that it appears to be required in some States that an express agreement should be shown to establish the fact that the paper was so taken.1 That, however, in so far as it means an agreement formulated in terms, is contrary to the analogies of the law, and the better authorities consider that sufficient evidence of any kind, otherwise proper, that the parties meant the transfer to operate as payment, may be received.2

As for paper taken to secure a debt created at the same time, there can be no place ordinarily for question; the creditor is a holder for value by all the authorities. So, too, where any new credit or indulgence is given upon the faith of the new paper, that paper is held for value. Still even in such cases the situation will be changed if the security is not passed at the time to the credit of the creditor, but is only to be applied by him when paid, he in the meantime holding it only as agent of the debtor; for then, as we have already said, the debtor is the real holder.5

§ 4. MEDIATE AND IMMEDIATE PARTIES.

One further remark is necessary in regard to the whole term 'bona fide holder for value.' To make a man such, as

1 Brown v. Olmsted, 50 Cal. 162; Tobey v. Barber, 5 Johns. 68; James v. Hackley, 16 Johns 273. See Peters v. Beverly, 16 Peters, 532, 562.

2 Thompson v. Briggs, 28 N. H. 40; Smith v. Smith, 27 N. H. 244; Johnson v. Cleaves, 15 N. H. 332; Jaffrey v. Cornish, 10 N. H. 505, Gibson v. Tobey, 46 N. Y 637, 642,

8 See Stotts v. Byers, 17 Iowa, 303; Curtis v. Mohr, 18 Wis. 615; Logan v. Smith, 62 Mo. 455.

4 Housum v. Rogers, 40 Penn. St. 190; Washington Bank v. Krum, 15 Iowa, 53.

5 See Scott v. Ocean Bank, 23 N. Y. 289.

regards the defendant, with the special rights of the position, there must have intervened between the two at least one holder. And ordinarily such a holder is an indorsee; but the payee of a bill of exchange may be a bona fide holder for value against the acceptor, for one holder, to wit, the drawer, intervenes. Where there has been no intervening holder, the plaintiff and defendant are called. immediate parties, and any defence is open which would be open to an action upon any ordinary simple contract in writing; the doctrine in regard to equities has no application to such a case.

§ 5. EQUITIES: HOW SHOWN: THEIR Nature.

The cardinal rule we have now reached is that a bona fide holder for value takes free from equities, or as it is sometimes expressed, purchase for value without notice cuts off equities. It makes no difference from whom the paper was taken; it may have been taken from a thief; enough that the holder took it bona fide and for valuable consideration.

The existence of equities is to be shown by the defendant and traced to the plaintiff, after the plaintiff has made a presumptive case; and that the plaintiff makes by producing the paper in evidence, duly indorsed when indorsement is necessary, and proving the signatures.1 In certain cases the defendant is helped out in his case by presumption; in others he is not.

If the defendant can show that the instrument was obtained from him by fraud or by duress, or if he can show that it was tainted in the hands of the party who took it from him, with illegality, he makes out his case by

1 Statute in some States dispenses with the necessity of proving sig. natures the genuineness of which is not expressly denied.

presumption against the plaintiff; for the law presumes on such a state of facts that the plaintiff is not the true holder, that the true holder is the man affected by the taint of fraud, duress, or illegality, and that he has merely turned the paper over to the plaintiff colorably for the purpose of suit. In other words, the law presumes that the plaintiff is at least not a holder for value; and the plaintiff is now put to his proofs to sustain his claim. For example: The plaintiff is indorsee of a promissory note made by the defendants, and now sued upon. The defendants offer to show that the payee of the note illegally arrested them, and that this note was given to procure their release from duress, upon the promise of the payee to set them at liberty, which was accordingly done. They offer no other evidence; nor does the plaintiff offer any evidence to meet it, and a verdict is taken for the defendant by consent, subject to the opinion of the court. The defendant's evidence is sufficient; proof of duress by the payee would be a good defence against him; and the presumption is that the payee, being guilty of illegal conduct, has placed the note in the hands of the plaintiff to sue upon it for him.' Again: The plaintiff is indorsee, and the defendants are acceptors, of a bill of exchange now sued upon. The defendants offer to prove that the bill was accepted by them in payment of intoxicating liquor sold to them by the payees in violation of statute, and offer no other evidence. The plaintiff objects to the admissibility of the evidence, and the objection is sustained, and judgment rendered for the plaintiff. The ruling against receiving the evidence offered by the defendants is wrong; the evidence is proper and is sufficient to raise a presumption that the payees have put the bill into the hands of the plaintiff to sue upon it for them."

