counsel, himself, proved conclusively. The defendants have nowhere offered evidence that the plaintiff received the' draft in bad faith, or with knowledge of fraud on the part of Requelme, or even of a failure of consideration (see Goodman v. Simonds, 30 How. U. S. 343).
    , VIII. But it should not be forgotten that bills of exchange are commercial instruments in the strictest sense, and are always regarded as favored instruments, as well on account of their negotiable quality as their universal convenience in mercantile affairs (Goodman v. Simonds, 20 How. U. S. 343, 364). The bill in question is a foreign bill. If discounted for the drawer at Havana or Key West, and subsequently accepted by the defendants at Philadelphia, it becomes a negotiable instrument in the hands of the holder for value; other wise the benefit and usefulness of this class of paper in commercial transactions must entirely fail. The acceptance cures all defects, and acknowledges that the acceptor has funds of the drawer in his hands. The acceptor is thereby estopped from denying his liability. In the case of Parsons v. Armor (3 Peters U. S. 428), the court made use of this language: “Every one knows that a bill of exchange is the substitute for the actual transmission of money by sea or land. Power, therefore, to draw upon a house in good credit, and to throw these bills upon the market, is equivalent to a-deposit of cash in the vaults of the agent.” The court here assumes that such bills may be sold before acceptance ; the question of the right to draw is • cured by the subsequent acceptance, and the acceptor can not question the title or the good faith of the holder who has given value in good faith for the bill before its acceptance. This rule is absolutely essential to the' value of foreign bills of exchange where long distances intervene between the drawer and drawee. The almost universal custom is to discount a foreign bill before its acceptance. Take, for instance, the case of circular drafts drawn by numerous houses in New York on their correspondents in London, which drafts are purchased in New York, for the purpose of carrying funds for traveling. Will it be argued, for an instant, that when the drawee accepts such a draft, he can refuse its payment on the ground that the holder did not receive it on the faith of the acceptance by the London house. The possibility of such a defense would totally destroy this method of business transactions.
    IX. An analogous principle is to be found in the case where a person draws and delivers to the payee a check upon a bank—which bank subsequently certifies the check. The payee can recover from the bank upon this certification (Farmers’ & Merchants’ Bank v. Butchers’ & Drovers’ Bank, 16 N. Y. 125; Merchants’ Bank v. State Bank, 10 Wall. 604).
    X. The defendants themselves proved the consideration passing between the plaintiff and Bequelme, and the court properly excluded all evidence relative to a failure of consideration between Bequelme and the defendants. The acceptance, once made, if the bill has been delivered to the holder, is irrevocable (Story on Bills, § 252; Swift v. Tyson, 16 Pet. U. S. 1, 19, 22). (This leading case fully reviews the law upon this subject, and establishes conclusively the doctrine contended for.)
    XI. It may be contended that the draft in question was given for a pre-existing debt, because it was not transmitted to the plaintiff until several days after the sale of the steamer for who.se price it was given. This, however, would not constitute a defense, the law being entirely settled that when a note is given for a preexisting debt, it is held bona fide and without notice (Swift v. Tyson, 16 Pet. 1; Bank of Salina v. Babcock, 21 Wend. 499 ; Youngs v. Lee, 12 N. Y. 555).
    XII. As to the refusal of the court to admit the deposition of the plaintiff taken before trial, the deposition was. properly excluded. 1. The defendant had called the plaintiff as his own witness, both before and at the trial, and he had no right to impeach him by showing that he had made contradictory statements (Pickard v. Collins, 23 Barb. 444). 2. The deposition, was offered for a specific purpose only, viz., to show that there was no consideration between Bequelme & Co., the drawers, and Dallett & Co., the acceptors. For this purpose it was clearly inadmissible, the defendants having already proven by the witness that he was a bona fide holder for value given before maturity.
    XIII. The court properly excluded the question at fol. 38, as to what the plaintiff had testified on such former examination. The only way to prove the former written statement would have been to introduce the deposition itself. A witness cannot be asked to give the contents of a written paper signed by him. He may be asked whether he wrote or signed the paper containing the declaration, but not to state its contents (1 Greenl. Ev. §§ 463, 465). Such a question, moreover, seeks to prove by parol the contents of a written instrument.
    XIV. The court properly refused to allow the defendants to go to the jury on the question whether the plaintiff ever parted with value for the draft. The defendant himself proved that value was given for the drafts, and there was no contradictory evidence on the part of the • plaintiff. Indeed, the court, on this very ground, prevented the plaintiff from going more particularly into the question of consideration. Besides, the acceptance sixty days after sight postponed the plaintiff’s remedies, and was sufficient consideration.
    
