author: Robertson, J. Hoffman, J. Bosworth, Ch. J.

text:
    The Belmont Branch of the State Bank of Ohio, Plaintiff and Appellant v. William Hoge and Thomas S. Hoge, Defendants and Respondents.
    1. A person who takes negotiable paper as security for a loan made on the security thereof, from one holding it for collection merely, and without authority to dispose of it, and takes it with knowledge of such circumstances as would excite suspicion and lead a man of ordinary prudence to make inquiry, but makes such inquiries as a man of ordinary prudence would make, and the information he gets is such as would naturally be credited, and removes all suspicion, he acts in good faith, and will acquire a title, so far as it depends upon the question of good faith.
    2. Where the loan, in such a case, is made in the State of New York to a corporation, the true owner of the paper thus pledged cannot impeach the title of the borrower and reclaim the paper, on the mere ground that the loan was at more than seven per cent., where, apart from the force of the fact that the loan was usurious, the lender is a bona fide holder for value. (Robertson, J., dissented.)
    (Before Bosworth, Oh. J., and Hoffman and Robertson, J. J.)
    Heard December 10, 1860,
    decided February 9, 1861.
    Appeal by the plaintiffs from an order denying a motion made by them for a new trial.
    This is an action to recover damages for the wrongful conversion, by the defendants, of four certain bills of exchange alleged to be the property of the plaintiff.
    It appeared at the trial that the bills in question, at about the time of their date, were discounted by the plaintiff, at its place of business, in the State of Ohio, for certain persons there residing, whereby the plaintiff became the lawful holder and owner thereof. That said bills were thereupon indorsed by the plaintiff’s cashier to Edwin Ludlow, Esq., cashier of the Ohio Life Insurance and Trust Company, at the city of New York; and in this condition were transmitted to said Trust Company at New York, the plaintiff’s collection agent, for the purpose of collectidn, and for no other purpose whatever.
    Afterwards, during the months of June and July, 1851, the said Ludlow transferred said bills to the defendants, as collateral security for loans made by the latter to the Trust Company.
    On the 28th of August following, said bills were duly demanded by the plaintiff, but the defendants refused to deliver them. The defendants were at the same time notified that plaintiff was the owner of the bills.
    According to the defendants’ testimony, the Trust Company was still indebted to them at the time of the trial, on account of the loans before referred to.
    It was proved that the Ohio Life Insurance and Trust Company was a foreign corporation, organized under the laws of the State of Ohio, and having its principal office at Cincinnati, in said State; and that the defendants knew that fact.
    The plaintiff’s counsel having taken several exceptions to the rulings of the judge, during the progress of the trial, and to his charge to the jury, and to his refusal to charge as requested, and the jury having found a verdict for the defendants, the plaintiff moved, at special term upon a case and exceptions, for a new trial; which motion, having been denied, the plaintiff appealed to the general term, and asks for a new trial:

      First. On the ground of error in excluding evidence offered by the plaintiff, to the effect that the loan from the defendants to the Trust Company was at an usurious rate, and that said company had been borrowing money at an illegal rate.

      Second. For error of the court in not directing a verdict for the plaintiff, and in not charging the jury, as requested by the plaintiff.

