note this fact: A holder, to be a holder in due course, must not only be a taker before maturity in good faith and without knowledge of defenses, but he must have given value. When the word "value" is used in this latter sense, it is not synonymous with the word "consideration." The rule requiring consideration as a condition precedent to the enforceability of mutual promises, is wholly distinct from the independent rule requiring the giving of value as a condition precedent to the right to hold prior parties to a negotiable instrument free from defenses which such parties had as against holders not in due course.

The rules requiring consideration in contracts and the rule requiring the giving of value in order to constitute one a holder in due course have been kept distinct unless section 25 has made them identical. It may be said that any group of facts which constitute consideration will also constitute the giving of value, but under common law rules one may give value without parting with consideration. If section 25 has made these two rules identical then if A. signs a note of M. subsequent to its execution and delivery to P., he will be bound to P., even though there was no consideration between P. and A. at the time he signed. This would make inapplicable the rule that past consideration is not sufficient to support a promise. It is possible, but not likely, that the courts will so interpret section 25. We have seen, therefore, that a holder may recover from his immediate transferor only when there is consideration between them. If the holder did not part with consideration, he may still recover from any prior party who, for a consideration, was bound to any prior party.

The application of the doctrine of consideration as between the parties to a bill of exchange presents some special situations which may be noted briefly. Suppose M. draws his check on the D. bank, payable to P. or order, and delivers the same to P., by way of gift, what relations are created? If the bank dishonors the instrument, P. cannot recover from M., because there is no consideration between them. Even where D. has by contract with M. bound itself to honor M.'s checks, and wrongfully dishonors the instrument, P. still is unable to recover from M. If the drawee bank D. does pay the check, D. may charge M.'s account. The act of payment by the drawee, D., was simply in performance of its contract duty to M. The same result would follow if, instead of paying the amount of the check to P., the drawee, D., certified the check; that is, promised to pay it upon demand of the holder. There need be no consideration for this promise between D. and P., because D.'s duty does not arise from the apparently gratuitous act of promising to pay P., but arises from a contract between D. and M. If there were no contract between M. and D., and D. certified the check, P., being a donee, D. could successfully set up absence of consideration as a defense, for here there is no consideration between any of the parties to the instrument. In other words, the

law requires that there be consideration between at least two of the parties but it is not necessary that there be consideration between all parties.

One very common transaction which concerns negotiable instruments involves the assumption by one party of the duty to discharge it to the holder, where such party is but lending his credit to the principal debtor thereon. Such a person is called, generally, a surety. A surety on a negotiable instrument is usually called an accommodation party. All accommodation parties are sureties but not all sureties are accommodation parties. Obviously, there may be sureties on contracts other than on negotiable instruments. The principles which were adverted to in chapter XI of Contracts, dealing with the rights and liabilities of sureties generally, are likewise applicable to accommodation parties. The status of an accommodation party is not determined by the position of his name on the instrument. He may be a maker, drawer, acceptor, or an indorser. His status is determined by his relation to some other party to the instrument-the principal debtor. Similarly, the principal debtor may occupy any position on the instrument. The section of the Negotiable Instruments Law following, in the main, asserts a proposition which is self-evident from the cases in chapter II of Contracts dealing with the matter of consideration.

Section 29. An accommodation party is one who has signed the instrument as maker, drawer, acceptor or indorser without receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew him to be only an accommodation party.

There is one special situation involving the liability of accommodation parties which has given rise to a conflict of authority which has not been definitely settled by the above section. If the instrument is issued by the accommodated party, for the first time after maturity, may the party who then gives value hold the accommodation party; i. e., the surety? It has been held that the accommodation party is liable in this case. This holding is contrary to the weight of authority before the act, and it has been argued that this decision is not justified by the statute, but that, if it is, the act should be amended, so as to conform the weight of authority before the act.