1 Clark v. Pease, 41 N H. 414; L. C. 507.

2 Paton v. Coit, 5 Mich. 505; L. C. 529.

How far the plaintiff indorsee should go in the way of meeting the presumption is not quite clear. He must at

least show that he took the instrument for value, and it seems that he must also give in evidence the circumstances under which he took it. If that evidence does not indicate that he took the instrument with notice of the equity, and is believed, he will then be entitled to recover. In other words, it appears not to be required of the plaintiff, in answer to the evidence of fraud, duress, or illegality, that he should give evidence directly to the purpose of showing that he took without notice.1

In the case of other equities, such as want or failure of consideration, proof of their existence raises no presumption against an indorsee claiming to be a bona fide holder for value.2 The evidence would, therefore, be insufficient to meet the plaintiff's case; though his own case is only presumptive, for he has thus far given no actual evidence, other than by the production of the paper, that he is a bona fide holder for value. The defendant must accordingly go further, and give evidence either that the plaintiff took with notice of the equity in question or that he is not a holder for value.3

Taking paper with notice, or without valuable consideration, subjects the taker, however, only to such equities as existed at the time he took it; if none then existed, his title will be good. It is then no defence that the holder

1 See Paton v. Coit, 5 Mich. 505; L. C. 529, 531; Sullivan v. Langley, 120 Mass. 437. Compare 2 Bigelow, Fraud, 487, and

notes.

2 A fortiori of evidence that the defendant signed for accommodation, for that is not of itself an equity. Duncan v. Gilbert, 5 Dutch. 521; Grant v. Ellicott, 7 Wend. 227; L. C. 448; Knight v. Pugh, 4 Watts & S. 445.

3 See Paton v. Coit, supra; Clark v. Pease, 41 N. H. 414; L. C.

1

took the paper after its maturity; the effect of so taking the paper is to subject him to existing equities, and if none exist he is entitled to recover. Negotiable paper does not lose its property of negotiability on passing its maturity. An exception is made, in this country, in the case of accommodation paper; to take such paper after maturity is treated as taking it with notice of an equity, to wit, that the defendant loaned his credit only until the paper became due.2

It should also be observed that if the holder was a holder for value bona fide when he took the paper, he will remain such, though afterwards he may become aware of some equity which might have been set up against a prior holder. Indeed, as we have seen, it is no defence that the holder knew, when he took the paper, of the existence of an agreement between the defendant and the party next after him, under which equities have since arisen, if none such existed when the holder took the paper. If, however, the holder made but part payment of the purchase price of the instrument, and before completing payment received notice of an equity, he cannot become a bona fide holder for value except in respect of his part payment.*

3

It remains to consider what is meant by equities. The answer in general is plain enough; any facts which would be a defence to an ordinary simple contract of the common law, not being what we have denominated Legal or

1 Leavitt v. Putnam, 3 Comst. 494; L. C. 129.

2 Chester v. Dorr, 41 N. Y. 279; Bower v. Hastings, 36 Penn. St. 285; Kellogg v. Barton, 12 Allen, 527. Contra, Charles v. Marden, 1 Taunt. 224; Sturtevant v. Forde, 4 Man. & G. 101; Caruthers v. West, 12 Q. B. 143; Jewell v. Parr, 13 C. B. 909; Story, Notes, § 194.

8 Patten v. Gleason, 106 Mass. 439.

4 Dresser v. Missouri Const. Co., 93 U. S. 92.