      Third. Because the verdict is against the weight of evidence.
    The plaintiff’s counsel requested the court to direct the jury to find a verdict for the plaintiff, and to charge the jury:
    “ 1st. That if they find that the defendants took the bills in question, with notice that they were not the property of the Trust Company, the plaintiff is entitled to their verdict.
    “ 2d. If the jury find that the bills were taken by the defendants under circumstances which ought to have excited their suspicion and put them upon inquiry as to whether they were the ■ property of the Trust Company, the plaintiff is entitled to a verdict.
    “3d. If the defendants had notice that the bills in question were held by the Trust Company for collection merely, and if they received them from Ludlow as the plaintiff’s agent, they were bound at their peril to ascertain the extent of his authority. And Ludlow having no such authority, the plaintiff is entitled to recover.
    ■“ 4th. If the defendants had notice that the bills were held for collection, it is'no defence, that the defendants were informed or had reason to believe that the Trust Company had made advances upon them to the plaintiff.
    ‘1 5th. Assuming that such advances had in fact been made, this would only have given the Trust Company a lien on the bills for such advances, and would have given it no authority to pledge them.
    “ 6th. Assuming that in case the Trust Company had made advances upon the bills they would have been authorized to pledge them to the defendants, it could only have been to the extent of such advances, and it was clearly proved that no such advances had been made in fact.”
    And thereupon, the court charged them as follows :
    “ The plaintiff’s counsel has asked me to instruct you, as a matter of law, that the plaintiff is entitled to a verdict. So the defendants’ counsel has asked me to instruct you that the defendants are entitled to a verdict as a matter of law. I have refused both requests, and shall submit it to you, to determine the facts on which the rights of the parties depend. The counsel on both sides have also presented a series of propositions, embracing the views they respectively hold of the law applicable to this case, and have requested me to charge you in -the terms of them. I shall not state them to you in detail, but shall endeavor to cover them by the views I shall submit to you.
    “ The plaintiff brings this suit to recover for four acceptances, with interest, on the grounds that when they came to the hands of defendants, they were the property of the plaintiff, and the plaintiff has demanded them, and the defendants have not delivered them to the plaintiff, but have refused to do so.
    “ The defence restsupon the grounds that the defendants took them in good faith, advanced money upon them which is still unpaid, and had no -reason to doubt when they came into their possession that they were the property of The Ohio Life Insurance and Trust Company, and that they had full power to dispose of them. In reference to the question of ownership, there is no doubt, in point of fact'-, that when they came into the possession of the Trust Company, they were the property of the plaintiff, sent to be collected, and that the plaintiff has not since given to the Trust Company any authority to do anything else with them. That the plaintiff has had no settlement with the Trust Company. That they were never discounted for, and no advance was made upon them to the plaintiff by the Trust Company.
    “ The question is, whether the defendants took them under such circumstances as that they acquired a good title.
    “ The law is well settled, that negotiable notes and bills may be disposed of without the knoAvledge of the true owner, so that if they come into the hands of a third person in good faith and for value, without notice of any defect of title, or of circumstances that should create suspicion, he obtains a good title. Mr. Hoge testifies to the fact, that advances were made on this and other paper, and that such advances are in part unpaid; unless the other evidence shows that he is mistaken, then so far as the defence rests on the fact of paying value for the paper, it is made out.
    “ If the defendants made advances on them, and if they have not been repaid, and if they took them without notice of any circumstances that should make them suspect the title, then they are entitled to a verdict.
    “William Hoge says the loans have not been repaid.
    “ That you must take to be true, unless you find that there is a mistake, and that the whole had been repaid before suit brought.
    “ And perhaps it is proper to make a passing remark upon the testimony of T. S. Hoge and of William Hoge in relation to the loan of $50,000.
    “ Mr. Thomas Hoge states that that loan was made by himself, a special loan, and was returned. It is for you to say whether that was a loan made on the securities in their hands, and if so, whether there is any contradiction between them.
    “ The next question is, did the defendants know or believe that the Trust Company did not own this paper. Mr. Hoge says he supposed the Trust Company owned this paper. It is argued, however, that his testimony shows that he had notice that this paper belonged to the plaintiff.
    “H® did testify as follows :
    “ Q. When you took the acceptances in suit, what had been said’to you as to the paper they were passing to you and asking advances upon ?
    “ A. Mr. Ludlow stated to me, that these banks wanted ■ money, and they wanted to give it to them; that it was for their interest to give it to them, and these banks were in the habit of leaning upon them, and when they held their paper, and were asked to advance, they wished to give it to them.

      “ It might be true that this paper was sent for collection, and that the bank that remitted it had wished to draw against it, and had asked to have it passed to their credit.
    “It is in evidence before you, that there would be no change in the indorsement, if the paper had been discounted.

