
    Chauncey W. Moore and others v. William Ward and others.
    Where a party, without consideration, accepts a draft with a conditional understanding that it is to be used for a special purpose, in its application to which purpose lie lias some interest, and it is converted to a different purpose, he is not liable upon it except to an innocent holder, who has taken it before maturity, and given a good consideration for it. But if the acceptor receives a full consideration for his acceptance, he is liable thereon to the holder, and it is immaterial what use was made of the draft by the drawer, or whether the holder has paid value therefor or not.
    W. accepted certain drafts of the R. R. V. TI. E. E, Co., upon the agreement thaA they should provide funds to take them up as they matured. The compatriot, the same time pledged with W. bonds to an amount, at their par value, exceeding the drafts, upon the agreement that W. might sell them without notice, and reimburse himself the amount of his acceptances if they were not provided for by the oompany pursuant to their contract, and might use them in the interim, provided he would supply their place with similar bonds, upon the company’s paying the drafts before maturity. The drafts were to be used upon an uncompleted part of the company’s route. Held—
    I. That the acceptance was not an accommodation acceptance by W., but was one for value.
    II. In the absence of any evidence, as to W.’s use of the bonds, or of any loss to him thereon, it was immaterial that the oompany used the acceptances for a different purpose than that for which they were intended to be used; and it was immaterial whether the holder, an indorsee, paid value for them or not.
    TTT That evidence of W. being interested in the completion of the railroad was • irrelevant, and properly excluded.
    Appeal by defendants from a judgment entered on a verdict of a jury. This action was brought upon an acceptance of tbe defendants, drawn by The Bock -Biver Yalley UnioD Bailroad Company for $1,000, accepted by tbe defendants, and indorsed to tbe plaintiffs. Tbe cause was tried before Judge Ingrabam and a jury. Tbe draft having been read in evidence, tbe plaintiffs rested. Tbe defendants then offered evidence of tbe following facts: That the draft was one of eight of an aggregate amount of $21,675.43, drawn by tbe Bock Biver Yalley Union Bailroad Company on tbe defendants, and accepted by tbem. To show tbe agreement under wbicb these drafts were accepted by tbe defendants, they introduced, in evidence, tbe following letters, written by tbe president of tbe Rock River Yalley Union Railroad Company to tbem:
    “ Office Rock River Yalley Union Railroad Company, No. 18 Exchange Place.
    “New York, August 25th, 1853.
    “ Messrs. Ward Brothers & Co., ■ New York.
    “ Gentlemen, — Tbe Rock River Yalley Union Railroad Company may have occasion to draw on your bouse from time to time in sums to suit, amounting in all to $10,000 or $15,000, at 60 days’ date, for use on tbe Janesville end of tbe road; and in case any drafts should be drawn for that purpose by me, I crave due honor on presentation, of wbicb due advice will be given yon, charging your usual commission for accepting; and for my drafts so drawn, Í agree-to deposit with you bonds of tbe city of Janesville, -at a margin of 15 per cent, as collateral security, and to place you in funds at least three days before tbe maturity of my drafts, otherwise you are to avail of tbe said bonds for your reimbursement without further notice.
    “ Respectfully yours,
    “A. Hyatt Smith, Pres’t.
    
    “Approved — R. J. Walker, Director and Trustee.
    
    
      “ In accordance with tbe above I beg to advise my draft in favor of A. Hyatt Smith, Aug. 8tb, 90 days, wbicb please honor for $1,700.”
    “New York, Sept. 28, 1853.
    “Messrs. Ward Brothers & Co.
    .“Gentlemen, — It is tbe desire of tbe company to extend tbe amount stipulated in tbe annexed letter, to an amount not exceeding in all twenty-two thousand dollars, upon tbe same terms therein set forth, and have to request you to honor my drafts in conformity.
    “ Respectfully yours,
    “A. Hyatt Smith, Pres. R. R. V. U. R. R. Co.”
    Herewith you will receive 23 bonds of the city of Janesville, for $1,000 each, to be held by you. as collateral in accordance with the terms-of the letter, and the receipt to be given by you to show more fully xhe nature of the transaction.”
    To this letter was attached a list of the drafts drawn by the railroad company on the defendants, among which was the acceptance in suit.
    The defendants also introduced in evidence the following receipt given by them to the company :
    
      “ New York, September 28th, 1853 — Received from A, Hyatt Smith, Esq., President R. R. Y. U. R. R. Co., twenty-three of 8 p. c. city of Janesville bonds of the par value of one thousand dollars each, as collateral security for his several drafts accepted by us (as advised), under his letters to us of the 25th August, and September 28th, as follows:
    [Here follows a list of drafts including the draft in suit.]
    “Said bonds are numbered as follows:
    la 9 - - - 9 61 a 68 - - - 8
    47 a 50 - - - 4 72 & 75 - - - 2
    Total.23
    ' “ In case of non-fulfillment on the part of said company to place us in funds in accordance with tbe above-mentioned letters, authority bas been given to sell the said bonds for reimbursement, without further notice ; and their consent given us to use, transfer or hypothecate the same in the mean tinje at our option, we being required, on payment or tender of the amount of said drafts at any time before said drafts mature., or bonds shall have been sold, to return to said company an equal quantity of said bonds, and not the specific bonds deposited.
    “Ward BROTHERS & Co.”
    
