
    FRANK LESLIE, Plaintiff v. GEORGE F. BASSETT, et al., Defendants.
    
      Bill of Exchange—Liability of acceptor on bill transferred after acceptance by payee before maturity.
    
    This action is brought by plaintiff on a bill of exchange drawn by the American Exchange in Europe on the defendants, and by the latter accepted, and afterwards, and before the maturity of the bill, transferred by the American Exchange to plaintiff. At the time of the transfer the American Exchange was indebted to the plaintiff in the sum of $50,000, upon which interest was about to become due to plaintiff. The American Exchange to provide for the payment of that interest, endorsed and delivered to plaintiff the bill in suit,, under the agreement that it should be applied in payment of the interest, and any balance above the interest should be applied on account of the principal. The defendants claim that the consideration for their acceptance having failed, and the plaintiff having made no present advance upon the faith of the bill, she was not a bona fide holder of it, and that she took it subject to all the equities between the original parties.
    
      Held, that independently of the question, whether the plaintiff became a bona fide holder of the acceptance within the meaning of Coddington v. Bay, 20 Johns. 637, and kindred cases, a proposition not necessary to consider, the verdict was properly directed for other reasons, namely:
    
      The acceptance by the American Exchange of Alcock & Co.’s draft on account of defendants, furnished a sufficient consideration for the acceptance in suit. There was no agreement that the specific moneys collected on the acceptance in suit were to be applied by the American Exchange towards the payment of its acceptance to Alcock & Co. The acceptance in suit belonged to the American Exchange to dispose of, or do with, as it pleased. The transfer of the acceptance by the American Exchange to the plaintiff as a payment, in advance, of the interest ' about to become due to her on the $50,000 loan, and the application of any balance above the interest on the principal, was, therefore, a valid transfer of the acceptance, by the person having the absolute right of disposal, to the plaintiff. Even assuming that there had been a failure of, or no consideration for the defendants’ acceptance, the rule applicable would be that laid down in the case of the Grocers’ Bank v. Pen-field, 69 N. T. 504. The court said: “ It is universally conceded that the holder of an accommodation note, without restriction as to the mode of paying it, may transfer it either in payment, or as collateral security, for an antecedent debt, and the maker will have no defence. It is only where the note has been diverted from the purpose for which it was entrusted to the payee, or some other equity exists in favor of the maker, that it is necessary that the holder should have parted with value on the faith of the note in order to cut off such equities of the maker.’’
    Before Sedgwick, Ch. J., and McAdam, J.
    
      Decided May 4, 1891.
    The action is on a bill of exchange accepted by the defendants and transferred to the plaintiff before maturity. The circumstances leading to the acceptance and transfer are substantially as follows: “ The defendants, merchants, doing business in New York, were accustomed to made purchases of earthenware, of the firm of Henry Alcock & Go. of Colridge, Staffordshire, England, with which firm they had a line of credit. They had also been doing business through the New York office of the American exchange in Europe as a banking house in transacting their foreign business. Wishing to extend their credit with Alcock' & Co. beyond the usual limit, the defendants entered into an agreement with that firm, the substance of which was embodied in. „ a written memorandum, as follows:
    “ New York, September 20th, 1887.
    Terms 4 mos. Note with interest added at the rate of 5 per cent per annum to the extent of £2,000.
    . After the account shall have reached the limit of credit, £2,000, then Messrs. Alcock & Co. are to draw on American Exchange in Europe, London (with B. L. attached), on our account. Interest on same 5 per cent per annum.
    Geo. F. Bassett & Co.
    Henry Alcock & Co.”
    After this agreement was made, the defendants entered into' an agreement with the American Exchange, the substance and effect of which was that that corporation should accept the drafts drawn by Alcock & Co. for goods purchased by defendants of that firm, payable ninety days after date, with bills of lading and invoice attached. That the American Exchange should then draw upon defendants drafts for the amount of the draft drawn by Alcock & Co., with one per cent commission and expenses added, payable twenty days before the draft drawn by Alcock & Co. matured, so as to place the American Exchange in funds with which to pay the draft which it had accepted for Alcock & Co.
    . When this arrangement was consummated notice was given to Alcock & Co.
    Pursuant to the agreement, the defendants ordered a . bill of merchandise from Henry Alcock & Co., amounting to £344, 8s. 3d. For the purchase price Alcock & Co. drew their bill of exchange, dated March 28, 1888, upon the American Exchange, payable ninety days after date. This bill was forwarded to the American Exchange and duly accepted. The goods ordered were -sent to David Inglis, the agent of the defendant in Liverpool, who shipped them to the defendants.
    To place itself in funds to meet the bill of exchange which it had become bound to pay to Henry Alcock & Co., the American Exchange made its draft upon the defendants, Dated April 9, 1888, for $1,715.17, being the amount of the Alcock bill, with commissions and expenses added. This bill was payable sixty days from date, and on its face it is expressed to be for “ Mdse, a/c. 1087 Alcock & Co.”
    It is upon the acceptance of this draft that the action is brought.
    The plaintiff derived her title to the bill of exchange in suit in the following manner: On November 21, 1887, she loaned to the American Exchange in Europe, Limited, the sum of $50,000, and took therefor a certificate of deposit dated that day, and payable six months from date with interest at six per cent.
    The plaintiff and Mr. Gillig substantially agree in the statement that the plaintiff asked Gillig, as he was about to leave for Europe, in April, 1888, to make some provision for the payment of interest on the debt due plaintiff from the Exchange,, but which was not due until the 21st of May following. To this request Gillig assented, and thereupon endorsed and delivered to the plaintiff the bill in suit under the agreement that it should be applied in payment of interest, and that any balance above the interest should be applied on account of the principal.
    The bill in suit was drawn and bears date April 9, 1888. This transaction of its transfer was within a day or two thereafter, as they both testify.
    Thereafter, and on April 13th, 1888, the insolvency of the Exchange was known, and on April 13th, a receiver was appointed.
    Under the circumstances, the defendants claim,,that the consideration for their acceptance had failed, and that the plaintiff, having made no present advance upon the faith of the bill, was not a bona fide holder of it, and that she took it subject to all the equities between the original parties.
    