      “ The indorsement, so far as its terms and form are concerned, is sufficient to vest the title in the Trust Company.
    “Did the defendants know or believe that those acceptances were not the property of the Trust Company ?
    “If they knew it, they did not get a good title to them.
    “If they did not know it, did they have notice of circumstances that should lead them to suspect that they were not the property of the Trust Company ?
    “If they had notice of such circumstances, and did not inquire, their position is the same as if they had inquired and obtained the information which it is reasonable to presume that proper inquiries would have led them to acquire. Another rule is, that although a man has knowledge of circumstances, such as would excite suspicion and lead a man of ordinary prudence to make inquiry, still if he makes such inquiries as a man of ordinary prudence would make, and if the information he gets is such as would naturally be credited, and removes all suspicion, then he acts in good faith, and will acquire a title, so far as it depends upon the question of good faith.
    “ Did they know or have reason to believe that the Trust Company did not own the paper ? If they did, then they cannot recover.
    “ Again, if the jury find that the defendants took the bills in question under circumstances that ought to have excited the suspicion of a man of ordinary prudence, and put him upon inquiry as to whether they were the property of the Trust Company, and if they make no inquiry, the plaintiff is entitled to a verdict.
    . “If they had such knowledge or suspicion, and made such inquiries, and got such information as persons of ordinary prudence would credit, they would have acted in'good faith in taking them, and the plaintiff cannot recover; if this information would remove all grounds of suspicion.
    “ If you find for the plaintiff, then find for the face of three of the bills and interest.”
    The plaintiffs counsel thereupon excepted to so much of the charge as was in the following words :
    “ Another rule is, that although a man has knowledge of circumstances such as would excite suspicion, and lead a man of ordinary prudence to make inquiry, still, if he makes such inquiries as a man of ordinary prudence would make, and if the information he gets is such as would naturally be credited, and removes all suspicion, then he acts in good faith, and will acquire a title, so far as it depends upon the question of good faith.”
    The plaintiff's counsel then and there excepted to the charge in so far as it did not accord in substance with each of his requests hereinbefore set forth taken seperately. And in refusing to charge each of said requests otherwise than as had been charged, the plaintiffs counsel separately excepted.
    The court refused to charge otherwise than as had been charged, and the plaintiff’s counsel excepted.
    The jury rendered a verdict for the defendants.

      Edwards Pierrepont, for Appellant.

      Daniel Lord, for Respondents.
   Robertson, J.

—This action is brought by the plaintiffs, a corporation of the State of Ohio, to recover the value of certain drafts owned by them, which they claim to have been transferred to the defendants as security for a usurious loan, alleged to have been made to the Ohio Life Insurance and Trust Company; to whose cashier they were sent by the plaintiffs for collection.

The ownership of the drafts by the plaintiffs, their transmission of them to the cashier of the Life and Trust Company "for collection, and his borrowing money upon them, fully appear in evidence. No appropriation of the funds received by him, for the benefit of such company, or authority from them to use such drafts as security for any loan of money, is proved in the case; unless it must be inferred, from the ‘fact of'his being cashier, or his declaration that'he borrowed such funds for their use.

On the trial, a question was put to one of the defendants, in order to prove the usurious character of the loan, which is as follows:

“Q. "Were not the loans made by William Hoge & Co. to the Ohio Life and Trust Company through Mr. Ludlow, and to secure which it is claimed that the four acceptances are held by the defendants, made under an agreement by which Hoge & Co. reserved to be paid to them, and by which the Ohio Life and Trust Company agreed to pay to them, interest at and after a greater rate than at the rate of seven per cent, per annum, to wit, interest at the rate of fourteen per cent, per annum ?”

(To this question the defendants’ counsel objected. The court sustained the objection, and the plaintiffs’ counsel excepted.)

The validity of this exception is to be governed by the construction to be put upon the statute of 1850, prohibiting corporations from setting up the defence-of usury. (Ses. Laws, 1850, ch. 112.) If the plaintiffs are debarred thereby from setting up usury in the loan, for which their property was pledged without their consent; then such exception was not well taken; and that depends upon the question, whether the statute was intended to create merely a disability in corporations to plead usury as a defence, or to legalize usurious contracts made by them. If the purpose of the statute be to create a mere exception to general laws against usury, the form of expression adopted in it to accomplish that purpose is extraordinary; none parallel to it can be'found in any statute having such a purpose. Contracts where a corporation reserves usury are clearly not within it; as it speaks only of a defence. It does not affect the contract, but only the remedy; otherwise, it would render it valid in other countries or states, which it does not. (Hungerford Bank v. Potsdam and Wat. Railroad Co., 10 Abb. 24.) It does affect contracts made abroad and foreign corporations; Southern Life Ins. and Trust Co. v. Packer, (17 N. Y. R. 52) ; and applies to those made before its passage as well as since. (Curtis v. Leavitt, 15 N. Y. R. 85.) None of those results would follow from merely excepting loans to corporations from the effect of the statutes against usury.