SECTION 14.-DELIVERY

An instrument may be in form negotiable, it may be executed upon consideration, and it may even be in the hands of the payee, but these facts may occur under circumstances where it will fail

5 Marling v. Jones, 138 Wis. 82, 119 N. W. 931, 131 Am. St. Rep. 996 (1909). • Brannan, Some Necessary Amendments of the Negotiable Instruments Law, 26 Harvard Law Review, 494.

to be an enforceable contract because of the absence of one further requisite—i. e., delivery. It is to be noted that the written evidence of a negotiable contract is, in a fairly real sense, regarded as the thing of value in itself, much the same as a gold or silver certificate or national bank note is regarded as a thing of value. It is, in part, for this reason that the law requires, as a condition precedent to the enforceability of the contract, that there be a delivery of the instrument. To illustrate: If M. purchases goods from P., and executes a note payable to P.'s order, but does not deliver it, and thereupon P. by force or other unauthorized means obtains physical possession of the note, the defense of no delivery could be successfully interpreted, although M. might be held liable on the simple contract of sale which gave rise to the instrument. This rule and its corollaries are expressed in the following sections of the Negotiable Instruments Law:

Section 16. Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties, and as regards a remote party other than a holder in due course, the delivery, in order to be effectual, must be made either by or under the authority of the party making, drawing, accepting or indorsing, as the case may be; and in such case the delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property in the instrument. * ** And where the instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional delivery by him is presumed until the contrary is proved.

Section 15. Where an incomplete instrument has not been delivered it will not, if completed and negotiated, without authority, be a valid contract in the hands of any holder, as against any person whose signature was placed thereon before delivery.

That portion of section 16 which deals with the right of the holder in due course to hold a party on a negotiable instrument from whom there had been no valid delivery, was omitted here for this question is taken up in chapter IV. Likewise with respect to section 15, the rights of the holder in due course of a negotiable. instrument which originally was incomplete and was not delivered, is taken up in chapter IV.

Section 191, clause 6, defines delivery as follows: "Delivery" means transfer of possession, actual or constructive, from one person to another. The requirement of delivery always involves an intention to vest in the party to whom the instrument is made payable, the rights of a holder, and usually involves some physical act which outwardly manifests this intention. The problem is therefore, to determine what circumstances are sufficient to establish the existence of the requisite intent and act.

B.& B.Bus. Law-46

PAULSON et al. v. BOYD et al.

(Supreme Court of Wisconsin, 1908. 137 Wis. 241, 118 N. W. 841.) This is an action upon a promissory note by the receivers of the Security Savings Bank, Incorporated, against the maker of the note and the former owner of the note as indorser. L. T. Boyd is the maker of the note, and J. S. Ellis is the payee and indorser. It appears from the evidence of Boyd and Ellis that the note was given to Ellis by Boyd as a part of a transaction concerning the sale of some mining stock. Boyd was to give his note to Ellis for $2,500, the purchase price of the stock. The note, dated October 17, 1902, was for six months, and was to be renewed twice for the same length of time. The testimony of Boyd as to the terms of the parol agreement is admitted by Ellis to be correct; and the agreement, in effect, is embodied in Boyd's evidence, set out in the record as follows: "Shortly prior to the date of the first note, he persuaded me as a good friend of his to go into this deal with him and take some of his mining stock. I told him then that I had no money, and that I was in debt and couldn't afford to take the chance. He said he wouldn't urge me to do this if he didn't know all about it. I stated that I didn't have any money to buy it with, and he said, "That doesn't make any difference' and he said, 'I will carry it with the bank, I will carry it 18 months if you will pay the interest.' Then I said: 'Suppose at the end of 18 months, I can't pay it?' He said: "Then I will take it off your hands; but I am sure that you will have realized enough on it to pay it, and make a good profit. I said, 'I don't see any reason why you should do that for me'; and he said, 'I know you have been up against it pretty hard, and I would like to see you make some money,' and I said, "That is very friendly of you, and I will accept the offer,' and in that case I took the stock conditionally, and signed the note which he was to renew twice, and at the expiration of the 18 months, if I didn't want the stock, he would take it off my hands." There was no actual delivery of the certificates of stock by Ellis to Boyd. At the time of this agreement Ellis conducted a private banking business under the name "Security Savings Bank." Pursuant to the provisions of chapter 234, p. 351, Laws 1903, the Security Savings Bank was incorporated for the purpose of succeeding to the business and assets of the private bank of the same name previously conducted and managed by J. S. Ellis. The new bank was incorporated August 21, 1903; the incorporators and stockholders being Ellis and his relatives. At the stockholders' meeting the record shows the following: "On motion it was ordered that the board of directors be and are directed to assume the liabilities of the private bank heretofore known as the Security Savings Bank of Ashland, Wisconsin, in consideration of the transfer of the assets of said bank to their corporation." At the directors' meeting J. S. Ellis was elected president, E. H. Ellis, his brother, vice president, and Ellis Kennedy, a nephew and former employé of the president, was elected cashier. Under the agreement between Boyd and Ellis, three notes were given by Boyd to Ellis and deposited by Ellis at the bank. All were payable to the order of Ellis. Two of them were made before the incorporation of the bank, and one, the note in suit, thereafter. In each instance Boyd and Ellis conducted these transactions. The note in suit was received by Ellis as president and turned over to the cashier with instructions. The mining stock was always in the possession of Ellis and the