      Upon the conclusion of the trial, both sides asked for the direction of a verdict.
    The court directed a verdict in favor of the plaintiff for $1,995.60, the amount claimed with interest, to which direction the defendant excepted. The court thereupon ordered that the exceptions be heard in the first instance at general term, and the entry of judgment in the meantime suspended.
    
      Fullerton & Rushmore, attorneys, and C. E. Rushmore of counsel, for plaintiff.
    
      Wing, Shoudy & Putnam, attorneys, and Joseph A. Shoudy of counsel, for defendants.
   By the Court.—McAdam, J.

Independently of the question whether the plaintiff became a bona fide holder of the acceptance within the meaning of Coddington v. Bay, 20 Johns. 637, and kindred cases, a proposition not necessary to consider, the verdict was pror perly directed for other reasons. First, the acceptance by the American Exchange of Alcock & Co.’s draft, furnished a sufficient consideration for the acceptance in suit. Dowe v. Shutt, 2 Den. 621; Wooster v. Jenkins, 3 Ib. 187 ; Nantucket Pacific Bk. v. Stebbins, 6 Duer. 341; Newman v. Frost, 52 N. Y. 422. Second, there was no understanding that the specific moneys to be collected by the American Exchange, on the acceptance in suit, were to be applied towards the payment of its acceptance of Alcock & Co.’s draft. The arrangement was that the defendants should accept the draft of the American Exchange so as to put it in funds to pay its acceptance to Alcock & Co. twenty days before its maturity. In other words, so much money was to be placed with the American Exchange, to the credit of the defendants, against which its acceptance, a commission of one per cent and expenses were to be charged.

The American Exchange could do what it pleased with the defendants’ acceptance or the money realized from it, so long as the amount was credited on their books. Any use the Exchange might make of either would neither be a misappropriation or diversion of the acceptance or money. They could meet their own acceptance as well with any other money on deposit. The acceptance and its proceeds belonged to the Exchange to do with as it pleased, subject to its liability to make its acceptance to Alcock & Co. good. The defendants evidently trusted the responsibility of the Exchange and its ability to make good its obligation. The transfer of the acceptance by the Exchange to the plaintiff as a payment, in advance, of the interest soon to become due on the $50,000 loan made by her to it, the balance thereof above the interest to apply on the principal, was, therefore, a valid transfer of that instrument by the person having the jus disponendi, and she became the owner and transferee thereof before maturity. Even assuming there had been a failure of or no consideration for the defendants’ acceptance, the rule applicable would be that laid down in the case of The Grocers’ Bank v. Penfield, 69 N. Y. 504, wherein the question arose with respect to the title of the holder of a note made for the accommodation of the payee, and by him endorsed and delivered to the plaintiff solely as collateral security to a precedent debt, without any agreement, extending the time of payment of the debt. • The court said : “ It is universally conceded that the holder of an accommodation note, without restriction as to the mode of using it, may transfer it either in payment or as collateral security for an antecedent debt, and the maker will have no defence. 'It is only where the note has been diverted from the purpose for which it was entrusted to the payee, or some other equity exists in favor of the maker, that it is necessary that the holder should have parted with value on the faith of the note in order to cut off such equities of the maker.” Also see Continental Bank v. Townsend, 87 N. Y. 8.

The defendants do not plead diversion of the acceptance, and if they rely upon that defence it must be inferred from their answer, for the intention is not clearly expressed. It charges that the plaintiff received the acceptance with knowledge of the facts, and that she has collected and received out of property and security transferred to her by the American Exchange, sufficient to pay and satisfy all claims and demands she had against it, and ceased to have any right to collect or receive payment of the acceptance sued on, defences they utterly failed to establish. The defendants have called our attention to the case of Bassett, et al., v. Leslie, et al., 123 N. Y. 396, which was an interpleader suit brought by Bassett & Co. against Mrs. Leslie and Alcock & Co., in respect to the acceptance in suit and Alcock & Co.’s claim for the merchandise delivered on the faith of the acceptance of the American Exchange, subsequently dishonored. The court below, on demurrer interposed to the complaint, held, that the action was not maintainable. The general term, upon appeal, sustained the court at special term, and the court of appeals in affirming the courts below, and accepting as it properly did the allegations of the complaint in that suit as true (it having been demurred to), intimated that Mrs. Leslie (the plaintiff here) could not maintain an action on the defendants’ acceptance, it having been diverted, and she not being a bona fide, holder. The intimation was not necessary to a decision of that case, because the court put its affirmance on the ground that the claim of Mrs. Leslie on the acceptance, and of Alcock & Co. for the merchandise sold, were two separate and distinct obligations, and that Bassett & Co. could not be discharged from both on paying one. On the present trial, Bassett & Co., on the one hand, and Mrs. Leslie, on the other, have made their allegations and presented their proofs, and it is on these, and not on the undisputed facts alleged in the interpleader suit, that we are called upon to determine the propriety of the rulings made at the trial, and from these we draw the conclusions to which we have before referred. There was no defence to the action, the verdict was properly directed, the exceptions must be overruled, and the plaintiff permitted to enter judgment on the verdict, with costs.

Sedgwick, Ch J., concurred.  