One mode sometimes employed to get at the meaning of a statute is, to ascertain the evil and the remedy. In this case, we know from history the evil consisted in corporations rendering complicated transactions in the transfer of securities and bills of exchange a mode of setting aside contracts for usury unthought of in their formation; and a notorious case, then recently decided in the Court of Appeals, had awakened universal indignation. The prohibition was created, extending just far enough to prevent such artificial bodies from availing themselves of any plea of extortion; but it did not intend to encourage the practice of taking usury, or place those who had taken, or would take it from a corporation, in any better condition than others, except as regarded the borrowing corporation. Still less did it intend to allow the usury laws to.be evaded by permitting contracts to be made nominally with corporations, while the real borrowers became nominal sureties, with a secret understanding between them and the corporations. Such a license would have opened a new field for enterprise to such corporations as would undertake to make usurious contracts for borrowers for a per centage, while the latter would be the party really looked to; thus adding to the sacrifices made by needy borrowers in order to raise money. In such case, a prohibition to plead usury would be a privilege instead of an injury; as was shown by applications made to- the Legislature to confer the same on private individuals.

It is plain, therefore, that in regard to all others but the borrowing corporation itself, the prior statutes could only be maintained by confining the restriction to the corporation itself, and allowing all others, who might be parties to a usurious loan to a corporation, to avail themselves of the objection of usury. Such has been the decision of every court to whom the question has been heretofore submitted. The -first case which came before a court, in regard to the interpretation of this statute, was that of Bock v. Lauman, in Pennsylvania (24 Penn. 435), where the defendant had indorsed certain acceptances of a New York corporation, but was held to be a joint contractor. In that case, it was decided that the prohibition did not affect the defendant, or any other parties to a contract but the corporation. This was followed by the case of The Market Bank of Troy v. Smith, in Wisconsin, in the United States District Court, where a similar principle was adopted (Am. L. Reg. for September, 1859); and it was fully analyzed and fixed in this State, in the case of Hungerford Bank v. Potsdam and Wat. Railroad Co., before referred to. In that case, it was held that the accommodation indorser of a draft of a corporation, usuriously discounted, could set up the usury as a defence to his liability. The decision was expressly put upon the ground that the prohibition of the' statute of 1850 extended only to the corporation, and did not make the contract with others, as sureties, good. The whole force of the reasoning in that case was directed to the question, whether the fact of a contract being made with a corporation, although tainted with usury, made it, in all its remote or secondary consequences, and its operation on the rights of others, valid to all intents and purposes.

There can be no doubt, under the decisions last-cited, if the plaintiffs had been sureties for the loan to the Ohio Life Insurance and Trust Company, they could successfully have evaded any liability; or that if they had delivered their own note, or transferred property belonging to them as security for the loan, they could have recovered them back; but is contended that having trusted their choses in action in the hands of an officer of a corporation solely to collect them, and without an authority to employ them for any other purpose, if he represent them to be the property of such corporation, and obtain usurious advances upon them, the plaintiffs cannot reclaim them. This would be an extraordinary anomaly, if produced by the statute. Is it possible that a law has been deliberately passed in such a form as to bring about the result, that parties who Icnowingly and voluntarily pledge their responsibility and their property,, for the performance of a contract, may evade the responsibility, and reclaim the property, but if it is done by one who is an agent, for other purposes only, without authority for such purpose, they cannot ? Hastily as legislation is sometimes conducted, it is very rare to see it so stultify itself; and there is no room for supposing it has done so in this case ; such a consequence would make the validity of a contract depend on the representation of the agent, or rather upon the fact that the contract was made by an agent; for the possession of the notes, properly indorsed, was prima facie a representation of ownership.