      Joseph J. Marrin, of counsel for defendant, argued:
    —I. To entitle one to recover upon an acceptance (which is otherwise invalid) on the ground that he is a bona fide holder for value, it must appear that he parted with value upon the faith of such acceptance. This principle was laid down by the" general term of this court in the case of Farmers’ and Mechanics’ Bank v. Empire Stone Dressing Company, 5 Bosworth, 290. This authority has never been in any manner overruled or questioned, and when the defendants entered upon the trial of this action, they had a right to rely upon it as established law, which a judge sitting at nisi prius would deem himself bound to follow, and according to which they might, in all safety, shape the introduction of their testimony and the management of their case. They did rely upon it; and, in order to prevent any subsequent attempts to change or alter the facts, they began by proving by the plaintiff himself, that whatever value he claimed to have given for the draft, was given by him before the existence of the draft.or of the acceptance, and, consequently, that he did not part, and could not have parted, with value upon the faith of the acceptance. Having thus established, in a manner which could not beafterwards contradicted, one of the requisites of this branch of their defense, the defendants were proceeding to prove the other, to wit, that by reason of fraud and lack of consideration, the acceptance was invalid, when the court disallowed this testimony, declaring it would assume it to be true, and thereupon directed a verdict against defendants, subject to their exceptions. This was manifest error. In the case above cited, the bona ftdes of the holders was unquestioned. The bank had actually paid out its money in discount of the bills. Still, the rule was applied. In the case at bar, the good faith of the holder was more than doubtful, the value he claimed to have parted with was found, after the expiration of three years, to be still in his possession, and the written testimony showed that he did not receive the draft as owner, but that he was directed to collect the money and hold it for the drawer. The rule above laid down is founded on equity and correct principle, and may be said to be elementary law. It is of daily application'in cases of the more familiar form of negotiable paper, promissory notes; and the mistake that was committed was due, no doubt, to the hurry of the trial at one of the most crowded terms of the court. The acceptor of a bill is the same as the maker of a note ; and the drawer the same as the indorser. Now, if A. induce B. to deliver him merchandise on his promise to give him at a future time C.’s note, and then, by a false and fraudulent representation that he is just then sending to C.’s store goods, which, in fact, he sends and sells elsewhere, induces C. to make his note, and then indorses it to B., it is very evident that B. has trusted nothing but A.’sword, and that C. is not bound, because B. parted with nothing on C.’s promise which was not then in existence, and B. is no worse off than if 0. had declined to give A. his note. Such has always been the law ; and it simply means that Peter shall not be robbed to pay Paul, in cases where Peter has not induced Paul to give credit on his name. The rule of law that there is no obligation without consideration, is essentially the same respecting notes or bills as any other form of promise. And, if, in the case of a bona fide holder, in the course of trade, for value given on the faith of E.’s note or acceptance, the law, to protect such holder from B.’s contradicting the words “value received,” written above his promise, .assumes a consideration to exist, it is for the reason that such holder has been induced to give value on the faith of B.’s written promise as maker or acceptor, which the holder had before him when he gave such value. If Philbrick ever parted with any value, he did not part with it on the faith of the acceptance ; and no case could come more clearly within the authority cited and the principle therein confirmed, that the present one.
