and Mechanics' Bank v. Empire Stone Dressing Co., 5 Bosw. 275, is cited. We are unable to accept that decision as a correct exposition of the law. The court of appeals says of that case, in the case of Heuertematte v. Morris, 101 N. Y. 63, 54 Am. Rep. 657: "It is true that some expressions of the learned judge writing in that case may justify the citation, yet it should be considered that those remarks were unnecessary to the decision of the case, and the same court have twice since then refused to follow it. We conceive the rule there laid down finds no support in the doctrines of the text-writers or the reported cases. . . . . If a party becomes a bona fide holder for value of a bill before its acceptance, it is not essential to his right to enforce it against a subsequent acceptor that an additional consideration should proceed from him to the drawee. The bill itself implies a representation by the drawer that the drawee is already in receipt of funds to pay; and his contract is that the drawee shall accept and pay according to the terms of the draft. The drawee can, of course, upon presentment, refuse to accept a bill, and in that event, the only recourse of the holder is against the prior parties thereto; but in case the drawee does accept a bill, he becomes primarily liable for its payment, not only to its indorsees, but also to the drawer himself."

He

It is not, therefore, true that the purchaser of a bill before acceptance trusts wholly to the credit of the drawer. believes and expects that the drawee will accept; and upon such belief and expectation he acts. When Stockwell presented these bills to the plaintiff, he contracted that the drawee would accept and pay them. Upon that promise the plaintiff relied.

The reply to Heuertematte v. Morris, supra, is, that in that case the acceptor was an individual, and not a corporation; so that no question arose as to the validity of the acceptance. But the validity of the acceptance is not the question we are now considering. We have already endeavored to show that the acceptance in the case at bar bound the corporation as to a bona fide holder for value. The precise question now is, whether a person who receives an accommodation bill before acceptance, no new consideration moving from him to the drawee, can avail himself of a subsequent acceptance. In Farmers' and Mechanics' Bank v. Empire Stone Dressing Co., 5 Bosw. 275, it was held that he could not. In Heuertematte v. Morris, supra, it was held that he could. The latter case

was put upon the broad ground that the former was not law, and not upon any supposed distinction between corporations and individuals. The good faith of the holder must not be confounded with the validity of the acceptance. Although the latter may, and often does, depend upon the former, yet they are distinct questions for most purposes. An accommodation acceptance being valid, and the plaintiff otherwise a holder in good faith, the mere fact that he received the bill before acceptance does not make him a mala fide holder.

In Arpin v. Owens, 140 Mass. 144, the court say: "It is immaterial when an acceptance is made; it may be made at any time, and the rights of the payee and of the indorsee are the same after it is made, whether they were acquired in anticipation of it or subsequent to it."

These drafts were indorsed and sold by the plaintiff, and the avails were paid over to A. B. Stockwell. Stockwell paid the money so received to Hume Webster & Co. So far the transaction on its face is free from suspicion. It is not claimed that any fraud or illegality is found in terms. The most that can be claimed is, that there are certain circumstances in the case from which fraud may be inferred. Those circumstances are, that Stockwell had been previously speculating in stocks with the knowledge of Webster; that in doing so he had become largely indebted to Hume Webster & Co., a firm in which J. Hume Webster was a partner; that J. Hume Webster was the agent by whom the plaintiff indorsed and sold these drafts; and that the money received therefor was in a short time paid over to Hume Webster & Co. in part liquidation of Stockwell's indebtedness to that firm.

But these circumstances are not, in law, equivalent to fraud. At one time in England the question was held to be whether the plaintiff had taken the bill under circumstances which ought to have excited the suspicion of a prudent and careful man: Gill v. Cubitt, 3 Barn. & C. 466. Afterwards the rule was so far modified as to require gross negligence: Crook v. Jadis, 5 Barn. & Adol. 909. Later still, gross negligence was held to be evidence of mala fides merely, and not the thing itself. In Goodman v. Harvey, 4 Ad. & E. 870, Lord Denman says: "I believe we are all of opinion that gross negligence only would not be a sufficient answer where the party has given consideration for the bill. Gross negligence may be evidence of mala fides, but is not the same thing. We have shaken off the last remnant of a contrary doctrine."

In Swift v. Tyson, 16 Pet. 1, Story, J., says: "There is no doubt that a bona fide holder of a negotiable instrument for a valuable consideration, without any notice of facts which impeach its validity as between the antecedent parties, if he takes it under an indorsement made before the same becomes due, holds the title unaffected by those facts, and may recover thereon, although as between the antecedent parties the transaction may be without any legal validity." "Notice of facts which impeach its validity," means knowledge of those facts: Goodman v. Simonds, 20 How. 343; and by "facts" is intended facts which of themselves impeach the transaction, — in this case fraud, and not other facts which tend to prove fraud or which excite suspicion: Goodman v. Simonds, supra. And such is the law of this state: Brush v. Scribner, 11 Conn. 388; 29 Am. Dec. 303. We think that is the law of this country; at least we are aware of no contrary decision.