The fallacy in the reasoning, which leads to so anomalous a result, is that which assumes that the main contract, with all its ramifications and auxiliary obligations, must be entirely void, or entirely valid, as to all the parties to be affected by it; all contracts made with two parties, one of whom is under a personal disability, may be void as to him, and good as to the others. A covenantor to pay a usurious -loan may set up usury, although the purchaser of property pledged to secure such loan cannot; a contract by a corporation to pay a usurious loan may well be valid to the extent of their assets, that is, they can set up no defence against it, yet be invalid as against third parties and their property; the law has not declared such contract to be innocent, but merely that it is innocent as regards the borrowing corporation and its property. It is.in vain to say that third parties have a right to assume that corporations are owners of property of which they are possessed, and that, therefore, a usurious loan on the faith of it is valid; for it begs the whole question. Concede that such contract is illegal as regards third parties, and it is as just to say that usurious lenders to corporations take securities which they get from them at the risk of their not being the property of the borrowers, and therefore improperly pledged to them, as to say they are entitled to hold them against the innocent owners. The statute does not so purge the contract of all vice as to make it entirely meritorious, but rather merely puts the lender and borrower on the same Tooting, making it illegal as to the rest of-the world. In the language of Judge Allen, in the case before cited of Hungerford v. The Potsdam, Railroad Company, “ It is only by a construction not warranted by the language of the act, or required by any necessity, or necessary to give full effect to the statute and the intention of the Legislature as expressed in it, that it can be claimed that a usurious loan to a corporation, and all securities connected with it, are made valid;” and if not valid as to a voluntary party to the contract, they clearly should not be as to a stranger whose property was _ attempted to be used without his consent to pay such loan. It might be contended, with as much if not more plausibility, that the plaintiffs could not avail themselves of the usury because they were a corporation, as the statute of 1850 does not specify by or to whom the usury mentioned in it is to be reserved, but prohibits corporations generally from setting up the defence of usury; but if the object of the statute can be inquired into for the purpose" of interpreting it as to the connection of the corporation with the usury, it may be equally examined to see how far it meant to rid a contract with a corporation of all the consequences of its being usurious. It certainly would have been much easier and more direct, if the Legislature had intended it, to have excepted contracts with corporations from the operations of the usury law, and therein to have accomplished it by prohibiting corporations from setting up usury as a defence.

I am satisfied, therefore, that the plaintiffs were entitled to recover, if the question excepted to could only be truly answered in the affirmative. I consider the question of the notice which is to destroy lonafides in a purchase, as governed by the cases of Pringle v. Phillips, (5 Sandf. R. 157,) and Williamson v. Brown, (15 N. Y. R. 354;) but as the judge charged substantially according to the principles of those cases, and I consider the ground I have already stated sufficient, I do not consider it necessary to discuss the objection to the charge upon that point.

The judgment should therefore be reversed, and a new trial granted, with costs to abide the event.

Hoffman, J.

—1st. The first- important question under the first head is, what is the effect of the statute of usury, and the act of April 6th, 1850, ch. 172, upon-the case?

The point thus arises:

The acceptances in question being in the hands of the cashier of the Ohio Life Insurance and Trust Company, and being considered by the defendants to be the property of that company (a fact now assumed), were taken as collateral security for moneys loaned by them to such company.

One of the defendants being examined as a witness, this question is asked by the plaintiff: “Were not the loans made by William Hoge & Company (defendants) to the Ohio Life Insurance and Trust Company through Mr. Ludlow, and to secure which it is claimed that the four' acceptances are held by the defendants, made under an agreement, hy which Hoge & Company reserved to be paid to them, and by which the Ohio Life Insurance and Trust Company agreed to pay to them, interest at and after a greater rate than at the rate of seven per cent, per annum, to wit, at the rate of fourteen per cent, per annum ?”

To this question the defendants’ counsel objected. The court sustained the objection, and the plaintiff’s counsel excepted.

The question between the parties being, whether the defendants took the acceptances as holders in good faith, without reason to doubt their being the property of the Ohio company, it is insisted that if they took usury upon the loan, they were not holders or purchasers in good faith, and did not acquire a title to the bills. It is not to be disputed, that if the question under the statute of usury is not so affected by the act of 1850 as to vary the result, the proposition of the plaintiff is sound law.

