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Sec. 27. bill, entitled him to all the rights of a holder for value, a protection which
was given to such a holder on the grounds of commercial policy only, and in order to favour the unrestricted use, as currency, of negotiable paper. But it is now settled that the giving of a negotiable security payable on demand for an antecedent debt is a conditional payment of the past due debt, the condition being that the debt revives if the security be not realized : Currie v. Misa, L. R. 10 Ex. 153. Where there is a precedent duty which would create a sufficient legal or equitable right, if there had been an express promise at the time, or where there is a precedent consideration, which is capable of being enforced, and is not extinguished at the option of the party, founded upon some bar or defence which the law justifies, but does not require him to assert, there an express promise will create or revive a just cause of action. “ Where a man is under a legal or equitable obligation to pay, the law implies a promise though none was ever actually made. A fortiori, a legal or equitable duty is a sufficient consideration for an actual promise. Where a man is under a moral obligation which no Court of equity or law can enforce, and promises, the honesty and rectitude of the thing is a consideration; as if a man promises to pay a just debt, the recovery of which is barred by the Statute of Limitations. Or if a man after he comes of age promises to pay a meri. torious debt contracted during his minority though not for necessaries ; or if a bankrupt, in affluent circumstances after his certificate, promises to pay the whole of his debts; or a man promises to perform a secret trust, or a trust void for want of a writing by the Statute of Frauds. In such and many other instances, though the promise gives a compulsory remedy, where there was none before either at law or in equity, yet as the promise is only to do what an honest man ought to do, the ties of conscience upon an upright mind are a sufficient consideration : Per Lord Mansfield, C. J., in Hawkes v. Saunders, 1 Cowp. 290.
A pre-existing debt is a good consideration in whole or in part for a note or bill : Gooderham v. Hutchison, 5 U. C. C. P. 241.
There is no distinction as regards consideration, between a note given for a pre-existing debt and for a new consideration : Evans v. Morley, 21 U. C. Q. B. 547.
note was given by defendant, secretary of an insurance company, for a loss, the policy having been marked “ cancelled,” and left in the possession of the company, and the note was not payable until three days after the loss would be payable by the policy ;-Held, a sufficient consideration : Armour v. Gates, 8 U. C. Č. P. 548.
A debt due to a bankrupt estate, is a good consideration for notes given to the trustees and assignees of the estate : Gates v. Crooks, Dra. Rep. 459.
A debt due by a third party, but not yet payable, may form a valid consideration for a note given as collateral security for such debt: Dickenson v. Clemow, 7 U. C. Q. B. 421.
A note given by a man for his delay to fulfil a promise of marriage, and Sec. 27. for household services rendered to him by the woman during the engagement, is valid, notwithstanding that other reasons, in addition to these, may have induced him to give the note : Prescott v. Ward, 10 Allen (Mass.) 203. But see Raymond v. Sellick, 10 Conn. 480.
The mere fact of forbearance would not be a consideration for a debt ; but a binding promise to forbear, or an actual forbearance at a request express or implied, would be a good consideration for a promissory note : Crears v. Hunter, 19 Q. B. D. 341.
A note given to a committee appointed to relieve sufferers from a fire, being a special contract with such committee, is valid : Bayou Sara v. Harper, 15 La. An. 233.
4 This clause may apply to the class of securities known as accommodation bills or notes transferred to a holder for value, or to a bill or note in the hands of a holder, who has not himself given value for it, but has received it from one who is a holder for value, and who has all the rights of a “holder in due course. The holder of such a bill or note has the rights of such holder in due course against all parties to the bill or note, except the person from whom he may have received it. See note 7, p. 125.
A member of a joint stock association, not incorporated, lending a sum of money out of the joint fund to another member and taking from him a note payable to himself, individually, for re-payment, is a sufficient consideration, notwithstanding that the funds were advanced from the common stock : Comer v. Thompson, 4 U. C. 0. S. 256.
Where a stockholder in a joint stock company had given notes for bis stock, which he afterwards forfeited by not complying with the conditions of the association :-Held, that he could not set up such a forfeiture as a defence to an action on the notes : Glassford v. McFuul, U. C. T. T. 3 & 4 Vict.; s. p. Pine River Bank v. Hodsdon, 46 N. H. 114; Burk's Case, Re Central Bank, 1890.
A. indorsed a note for $1230, for the purpose of enabling the maker to obtain, as an additional advance, the difference between that sum and a loan of $918, which had been advanced to him before the making of the note; the additional advance, was, however, not made ; Held, that A. was not liable as an indorser for the $918 originally loaned : Greenwood v. Perry, 19 U. C. C. P. 403.