"But it must still be true," as is said in 1 Parsons on Notes and Bills, 259, "that while gross or even the grossest negligence is a different thing from fraud, the negligence may be such, and so accompanied, as to afford reasonable and sufficient grounds for believing that it was intentional and fraudulent." By this we apprehend that no more is meant than that the evidence may be so strong as to justify the court in finding fraud, and applies only to courts that pass upon both questions of fact and law, and has no application to this court, which must take the facts as they are found by the court below.

It may be further claimed that the fraud here contended for is not the fraud of antecedent parties to the bills, but fraud, if it exists, to which the plaintiff itself is a party; and that if the facts and circumstances establish fraud with reasonable certainty, the court ought so to regard it, notwithstanding the fact that fraud is not expressly found. We apprehend that the proposition does not relieve the case of the objection that the question is still one of fact and not of law. Nevertheless, assuming that the principle involved in the proposition is a correct one, we will briefly examine the facts to see if it has any application to this case. To make the principle applicable, we think the facts should be of a conclusive character. If they are ambiguous, or consistent with the absence of fraud, they are not sufficient.

There are certain facts essential to the conclusive character of this evidence, which are wanting; and their absence is sig

AY. ST. REP., VOL. I.-9

nificant. It is not found that Webster knew that Stockwell had no funds in the defendant's treasury, against which these drafts were drawn. If Stockwell had in fact had funds there, that would have effectually repelled any imputation of fraud. Webster's knowledge of the purpose of the drafts, a previous agreement even with Stockwell that the avails should be paid to Hume Webster & Co., would have been of no consequence. So also if he really believed that the bills were drawn against funds. That he did so believe is probable, as certain undisputed facts afford a reasonably good foundation for such a belief. For about three years Webster had known and had business dealings with Stockwell. Within a period of four months immediately preceding this transaction, the plaintiff indorsed and negotiated drafts by Stockwell on the defendant for seventy-five thousand dollars. Two days after the drafts in suit were negotiated, it indorsed and negotiated drafts by and on the same parties for thirty thousand dollars more. All these drafts were in fact accepted by the defendant, and paid at maturity.

In December, 1876, when Stockwell presented to the plaintiff drafts to the amount of forty-five thousand dollars, he, in legal effect, represented that he had funds in the defendant's hands; he virtually pledged his honor and reputation as a business man that it was true. When the defendant accepted those drafts, it admitted that those representations were true. The same representations were repeated by the parties in February, 1877, and on March 28th. All those representations were, for all the purposes of this case, true; for those drafts were all paid at maturity. Is it strange that the same representations made on the twenty-sixth day of March should be believed?

It is not found that Webster knew that the drafts were drawn for the purpose of raising money to pay to Hume Webster & Co. If he had not such knowledge, how could he be justly chargeable with a fraudulent intent?

Again, there is no finding that Stockwell was then in poor credit, or that Webster or Hume Webster & Co. supposed that they were in danger of losing by him. Hume Webster & Co. had, in the space of about one month, paid his checks to an amount exceeding one hundred thousand dollars. The plaintiff, during the same month, indorsed his drafts to the amount of seventy-five thousand dollars. These facts afford some ground for believing that both parties regarded him as trust

worthy. If they did, pray what reason had they for colluding with Stockwell for the purpose of drawing money illegally and unjustly from the defendant?

Moreover, the circumstances relied on as showing fraud are in themselves weak, and will hardly justify, much less require, the inference claimed for them.

We may add that if bills of exchange, which are supposed to be the highest type of negotiable instruments, can be successfully impeached by such circumstances as exist in this case, the integrity of all such instruments must be seriously impaired, and their usefulness as a circulating medium wellnigh destroyed.

In the next place, it is claimed that the plaintiff is not a bona fide holder, because the defendant's treasurer had no power to accept accommodation drafts; that the corporation itself had no such power; and that the plaintiff was bound to take notice of the powers of a corporation and its officers, and of the extent of their authority.

On account of the complex character of this proposition, it can only be properly considered by treating each branch of it separately. We may admit generally that the treasurer had no authority to accept accommodation paper, and that the directors had no power to confer upon him such an authority. But in order to prevent injustice and maintain the integrity of mercantile paper, it is necessary to limit the application of the principle to parties with notice. This limitation necessarily results from the fact that every business corporation has power to deal in negotiable paper in the line of its business. As such paper does not ordinarily show on its face the circumstances of its origin or the purpose for which it is made, it becomes important to distinguish those who have notice of its character and purpose from those who have not. To say indiscriminately that the holder of accommodation paper made by a corporation cannot be a bona fide holder simply because it is accommodation paper, ignores this important distinction, and amounts practically to begging the question.

We pass now to the second branch of the proposition,that persons dealing in commercial paper of a corporation are bound to take notice of the extent of its power. Here, too, we may properly admit that the proposition is a correct one; but care should be exercised in its application not to extend it beyond its appropriate limits. To clearly understand those limits, a distinction is to be observed between the terms of a