Ramsdell v. Morgan (16 Wend. 576), Keutgen v. Parks (2 Sandf. Sup. Ct. R. 60), and Bean v. Howell (Lalor’s Sup. to Hill, 39), are sufficient authorities for this point. The party guilty of usury in the transaction, by which he obtains property, is not a Iona fide purchaser, so as to hold it against the real owner.

The statute of 1850 enacts, “that no corporation shall hereafter interpose the defence of usury.” What is the import and extent of this provision?

• The first and obvious meaning is, that usury shall not be allowed as a means of defeating an action against the corporation, for the fulfillment of its engagement, or recovery of a demand, for which it is otherwise liable. The statute would have prevented the decision in the case of the Dry Dock Bank.

It has been, however, definitely settled, that it has a more comprehensive meaning. It extends to the prohibition of the corporation from bringing an action to recover securities deposited with a lender on a usurious loan.

In the Southern Life Insurance Co. v. Packer (17 N. Y. R. 51), a referee had given judgment for the surrender of securities in such a case, and payment of moneys collected upon them. The questions passed upon were, that the statute was retrospective; and that it applied to a foreign corporation. The application to the existing action was taken for granted, and judgment for the defendants was sustained. (See, also, Butterworth v. O’Brien (7 Abbott, 456).

The result then, is, that contracts with corporations shall in nowise be vitiated or affected by reason of any taint of usury in them. When the Legislature prohibits every mode of setting up a defence, or asserting a demand, in a "given case, it effectually destroys the right which otherwise would exist. The statute is, in my view, equivalent to an enactment that no contracts or transactions with a corporation shall be void or impaired b„y reason of any excess of legal interest being taken, or agreed to be taken, upon them from such corporation.

It-follows, that the lender can recover his demand; and he can recover, because the contract or transaction is rendered valid. His right to support an action rests upon the ground that the loan, which before was void as usurious, is now legal and free from the objection. And it then seems incomprehensible how he can be treated as continuing liable, criminally, for a misdemeanor upon a transaction which is so entirely rendered lawful, that he can recover upon it, and sustain it, civilly, in every respect, as if there had never been a statute of usury.

It is this train of thought which leads me to conclude, that the observations of some of the learned justices in the Court of Appeals are not to be treated as mere passing and needless expressions; but that, whether meditated upon and matured or not, they are accurate and sound. Pratt, Justice, in the case of Southern Life Ins. Co. v. Packer (ut supra), and'Comstock, Justice, in Curtis v. Leavitt (15 N. Y. R. 9-85),.speak of the act as a partial repeal of the usury laws ; and a repeal as to corporations.

It is needless to inquire what would be the case, if a corporation were a lender upon usury — not a borrower.

It is, then, clear, that the present defendants could have supported an action against the Ohio company for the loan upon which the acceptances were deposited. As between those parties, the case is precisely as if there had never been a statute of usury. The transaction, interpreted by the statute, is this: It was lawful for - the company to give, and the defendants to receive, fourteen dollar's upon every hundred dollars for the use of the money during a year. It is not easily comprehended how this legitimate contract between these original parties can leave it open to parties on collateral paper deposited, without any privity with the transaction, to assert usury in it. It seems to me to make the defendants holders and purchasers in good faith, so far as this question is concerned.

The language of Justice Hogeboom, in the case of Butterworth v. O'Brien (16 Howard, 503, 7 Abbott, 456), at general term, coincides with the views now taken. The statute, by prohibiting the defence, has removed the taint of usury. It is no longer, as to corporations, illegal. It has become a lawful and proper transaction. When the Hungerford Bank v. The Potsdam and Wat. Railroad Co. was before Mr. Justice Mason, at special term (9 Abbott, 124), he held that, under the act of 1850, the contracts of corporations were no longer invalidated by usury; and that' an accommodation indorser for a corporation, upon a usurious note, could not set up the defence to invalidate his contract.

The case was appealed to the general term (10 Abbott, 24, 19 How. 39), and the decision reversed.

After a careful consideration of the full and able argument of Mr. Justice Allen in that case, I may confidently say that entire concurrence may be given to its material propositions, (with, perhaps, one exception,) as well as to the decision, without varying the rfesult I have reached in the present instance.