Where the remitter of a foreign bill has received credit from the drawer, and the payee gives the remitter full consideration for the bill, but the remitter does not pay the drawer, the payee may maintain his action against the drawer, although the drawer has never received any consideration : Munroe v. Bordier, 8 C. B. 862.
H. W. & Co., American merchants, were indebted to P. & Co., of Paris, and C. & Co., of London, and being pressed for payment by P. & Co., remitted funds to C. & Co., which paid and overpaid them, with a direction to remit the balance to P. & Co. in Paris. C. & Co. then bought in London a bill on Paris, drawn by M. & Co. to the order of C. & Co. to be remitted at once to Paris to be paid for by C. & Co. on the next
Sec. 27. foreign post day. The bill was so remitted, but before the next foreign post day C. & Co. failed, and thereupon M. & Co. refused to pay the bill
. P. & Co. were afterwards paid by H. W. & Co. in full. In an action by P. & Co. on behalf of H. W. & Co. against M. & Co. on the bill ;- Held, that P. & Co. were entitled to recover as holders for value of the bill ; or if suing for H. W. & Co., C. & Co. were only correspondents of H. W. & Co., to remit the bill, and were not their agents to pledge their credit for the price of the bill : Poirier v. Morris, 2 E. & B. 89; 17 Jur. 1116.
Corn merchants in California agreed to sell cargoes of wheat to a miller in England, for which he was to give his acceptance against the bill of lading. The bill of lading was made out in six parts. Three parts, with corresponding bills of exchange drawn on the miller, were indorsed by the corn mercbants, and transferred to a Californian bank for value, and were, with the bills of lading annexed, accepted by the miller. One indorsed part of the bill of lading was inadvertantly sent by the corn dealers to the miller, and was transferred by him to an English bank for value. The bills of exchange were not met by the miller ;--Held, that the English bank, could not, under the circumstances, claim as holders of the bill of lading without notice : Gilbert v. Guignon, L. R. 8 Ch. 16
5 The discount of a bill must be distinguished from the pledge or deposit of a bill as security. A discounter is a holder for full value. The position of a pledgee (or mortgagee) is this. If he sue the acceptor or indorsers, be sues as trustee for the pledgor, and must account to him for the differt nce between the amount he has advanced, with interest and costs, and the amount recovered by him on the bill. If the pledgor could have sued on the bill, the pledgee can recover the whole amount due on the bill. And if the pledgor is a holder in due course, he will not be affected by any defect of title in the pledgor (ss. 29 and 38). Like every other holder in due course, the pledgee of a bill must use due diligence with reference to it, having regard to the nature of the security pledged, and the duties of the holders of bills or notes as defined by the Act, otherwise he may, through negligence, release the parties to the bill, and become responsible to the pledgor for any loss sustained by his negligence. A banker's lien is an implied pledge of his customer's securities ; and, in the absence of an agreement to the contrary, he has a lien on all bills received from his customer in the ordinary course of banking business for any balance that may be due from such customer. Prima facie, where a bill is negotiated from one person to another, it is deemed to have been wholly transferred to bim, and not to have been pledged or deposited as collateral security : Chalmers on Bills, 78. See further, note 5, p. 25.
ILLUSTRATIONS. The defendants made a note for $200 to one M., to assist M., in retiring paper in which the defendants were interested. M. discounted his own note for $200 with the bank, depositing with them the defendants' note as collateral. When M.'s note fell due, the defendants' note being then overdue, M. paid $25 and gave a renewal for $175, leaving defendants' note with the bank ;-Held, that as the note was transferred to the bank as security for the original debt, and not for M.'s note specially, the defendants remained liable : Canadian Bank of Commerce v. Woodward, 8 App. R. 347.
Where certain securities had been assigned as collateral for the payment Sec. 27. of a promissory note of $1,000, which note had been partly paid, and a new note given, the holder of the note is entitled to retain such securities until the whole amount of the original note is discharged by payment: Wiley v. Ledyard, 10 Ont P. R. 182.
One M. made a note payable to T. or order, for $4,000, which was discounted by the bank for T. Afterwards a note for $1,500 made by W. payable to T., and indorsed by M. for T.'s accommodation, was handed to the bank by T. as collateral security for the $1,000 note, and the bank also advanced on it $1,000 to T. This note, when it fell due was retired by another note for $1,500, made by W., payable to T. and indorsed by T. and by M. to the bank, and was given for the same purpose as the previous $1,500 note. The bank received $1,200 from T. on account of the $4,000 note, and the plaintiff, who was one of the indorsers on that note, paid the balance. In an action on this renewal note by the plaintiff against W. & M.:-Held, that he was entitled to recover ; for, 1. He was the holder of the note ; 2. The note being deposited with the bank as collateral security for the $4,000 note, and not merely for the $1,000 advanced on it, the bank held it for the full amount; 3. If the note could not be said, when taken, to be a security for value because the $4,000 note had not then matured, it became so when the latter note fell due, and value arising at any time during the currency of a note is sufficient : Blake v. Walsh, 29 U. C. Q. B. 541.