    II. The court erred in refusing to submit the case to the jury. The answer distinctly put in issue plaintiff’s title to the draft; and whether he ever parted with value for it or owned it, was a question purely of fact and belonged to the jury to determine. The very letter which conveyed the. draft showed that Philbrick did not own the draft, but was merely an agent to collect the proceeds and hold them for the benefit of another. This evidence overthrew the naked presumption arising from possession, since it defined the possession to be for the benefit of another than Philbrick. This letter was the only unbiassed testimony on the question of ownership. It was, moreover, the only direct testimony upon this point; for defendant’s counsel, guided in his examination of the plaintiff by the light of a former trial of the case, distinctly avoided asking the plaintiff whether he ever gam any consideration, and confined his inquiry to the time at which the plaintiff claimed that the consideration passed, if it passed at all. If it be admitted, for the sake of argument, that any greater force than this can be given to the plaintiff’s testimony, the question of his paying value, of his being any more than the mere agent of a man who had no claim, on account of his fraud and total lack of consideration, was a question for the jury. Ko such letter as Bequelme’s was ever heard of in a transaction such as Philbrick claims ; and this letter would have been conclusive with a jury of business men, accustomed to deal with facts and with the ordinary and natural course of commercial occurrences. The force of this letter was increased by Philbrick’s refusal to state whether he demanded or got any explanation of it; by the fact that he never parted with the vessel at all; and by the further fact that, although the draft was payable sixty days after sight, Philbrick held it for two weeks before he forwarded it for acceptance, thus losing the interest on ten thousand dollars for that time, if the draft had been his, and postponing, for that length of time, its maturity.
    III. It was error in the court to reject the testimony proposed to be got from the plaintiff, of his previous sworn declarations, that there never was any real delivery of the vessel or any consideration given by him. The objection that the plaintiff was defendant’s witness is an erroneous assumption of fact and of law. The rules of evidence preventing the contradiction of one’s own witness, were framed when parties were not allowed to testify, and can have no application to an adverse party called as a witness. The reasons of the rule are, that it is not fair to a third person, who has no personal interest in a controversy, to call him as a witness on the presumption that he is in your favor, and then seek to contradict him ; and, further, that it might lead to the corruption of testimony, by allowing one to introduce another to testify in his favor and, if the latter afterwards testified according to his oath, to contradict him by his previous statements of what he would swear to. Cessante ratione legis, eessat ipsa lex. A party is, of necessity, Ms own witness, and never can be anytMng else, and never can be presumed, either on or off the stand, to make any statement against his own interest, unless true. The general sense both of the bench and bar is, that an adverse party on the stand is always to be treated as an adverse witness, because he is, of necessity, the most adverse of all witnesses, and the rules of cross-examination apply.
    IV. It was error in the court to exclude the sworn declarations of plaintiff, previously made, by which defendants sought to prove that the vessel in question was never delivered by the plaintiff to Requelme, the drawer, and no consideration passed between them. The court had previously ruled, when refusing to al-' low defendants to prove these declarations by the plaintiff himself, that it would allow proof of these declarations afterwards, but refused when they were offered.
    V. It was error on the part of the court to prevent the introduction of the testimony showing fraud against the defendants, saying that it would assume it. The testimony being admissible, the defendants had a right to it; because, from the peculiarity of the facts in this case, it had a very important bearing on the question of Philbrick’s ownership of the draft.
   By the Court.—Freedman, J.

