Sec. 29. An agreement not to proceed in a prosecution for permitting unlawful gambling in a tavern, is an illegal consideration for a note: Dwight v. Ellsworth, 9 U. C. Q. B. 539. In order to render illegal the receipt of securities by a creditor from his debtor, where the debt has been contracted under circumstances which might render the debtor liable to criminal proceedings, it is no defence that the bill was indorsed by the drawer to the plaintiff, in order to stifle a prosecution for felony, if there is an actual debt due: Flower v. Sadler, 9 Q. B. D. 83; 10 Q. B. D. 572. A father, whose son had obtained discounts from a bank on paper on which the father's name had been forged, was appealed to by the bank to take upon himself the liability in respect of his son's forgeries and who did so, but with the knowledge that unless he did so his son would be exposed to a criminal prosecution, with a moral certainty of conviction, is not a free and voluntary agent, and the agreement he makes under such circumstances is not enforceable, even though the forged instruments are given up, and his son's peril is not put forward by the bank as the motive for inducing the agreement: Williams v. Bailey, L. R. 1 H. L. 200. To support a defence that a note was given in consideration of forbearance to proceed in a prosecution for felony, the particular nature of the criminal charge should be proved: Henry v. Little, 11 U. C. Q. B. 296. Where a note not void, but voidable, as one given for what is malum prohibitum, is given up in consideration of another note given at a distant day, the illegality of the former note will be no defence in an action on the latter Witham v. Lee, 4 Esp. 264. A note given in consideration of counterfeit bank notes sold by the payee to the maker, is void on the ground of public policy: Blont v. Proctor, 5 Blach. (Ind.) 265. A note given at the request of a director of a bank for money owed by him to the bank, in excess of the amount allowed by law, is not void: Pemigewasset Bank v. Rogers, 18 N. H. 255. A note given to an insurance company, contrary to an express statutory provision, is void: Otis v. Harrison, 36 Barb. (N. Y.) 210. A note given by one of several tenderers for a Government contract, to another tenderer, to induce him to withdraw his tender, is void: Kennedy v. Murdick, 5 Har. (Del.) 458. A note given to a magistrate for fines and fees imposed upon the maker on a criminal charge, is void: Kingsbury v. Ellis, 4 Cush. (Mass.) 578. Notes given to a municipal officer for licenses, are void; Newsom v. Thighen, 30 Miss. 414. A note given to induce a person to withdraw opposition to the opening of public road is void: Smith v. Applegate, 23 N. J. (Zab.) 852. Though a statute incorporating a company provides that subscriptions for stock shall be void if not paid in money, a promissory note given for such subscription is not void, and may be enforced, as the giving of such note is not contrary to public policy: McRae v. Russell, 12 Ired. (N. C.) 224. A note given for a transaction forbidden by law, being for an illegal consideration, is void: Brown v. Torkington, 3 Wall. 377. A note given in consideration of a promise by a defendant in a divorce Sec. 29. suit, that she would withdraw her pleading and make no defence to the action, is void: Stoutenberg v. Lybrand, 13 Ohio 228. A legislature, as a condition of granting a divorce from his wife, required the husband to pay her $500 for her future support, for which amount he gave his promissory note ;- Held, that the note was not against public policy, and was not void: Day v. Cutler, 22 Conn. 625. If part of the consideration only is illegal, the bill is void for the whole : Robinson v. Bland, 2 Burr. 1082. 7 By s. 37, when a bill is negotiated back to the drawer, or to a prior indorser, or to the acceptor, such party may re-issue and further negotiate it; and by this clause a holder whether for value or not, who derives his title through a holder in due course, is entitled to the rights of such holder in due course, provided he has not been a party to any fraud or illegality affecting it. The clause only affects "a party to any fraud or illegality," and not a party who has notice of such fraud or illegality. The doctrine of constructive notice as to defects in title is not to be extended. The question is whether a purchaser had the means of obtaining knowledge of the defect, and might by prudent caution have obtained it; and whether the not obtaining it, was an act of gross and culpable negligence: Ware v. Lord Egmond, 4 DeG. M. & G. 460; or that he designedly abstained from making inquiries: Jones v. Smith, 1 Hare 55. The equitable doctrine applicable to titles to real estate, is also applicable to titles to bills and notes. Thus where A. who had notice of an incumberance on an estate purchased it, and then sold it to B., who had no notice, and B. being a purchaser for value without