The individual defendants were, as before stated, accommodation indorsers. The learned judge says: “ They were in no sense strangers to the contract of loan. They were sureties of the borrower, and as such were embraced in the term ‘borrower,’ as used in the eighth section of the Revised Statutes relating to usury, and in the fourth section of the Usury Laws of 1837. A mere stranger to the transaction cannot ordinarily allege usury in respect to it. The defendants were not strangers to their own contract of indorsement. They are not necessarily restricted by their relation to the principal to the defences which may be made available to the maker .of the note.

“It is as to the contract of the corporation that the Statute of Usury is quasi repealed, not as to the individual indorser. It is only by a construction not warranted by the language of the act, nor required by any necessity, nor necessary to give full effect to the statute and the intent of the Legislature as expressed in it, that it can be claimed that the loan to a corporation, and all securities connected with it, are made valid by being taken out of the operation of the Statute of Usury by the act of 1850, and I am not prepared to go that length.”

The only expressions in this opinion, which might be interpreted as inconsistent with the views I have expressed, are those that I have italicized. They must be construed in connection with the case considered. And then it seems clear that the question of the right of an accommodation indorser of a corporation’s note, on a usurious consideration, is widely different from the question whether a transferee of collateral securities takes them in good faith, when he takes them to secure a- loan made in legal good faith.

Reference is made by counsel to the case of Bock v. Lauman (24 Penn. R. 435). In commenting on the statute of 1850, the court say: “It certainly does make contracts by corporations to give more than seven per cent, interest valid, and we suppose that it makes them entirely lawful as well for the lender as for the borrower. Here, however, the contract really is made with the corporation and the defendants as its sureties; and with the latter no valid contract can be made for more than seven per cent, interest. The indorser is so far a party to the transaction that he may object to it for usury.” (11 Wend. 329; 9 Paige, 297.)

The reasons for the decision in Gaither v. The Farmers’ and Mechanics’ Bank of Georgetown, (1 Peters’ U. S. R. 37,) and Harrison v. Hannell, (5 Taunton, 180,) there cited, appear to sustain these conclusions. “Gaither does not,” says the learned judge, in the first case, “propose, by this defence, to relieve himself from paying the note; it goes only to his liability to pay it to this individual. The indorsement of a promissory note creates several contracts ; and if, in this case, it could give a right of action against Gaither, the drawer, it ought also to sustain an action against Corcoran & Co., the indorsers; but against them it is perfectly clear an action could not be sustained, for they were parties to the usurious loan. It follows that their indorsement was a void act, and the property, and of consequence the right of action, never passed to these plaintiffs.”

So in the case from 5th Taunton the valid collateral bond was held void, “not because it was given for securing usurious interest, but because it was given for enforcing a-contract fo.r usurious interest.”

These cases show that the principle is this—that the collateral security follows and abides by the law, which attaches to the principal obligation.

I am of opinion that the ruling of the court below was in this particular correct.

The next point made under the head of the erroneous exclusion of evidence is, the rejection of testimony that the Ohio Company had been for a long time a needy borrower, raising money on good collaterals at exorbitant rates of interest.

This exception was not much pressed. We think it clearly untenable.

2d. The counsel of the plaintiffs insists that the jury should have been directed to find a verdict for the plaintiffs.

We do not see on what ground this could be claimed, unless under the first division of the fourth point — that the Trust Company, being a foreign corporation, such a discount was an illegal act, and would have given the company no title to the bills; and the defendants, having full notice of such illegality, would stand in no better position.

The statute (1 R. S. 712, .§ 3-6), and the act of 1837, chapter 20, with the cases cited, are, we think, inapplicable. The prohibition of the statute is now merely against a foreign corporation keeping an office for the purpose of receiving deposits, or discounting notes or bills, &c. We do not find in the case any testimony tending to show that an office was kept for the purpose. - The bills were transmitted by the plaintiffs to their collection agent, the Trust Company, for collection. The .company, .as the plaintiffs contend, did not discount them, but transferred them to others, to get money on them.

The court was right in this refusal.

The next branch of this second head of the plaintiffs is, the refusal to charge as requested.