In excluding defendants’ proposed evidence as to fraud by the drawers upon them, by means of which they were induced to accept the draft, and as to a failure of consideration between them and the drawers, the learned judge who presided at the trial clearly erred. He probably assumed that plaintiff had sufficiently shown himself to be a bona fide holder of commercial paper for value paid on the faith thereof. But such was not the fact. The sale of the steamer Ruby being a transaction between the plaintiff and M. Requelme individually, the plaintiff, under the direction of the firm of M. Bequelme & Co., contained in the letter accompanying the draft, to collect the samé and hold the proceeds subject to the order of M. Bequelme, and in the absence of proof showing an appropriation by M. Bequelme of the said proceeds to plaintiff’s use, appeared, so far as the evidence went, in the character of a mere naked holder possessing authority to collect for the benefit of the true owner; especially as the court had, at an early stage of the trial, excluded as unnecessary the proof offered by plaintiff to establish actual ownership, and had ruled proof of possession to be sufficient.

Even upon plaintiff’s theory, however, that he took the draft before acceptance, for the debt of M. Bequelme, the evidence was admissible. In such case, and as the evidence then stood, plaintiff took the unaccepted draft on account of an antecedent debt without parting with any value upon the faith of either the [draft or its acceptance, and defendants were not precluded from showing that their subsequent acceptance was procured wholly by the fraud of the drawers, and [was, in point of fact, wholly without consideration. Ghat wa.s one of the very issues raised by the answer, land, if established, as we must assume it would have been but for such erroneous exclusion, would have last the burden of proof upon the plaintiff to establish that he was an innocent actual owner and holder óf the ilraft for value paid on the faith of its acceptance.

I As against the holder of a draft, the acceptor, as a general rule, stands in the same position as the maker Bf a promissory note, and the drawer the same as the Endorser. By his acceptance the acceptor admits that Be has funds of the drawer in his hands to pay it. He B, in such case, regarded as the principal, and the ■rawer as his surety, and the accepted draft imports I debt due from the acceptor to the drawer, which is assigned to the payee. The instrument, being one of those which, on account of their negotiable quality and universal convenience in mercantile affairs, are specially favored by the law, if A., in the course of trade, parts with value on the faith of B.’s acceptance, the law, to protect A. as an innocent holder for a valuable consideration, against B.’s contradicting the words “value.received,” written above his promise, presumes a consideration to exist, and B. will not be permitted to overthrow such presumption by actual proof to the contrary.

But this rule applies only to a bona fide holder for a valuable consideration, and the doctrine as to what constitutes a person, such bona fide holder for value again varies in cases presenting a wide and marked distinction.

Thus, in Cole v. Saulpaugh (48 Barb. 104), anc Schepp v. Carpenter (49 Id. 542), the holder of an ac commodation note, which had been given by the make: without restriction as to the manner in which it shouh be used by the payee, was held to be a bona fide holde: for value as against the maker, notwithstanding it ap peáred that he took it for an antecedent debt and wit' notice of its character as accommodation paper. Thes decisions are based upon the fact that the ■ payee, nc being limited or restricted as to the manner of its use had a right to apply it to the payment or security < an antecedent debt, or to sustain his credit with ic i any other way.

So, in the absence of fraud, an acceptance has bee held to involve a consideration, inasmuch as it delai the holder’s resort to the drawer, which he might hai immediately in case of non-acceptance; and for ti same reason a subsequent acceptance before maturi and for the accommodation of the drawer has be< held to enure to the benefit of the holder who d counted the draft before acceptance, in the expectatio justified by a previous course of dealing, that it would be so accepted (Mechanics’ Bank v. Livingston, 33 Barb. 458.)

But where the acceptance is not only without consideration in fact, but, in addition, has been procured by means of a fraud practiced upon the acceptor, an entirely different rule prevails. Here, the mere taking ] of the draft on account of an antecedent debt, without giving up or surrendering something of value on the faith of its acceptance, is not enough to constitute the holder a bona fide holder for value as against the 1 acceptor. The doctrine of Swift v. Tyson, 16 Peters, has not been followed in this State. On the contrary, our courts held at quite an early day that I the receipt of commercial paper, fraudulently put in [circulation or diverted from the purpose for which it I was originally issued, merely as payment or security ¡for a precedent debt, no new credit or other thing of Ilegal value being given on the faith thereof, and no ¡security being relinquished or discharged, nor any new [responsibility incurred on the credit thereof, is not [parting with value, such as to enable the holder to [enforce such commercial paper against an aecommo[dation party, or to hold it against the true owner, or to íold it free of equities existing upon it against the transferrer at the time of the transfer.