Where a bill is remitted to another, indorsed merely to enable the party receiving it to raise money to meet future advances, it is while retained for such advances a mere deposit, applicable to the demands of the remitter, but if such remitter negotiates it, he constitutes the party with whom it is negotiated a holder. Indorsement is prima facie evidence of the discount of a bill, but the agreement of mere deposit may be shewn: Ex parte Twogood, 19 Ves. 229.
A mere discount of a bill, without the indorsement of the party who receives the money, does not give the holder of the bill any claim against such party : Ex parte Roberts, 2 Cox. 171.
Bankers may pledge bills deposited with them by a customer, though such customer is a creditor and not a debtor; and the parties to whom the bills are pledged, may hold them if they are unacquainted with that circumstance: Collins v. Martin, 1 B. & P. 648.
And the bank may negotiate them to such an extent as the necessary demands of their customer may require, without his express anthority : Thompson v. Giles, 3 D. & R. 733.
A promissory note given by principal and surety for a definite sum payable on a fixed day, is presumed to be given in consideration of an advance at the date of the note, and if the payee asserts as against the surety that the note was to secure the balance of an account due by the principal to the
payee, the burden of proof lies on the payee : Re Boys, L. R. 10 Eq. 467.
The holder of promissory notes, transferred by the payee as collateral security against a future liability on the holder's part for the payee, can collect the notes at maturity before that liability arises; and the payee has no control over them so as to enlarge or vary the maker's liabilty : Ross v. Tyson, 19 U. C. C. P. 294.
Where promissory notes were given to a creditor by his debtor as collateral security for the debt, unless the debtor suffers by the tardiness or laches of his creditor in collecting such notes, he is not damnified ; and if he is demnified, then such debtor is released to the extent of the loss caused by the creditor's laches : Ryan v. McConnell, 18 Ont. R. 409.
SS. 43 & 52.
to holder for value.
Sec. 28. 28. An accommodation party to a bill is a person who Accommoda- has signed a bill as drawer, acceptor or indorser, without
receiving value therefor, and for the purpose of lending his Imp. Act,8. 28 name to some other person :
1 His liability
2. An accommodation party is liable on the bill to a holder for value; and it is immaterial whether, when such holder took the bill, he knew such party to be an accommodation party or not. 2
1 The object of an accommodation bill is to enable the parties thereto, by a sale or other negotiation thereof, to obtain a free credit circulation of such bill. The parties to every accommodation bill hold themselves out to the public, by their signatures, to be absolutely bound to every person who shall take the same for value, to the same extent as if that value were personally advanced to themselves, or on their own account, and at their own request : Story on Bills, s. 191. In common language, a bill accepted or indorsed without any consideration to the party making himself liable on the bill, is called an accommodation bill; but, in strictness, an accommorlation bill is not merely a bill accepted or indorsed without value received by the acceptor or indorser, but a bill accepted or indorsed without value by the acceptor or indorser, to accommodate the drawer, or some other party, i. e., that the party accommodated may raise some money upon it, or otherwise make use of it. This distinction is of importance; for a party accepting a bill merely without consideration (as if, for example, he does not know the state of accounts between himself and the drawer), and is afterwards sued on that bill, he cannot charge the drawer with the costs of defending the action ; whereas the acceptor of an accomodation bill, properly so called, who is compelled by an action to pay it, has a claim upon the drawer for all the expenses of the action : Byles on Bills, 323. By an accommodation bill or note the acceptor of the bill, or maker of the note, becomes the principal debtor according to the form of the instrument; but whether a party is in that capacity, or is an accommodation indorser, he is a surety for the person who obtains value for the bill or note; and it is the duty of such person to pay the bill or note at maturity. Where there is an account between the parties, and bills are accepted, those are not strictly accommodation bills : Oriental Financial Corporation v. Overend, L. R. 7 Ch. 146n. See also s. C., L. R. 7 H. L. 348. Presentment for payment is dispensed with where the accommodation bill or note is accepted or made for the benefit of the indorser : s. 46 (2) (d); as also notice of dishonor : s. 50 (2) (d); and as a consequence it may be inferred that protest is also dispensed with : s. 51 (9). An accommodation bill when paid by the party accommodated is discharged : s. 59 (3). By s. 36 (2), an overdue bill can only be negotiated subject to any defect of title affecting it at maturity; and