      No evidence was offered by tbe defendants as to wbat bad been done with tbe bonds referred to in this receipt, or as to tbeir value.
    Tbe defendants offered to prove that, on tbe upper or Janes-ville end of tbe road, the line was entirely uncompleted; that the other end was partially completed; and that tbe defendants were creditors, as mortgage bondholders and otherwise, of tbe company to the amount of over $100,000 at tbe time tbe agreement above described was made. This evidence was objected to and excluded by tbe judge. It further appeared that tbe draft was passed by A. Hyatt Smith, President of tbe Rock River Valley Union Railroad Company, to tbe firm of II. O. Clark & Co., of lyhioh firm be was a member, as part of tbe capital which be bad agreed to invest in that firm, and that it was passed by them to tbe present plaintiffs, by whom it was applied on a debt due to them from H. O. Clark & Co., but whether it was in absolute payment and discharge of the debt did not very distinctly appear. On this evidence the judge directed tbe jury to find a verdict for the plaintiffs, and judgment having been perfected on tbe verdict which was rendered pursuant to this direction, the defendants appealed.
    
      P. T. Woodbury, for tbe appellants.
    I. To warrant an unqualified direction at tbe trial in favor of either party, the facts claimed to have been proved by tbe party against whom tbe direction or instruction is given must be undisputed. Rich v. Rich, 16 Wend. 676; Dwyer v. Sowzer, 6 ibid. 487 ; Orawfm-d v. Wilson, 6 Barb. 518.
    II. Tbe facts proved constituted a perfect defence to tbe action, and tbe court.erred in instructing the jury that, on tbe evidence, tbe plaintiffs were entitled to recover.
    1. Tbe plaintiffs did not take tbe draft in tbe regular course of trade, and were not holders thereof for value. Receiving paper on account of a pre-existing debt, even when received as so much payment, is not receiving it for value, or in tbe regular course of trade. Qoddingion v. Bay, 20 Johns. 651; Payne v. 
      Cutler, 13 Wend. 605; ¡Stalker v. McDonald, 6 Hill, 93; Roosa v. JBrotherson, 10 Wend. 85; Holbrook v. Mix, 1 E. D. Smith’s R. 159.
    2. The acceptance bj a creditor of a bill or note of a third person, even when not indorsed by the debtor, never operates as a satisfaction of a precedent debt, unless it is expressly shown that such at the time was the understanding, even although a receipt is given acknowledging the bill or note to have been received as payment in full. Noel v. Murray, 1 Duer, 388; Mun-roe v. Hoff, 5 Denio, 362; 1 Smith’s Leading Cases, 256, note; Porter v. Talcot, 1 Cow. 359 ; Raymond v. Merchant, 3 ibid. 147; Burdick v. Creen, 15 Johns. 247. And see Fulton Bank v. Phoenix Bank, 1 Hall Sup. Ct. R. 574. ^||
    3. If the plaintiffs are not holders in the regular course of trade, and for value, the defendants can set up, as against them, the same defence which they could against the drawers or payees, viz.: a fraudulent diversion of the draft from the purposes stipulated between the drawers and acceptors when it was accepted. Wardell v. Howell, 9-Wend. 172; Brown v. Taber, 5 ibid. 566 ; Small v. Smith, 1 Denio, 583; Ontario Bank v. Worthington, 12 Wend. 593.
    III. The court erred in refusing to receive evidence of the special interest of the acceptors in the completion of the Janes-ville end of the road.
    
      F. FI. Mather, for the respondent.
    I. There being no conflict of testimony, it was the duty of the judge to charge as he did.
    II. Defendants showed nothing impeaching the plaintiffs’ title as bona, fide holders of the acceptance.
    1. The plaintiffs received it for a valuable consideration in the usual course of business, before maturity, and without notice of any defect of title or consideration. Story on Bills, § 192; Story on Prom. Notes, § 195 and note; Frisbe v. Lamed, 21 Wend. 450; St. John v. Purdy, 1 Sandf. S. C. R. 9; Seneca Go. Bank v. Neass, 3 Comst. 442; Youngs v. Lee, 18 Barb. 187.
    