transfer of the stock on the books of the corporation was not made until after the execution of the last note. The certificate of stock then made out was sent to Ellis and held by him. Boyd offered to transfer any interest in the shares of mining stock to which the agreement between him and Ellis referred, and renewed this offer at the trial.

SIEBECKER, J. At the trial the defendant Boyd relied upon an agreement between him and Ellis, the payee in the note given by the defendant. The transaction between the defendant and Ellis for the purchase of mining stock is admitted by Ellis to have constituted the agreement for which the notes were given. The primary question is: What was the parol agreement between these parties? The evidenceof it is not voluminous or contradictory, and is, in effect, that Ellis undertook to assist Boyd in securing the advantages of an interest in a mine, if it should prove a profitable enterprise at the expiration of 18 months. To accomplish this, Boyd contracted for the purchase of some mining stock from Ellis at an agreed price of $2,500 upon the following arrangement: Since Boyd had no available means to make such a purchase, Ellis made him an offer for such purchase, under which Boyd was to give him a note for the amount, which Ellis was to carry and renew for 18 months. If the stock had not then realized enough to pay the purchase price, and Boyd did not then want the stock, then Ellis was to take it off his hands, and cancel the note. The stock realized nothing, and Boyd insists that, under the parol agreement with Ellis at and before the delivery to Ellis of the first note, the notes never went into effect as completed contracts. He contends that he was to have the right at the expiration of 18 months to elect whether he wanted the stock.

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We are of the opinion that the facts sustain this claim and show such an agreement between the parties. An examination of the evidence, in view of the relations of the parties and the considerations which induced him to make and deliver the note, leads us to the conclusion that it was not intended and agreed by them that the note should be a present binding agreement, but that it was delivered to Ellis upon the condition that, if Boyd paid interest on the sum for 18 months, Ellis was to renew the notes, as agreed, and, if at the expiration of that time Boyd did not want the stock, the agreement to purchase was to be terminated at Boyd's election, and the note canceled. Such oral agreements are not contradictory of the written instrument. This rule was declared and fully discussed in the recent case in this court of Hodge v. Smith, 130 Wis. 326, 110 N. W. 192, where it was held: "It is familiar law, notwithstanding some conflict in the authorities, that a person may manually deliver an instrument, though it be in the form of commercial paper, to another, on its face containing a binding obligation in præsenti of such person to such other, with a contemporaneous verbal agreement that it shall not take effect until the happening of some specified event, and that the paper, as between the parties, will have no validity as a binding contract till the condition shall have been satisfied; and that proof of such condition does not violate the rule that a written instrument cannot be varied by a contemporaneous parol agreement; that such evidence, only goes to show that the instrument never had vitality as a contract"-citing cases. It is there also held that this principle is recognized in the negotiable instrument law, section 16. * *

*

Can defendant assert this defense to the note in the hands of the