notice, afterwards sold it to C., who had notice of such incumberance, it was held that C. got a good title from B., and that he held the estate free of the incumberance; for if the rules were otherwise, the sale of estates would be very much clogged: Harrison v. Forth, Prec. Ch. 61; Lowther v. Carlton, 2 Atk. 242. ILLUSTRATIONS. An innocent party, who is a holder for value, may transfer a good title in a bill to a person who was no party to the original fraud, though he have had knowledge of it: May v. Chapman, 16 M. & W. 355. An indorsee without value is entitled to recover on a bill or note if any intermediate party is a holder for value: Wood v. Ross, 8 U. C. C. P. 299. A note given for the price of lottery tickets is not under 12 Geo. II c. 28, (Imp.), void in the hands of a bona fide holder for value: Evans v. Morley, 21 U. C. Q. B. 547. The holder of a draft payable to order, which he has obtained bona fide, and for value, but without indorsement, has no better title than the prior holder, even though he afterwards gets such prior holder to indorse it; and he is affected by fraud, of which he has notice before he obtains the formal indorsement: Whistler v. Forster, 14 C. B. N. S. 248; 8 L. T. N. S. 317. Where a trader in the course of his business received a cheque, which had been stolen from the payee, and gave the difference to a stranger, who Sec. 29. presented it in payment of an article purchased ;--Held, in the absence of fraud and negligence on the trader's part, that he was entitled to recover: Lee v. Newsom, D. & R., N. P. C. 50. Presumption of value and B. indorsed a promissory note made by C. for the purpose of retiring another similar note which he had previously indorsed for C.'s accommodation, and gave it to C. Instead of retiring this note, however, C. handed it to the plaintiff in payment of a debt, who took it in good faith, but made no inquiry respecting C.'s title to the note, or his authority so to deal with it ;-Held, that the plaintiff was entitled to recover against B: Cross v. Currie, 43 U. C. Q. B. 599; 5 App. R. 31. Where it was alleged that a prior note had been obtained by fraud from the maker, and subsequently another note was given as a substitute for such prior note, evidence of the alleged fraud is inadmissible in the action on the substituted note: Dougall v. Post, 5 U. C. Q. B. 554. A note payable to L. or bearer was made by and deposited with one D. as collateral security for note made by L. payable to D., which D. had discounted in a bank. Afterwards R.'s note when overdue was also transferred to the bank, as collateral security for D.'s note; - Held, that even if the bank had no higher title than D., D. had a vested right in the note at maturity, which he could transfer to the bank: Canadian Bank of Commerce v. Ross, 22 U. C. C. P. 497. 30. Every party whose signature appears on a bill is good faith. prima facie deemed to have become a party thereto for value: 1 Where onus probandi is shifted. Actual knowledge of usury. What a bill or note for 2. And every holder of a bill is prima facie deemed to be a holder in due course; but if, in an action on a bill, it is admitted or proved that the acceptance, issue or subsequent negotiation of the bill is affected with fraud, duress, or force and fear, or illegality, the burden of proof that he is such holder in due course shall be on him, unless and until he proves that, subsequent to the alleged fraud or illegality, value has in good faith been given for the bill by some other holder in due course : 3. No bill, although given for a usurious consideration or upon a usurious contract, is void in the hands of a holder, unless such holder had at the time of its transfer to him actual knowledge that it was originally given for a usurious consideration, or upon a usurious contract: 3 4. Every bill or note the consideration of which consists, patent rights in whole or in part, of the purchase money of a patent tain. right, or of a partial interest, limited geographically or must con otherwise, in a patent right, shall have written or printed Sec. 30. prominently and legibly across the face thereof, before the same is issued, the words "given for a patent right:" and without such words thereon such instrument and any renewal thereof shall be void, except in the hands of a holder in due course without notice of such consideration. to take rights of 5. The indorsee or other transferee of any such instru- Transferee ment having the words aforesaid so printed or written subject to thereon, shall take the same subject to any defence or set- original off in respect of the whole or any part thereof which would have existed between the original parties: parties. or if present ed words not in such bill or written on note. 6. Every one who issues, sells or transfers, by indorse- Misdemeanment or delivery, any such instrument not having the words "given for a patent right" printed or