      2. The parties wbo transferred it to tbe plaintiffs so received it, and plaintiffs are entitled to all the benefit thereof. Same authorities; White v. Springfield Bank, 3 Sandf. S. C. R. 222; Bank of St. Albans v. Gilliland, 23 Wend. 311; Bank of Sa-lina v. Babcock, 21 ibid. 499; Mohawk Bank v. Carey, 1 Hill, 513.
    III. The acceptance was not an accommodation one, nor made without consideration.
    1: Defendants agreed to receive a commission for accepting.
    2. They also had a deposit of negotiable eight per cent, bonds to the amount of $23,000, as a further consideration for the Upceptance. Byles on Bills, p. 177; Story on Bills, § 183; Cameron v. Chappel, 24 Wend. 94; Bow v. Schutt, 2 Denio, 621.
    3. The bonds were not merely received as collateral security, but were in law exchanged with defendants for the acceptance.
    IV". Defendants did not show any fraudulent diversion of the draft. No proof was given that it had not effected the substantial purpose for which it was made and accepted.
    Y. The evidence offered by the defendants, and excluded, was insufficient, if not irrelevant.
   Daly, J. —

Nothing had been established on the part of defendants to render it necessary for the plaintiffs to show that they were holders for value. The defendants accepted the draft in pursuance of an agreement between them and the drawer, by which they received certain bonds to the par value of $23,000, on condition that they would accept drafts for the railroad company, of which the drawer was the president, to an amount not exceeding $22,000. They 'accepted drafts to the amount of $21,675.43, the last acceptance being three of $1,000 each, One of which was the draft in suit. By the terms of this agree ment the drawer was to place them in funds to meet their acceptances at least three days before they became due, or the defendants were to be at liberty to sell, hypothecate, or transfer the bonds, to reimburse themselves. There was, therefore, no want of consideration, but, presumptively, a full and adequate consideration for their accepting the draft in suit; and before they could impeach or inquire into the title of the plaintiffs it was necessary for them to show a want of consideration at the time the draft was accepted, or a subsequent failure of consideration. The par value of the bonds'when they were placed in the hands of the defendants was equal to the amount to which the defendants accepted, including the draft in suit; or if they were not of that actual value, or afterwards fell in value, and proved insufficient to secure the defendants to the amount of their acceptances', it rested with them to show it, which they did not. The court vflllji, therefore, justified in concluding that they had received a full consideration for accepting the draft; and if they had, then it was wholly immaterial whether the plaintiffs had given value for the draft or not; as the holders, they were entitled to recover it.

It is urged that the acceptance of the defendants was for a special purpose; that the amount for which they agreed to accept was to be used on the Janesville end of the road, and that the draft in suit was used by the drawer for a different purpose — having ■ been given by him, to the plaintiff, for an antecedent debt. But if they received a full consideration for accepting it, if is wholly immaterial what use was made by him of the draft. Where a party, without consideration, accepts a draft with a condition and understanding that it is to be used for a special purpose, in its application to which purpose he has some interest, and it is converted to a different purpose, he is not liable upon it, except to an innocent holder, who has taken it before maturity, and given a good consideration for it. But the defendants.are not in this position. They offered to show that when they made the agreement above referred to, they were creditors of the railroad company, asmortgage bondholders, to the amount of $100,000, and that the Janesville end of the road was not completed; with a view, it is to be presumed, of showing that they w.ere interested in the amount of tbe draft being applied to tbe purpose for wbicb it was drawn. But tbis evidence, if it bad been admitted, would not bave changed tbeir position, and brought them within tbe rule referred to. Tbe inducement to the acceptance of tbis draft, and of tbe other drafts included in tbe agreement, was not that tbe defendants were creditors of tbe company, but it was a distinct consideration, tbe placing of securities in tbeir bands sufficiently ample to cover them to tbe extent of tbeir acceptances. It was, therefore, 'a transaction entirely distinct and separate. Even if it bad been shown that tbe sale or hypothecation of these securities bad tbe effect to lessen tbe value of tbe other bonds of tbe company mortgaged to tbe defendants, it would not r<jjjjf.ve. them from tbeir liability upon these acceptances to tbe holders of tbe drafts, whether the holders bad given value for them or not. But whether it would or not, nothing of tbis kind was attempted to be shown. As tbe case stood before tbe court, they bad received a full consideration for tbe acceptance of tbis draft; they were bound to pay it, and bad no right to call upon tbe plaintiffs to show that they bad taken it for value.

But, if I deemed tbe point essential to tbe determination of tbis case, I could not agree with tbe other members of tbe court, that tbe plaintiffs are holders for value, so as to give them a right to recover upon a draft accepted without consideration, and diverted from the purpose for wbicb it was accepted. In tbe courts of tbe United States, and in several of tbe states, tbe circumstances under wbicb tbis draft was taken by tbe plaintiffs would be sufficient to make them holders for value. In tbis state, however, I understand the law, as settled, to be otherwise; but my reasons for so thinking would require an extended and careful examination of tbe course of our judicial decisions, which it is unnecessary that I should go into, as we all agree that the judge was right in telling tbe jury that, upon tbe evidence, tbe plaintiffs were entitled to recover.  