This rule has been firmly maintained, both at law and in equity, by a long and uninterrupted series of adjudications, and is beyond question the settled law of (this State (Coddington v. Bay, 20 Johns. 637 ; affirming S. C., 5 Johns. Ch. 54; Stalker v. McDonald, 6 Hill, 93 ; Wardell v. Howell, 9 Wend. 170; Rosa v. Brotherson, 10 Id. 86; Hart v. Palmer, 12 Id. 523; Ontario Bank v. Worthington, 12 Id. 593 ; Payne v. Cutler, 13 Id. 605; Morton v. Rogers, 14 Id. 576; Commercial Bank v. Horton, 1 Hill, 501; Manhattan Co. v. Reynolds, 2 Id. 140; Scott v. Betts, Hill & D. Supp. 363 ; Elliott v. Dudley, 19 Barb. 326 ; Francia v. Joseph, 3 Edw. Ch. 183 ; Clark v. Ely, 2 Sandf. Ch. 166 ; Furniss v. Gilchrist, 1 Sandf. 53; Stewart v. Small, 2 Barb. 559 ; Mickles v. Colvin, 4 Id. 304; Spear v. Myers, 6 Id. 445 ; Clark v. Gallagher, 20 How. 308; Farrington v. Frankfort Bank, 31 Barb. 183 ; Prentiss v. Graves, 33 Id. 621 ; Cardwell v. Hicks, 37 Id. 458 ; West v. American Exchange Bank, 44 Ib. 175; Crandall v. Vickery, 45 Id. 156; McBride v. .Farmers’ Bank, 26 N. Y. 450 ; Lawrence v. Clark, 36 N. Y. 128).

It is only where a creditor receives a negotiable paper fraudulently put in circulation or diverted from its purpose in good faith, and in actual satisfaction and discharge of a prior indebtedness, so that, unless sucl paper is available in his hands, he loses the demand that this is considered as parting with value. In sucl case the actual discharge of the personal .responsibility of the debtor is equivalent to parting with securities o: to paying money. The extinction of a legal demam . in its original form is, however, to be proved affirms tively ; and the question whether the party is a holde for value, so as to displace in his favor any right o, equity of prior parties, depends upon the fact bein established of an intended and actual extinguishmei (N. Y. Exchange Co. v. De Wolf, 3 Bosw. 86, and at thorities there cited).

Time and space do not permit me to make a moi extended reference to the authorities cited than I hat done, and I- will conclude, therefore, by calling attei tion yet to the following decisions of a comparative! recent date, which deserve to be carefully noted :

In McBride n. Farmer’s Bank, 26 N. Y. 450, an Commercial Bank of Clyde v. Marine Bank, 6 Abb. P N. S. 33 ; S. C., 3 Keyes, 337, it was held that a ban does not become a purchaser for value of demands r .mitted to it for collection, by reason of its having balance against the remitting bank, for which it h refrained from drawing, and of its having discounted notes for the latter upon its indorsement, in reliance upon a course of dealings between the banks to collect notes for each other, each keeping an open account of said collections, treating all the paper sent for collection as the property of the other, and drawing for balances at pleasure.

In Bright v. Judson, 47 Barb. 29, it was expressly decided that fraudulent representations by which one "s induced to accept a bill, are a bar to a recovery hereon by a holder who took the bill in payment of an ntecedent debt without surrendering something of alue upon the faith of such acceptance.

And in the Farmers’ and Mechanics’ Bank v. mpire Stone Dressing Company, 5 Bosw. 289, the ecision was that to entitle one to enforce an acceptance, hich is otherwise invalid (whether for want of power n the agent who wrote the acceptance to bind his rincipal, as in that case, or for fraud practiced by the rawer upon the acceptor, as in the case at bar, makes o difference), on the ground that he is a bona fide older for value, it must appear that he parted with alue upon the faith of such acceptance. He may be bona fide holder of the bill for value paid therefor, nd be entitled to enforce it against every other party ereto, and yet have no right to recover on such cceptance.

In view of the authorities referred to it is entirely ear that defendants had an unquestionable right to "ove the facts embrececl in the two offers made, and at the exclusion of their proposed evidence constited error.

Defendants’ exceptions to such exclusion of their "dence, and to the direction of a verdict against them ust, therefore, be sustained, and the verdict must be t aside and a new trial ordered, with costs to defend-ts to abide the event.  