written manner aforesaid across the face thereof, knowing the consideration of such instrument to have consisted, in whole or in part, of the purchase money of a patent right, or of a partial interest, limited geographically or otherwise, in a patent right, is guilty of a misdemeanor, and liable to imprisonment for any term not exceeding one year, or to such fine, not exceeding two hundred dollars, as the court thinks fit. 4 1 This clause may be read in connection with the ss. 23 and 56. The latter section seems to modify the rule that only those who sign the bill in one of the characters mentioned in s. 23, are liable on such bill. Hitherto the judicial decisions as to the parties who sign or back the bill, intending to become sureties for the payment of the bill, have not been uniform, for sureties, as such, have not been recognized by the lawmerchant. Accommodation acceptors, makers, and indorsers do not usually become parties to bills or notes "for value," nor do sureties. But if the remarks in the note to s. 56 correctly indicate the intention of the Legislature, it may follow that the liability of sureties, or parties pour Aval, will be found te be the same as the sureties known as accommodation parties. Bills of exchange and promissory notes differ from other contracts at common law in two important particulars; first they are assignable, whereas choses in action at common law are not; and secondly, the instrument itself gives a right of action, for it is presumed to have been given for value, and no value need be alleged as a consideration for it: Foster v. Dawber, 6 Ex. 853. Sec. 30. ILLUSTRATIONS. Where it appeared that a note was intended to have been made to the plaintiff or order, to be indorsed by him to the defendant, to secure a debt due to the defendant by the maker, but by mistake it was made payable to the defendant or order; and he thereupon indorsed it to the plaintiff, in order to enable him to sue the maker, and on the understanding that the plaintiff should have no recourse against him as indorser ;— Held, a good defence: Blain v. Oliphant, 9 U. C. Q. B. 473. Where in an action on a note payable to A., it was proved that B. indorsed it, and then brought it to A., who indorsed it merely for accommodation, without receiving any value for it :-Held, that want of consideration could not be inferred, as between the maker and B., and that the plaintiff was not obliged to prove the consideration: Mair v. McLean, 1 U. C. Q. B. 455. Where it appeared that before suit the defendant, by agreement with R. and O., the second and third indorsers, made, and indorsed to them another note, which was accepted in full satisfaction and discharge of the note sued upon, but which note remained in the hands of R. and O. without the fault of the defendant;-Held that the proof of consideration lay on the plaintiff: Maulson v. Arrol, 11 U. C. Q. B. 81. Where an indorser indorsed a note while in blank, there being no maker's name attached to it nor any sum nor payee expressed in it, and the name of the maker was afterwards signed without authority ;--Held, that the indorsee suing must shew himself a bona fide holder for value: Hanscome v. Cotton, 15 U. C. Q. B. 42. The defendant agreed to become surety for whatever goods P. should order of the plaintiff. P. sent the goods ordered and other goods, without disclosing these facts to the defendant, but in perfect good faith. The plaintiff then presented a bill of exchange on P. for signature by the defendant. who signed the same, supposing it was for the goods ordered. P. kept all the goods;-Held, that the defendant was liable only to the extent of the goods ordered, and that the consideration for the bill failed as to the excess: Barber v. Morton, 7 App. R. 114. 2 The effect of this clause is that the prima facie evidence of value which the production of the bill or note establishes, may be displaced by proof that the acceptance, issue or subsequent negotiation of the bill or note is affected or tainted with the defects of title described; and the onus is then on the party claiming to be a holder in due course, to prove that, subsequent to the defect in title, value was given in good faith by some other holder of the bill or note. The latter part of the clause differs from the English Act in regard to the party giving the "value in good faith ;" the English Act reading: "the burden of proof is shifted unless and until the holder proves that subsequent to the alleged fraud or illegality, value has in good faith been given for the bill;" thus allowing the proof that value has been given by the then, or some prior, holder of the bill. This Act limits the proof of such value to have been given "by some other holder in due course.' But the difference in application may be found to be more in words than in substance; and on this see s. 29. See also as to prima facie evidence, notes 1, p. 77, and 7 and 8, pp. 84-85. |