Almost all the questions remaining in the case may be considered together under this head. They involve the consideration of the accuracy of the judge’s charge, of the exceptions taken to it, and of every point in which a charge was not made in accordance with the request to charge.

If the charge comprises a full statement of the law on every material point, and if the actual charge on each of such points is correct, it is a necessary conclusion that the request need not have been complied with.

The first objection to the charge is, for stating the rule to be that, though a man has such knowledge as will excite suspicion and lead to inquiry, yet if he make such inquiries as a man of ordinary prudence would do, and if the information received be such as would naturally be credited and remove suspicion, then he acts in good faith, and will acquire title, so far as it depends on a question of good faith.

It is obvious that the same general rule must apply as well to the case of a person’s supineness in making inquiry, when he is apprised of something to lead to it, as to the case of his reliance upon the information which an inquiry, once commenced, has obtained. In each case the question is, was it a neglect indicating bad faith, which made him omit entirely in the one instance, and omit to proceed fur-' ther in the other ?

The Lord Chancellor of England has adverted to the rule now recognized as follows: “Imust not part with this case without expressing my entire concurrence in what has of late years fallen from judges of great eminence on the subject of constructive notice, namely, that it is highly inexpedient for courts of equity to extend the doctrine. Where a person has actual notice of a fact, there can be no danger of doing injustice if he is held to all the consequences of that which he knows to exist. But where he has not actual notice, he ought not to be treated as if he had notice, unless the circumstances are such as enable the court to say, not only that he might have acquired, but also that he ought to have acquired the notice with which it is sought to affect him; that'he would have acquired it, but for his gross negligence in the conduct of the business in question. The question, when it is sought to affect a purchaser with constructive notice, is not whether he had the means of obtaining, and might by prudent caution have obtained the knowledge in question, but whether the not obtaining it was an act of gross or culpable negligence,” (Per Lord Cranworth, in Ware v. Egmont, 31 En. L. and Eq. Rep. 89.)

The case of Jones v. Smith, cited by counsel, (1 Phillips’ Rep. 244, 1 Hare’s Rep. 43,) is a striking example of this general rule, applied by Lord Lyndhurst to the case of neglect in conducting an- inquiry which had been begun. The cases áre critically examined, from those which proceed upon the ground of what is termed “ willful blindness” to those in which a wary and prudent person would have inquired further ; yet the party, had acted bona fide, and only omitted to do what a wary and cautious person would have done.

But the opinions in the case of Frazer v. Western, especially that of Mr. Justice Bronson, in the Court of Appeals, should be noticed upon this subject. The case is to be found in 1 Barbour’s Ch. Rep. 220, and in Howard’s Appeal Cases, vol. 1, 448. The assistant Vice-Chanceller, Hoffman, had found the defendant not to be a purchaser for valuable consideration, on the ground mainly that he had a trust deed in his possession, which showed it was a voluntary conveyance by a husband to a wife, and that the trustee was to convey on her request; and that an inquiry of the trustee would have led to the ascertainment of the fact that the grantor was utterly insolvent in May, 1830, and to inquire whether he was not insolvent in August, 1828, the date of the conveyance. (1 Barb. Ch. Rep., ut supra.) The language of Sir William Grant, was held pertinent:

“He was bound merely not to shut his eyes against the information which, without extraordinary neglect, he could not avoid receiving.”

The Chancellor reversed the decree, on the ground of Western being (particularly from the force of his answer) a purchaser for valuable consideration without notice of the fraud.

In the Court of .Appeals, Ch. Justice Jewett supported the Chancellor’s decree on the Chancellor’s ground.

Mr. Justice Bronson examined the case, and concurred with the assistant Vice-Chancellor in his views on this, as on the other points. His comments upon the principle of constructive notice, and the duty of prosecuting the means of information open to a party, and his criticism of authorities, is more elaborate than is usual with him. It is not to be questioned, that he supports a rule, under which much less would be deemed constructive notice than under that -of the late English authorities.

He held that Western could not be deemed a bona fide purchaser without notice. “No one could read the deed — especially no eminent counselor-at-law, like Mr. Western—without having his suspicions aroused that it was a device to defraud the creditors of the grantor.”

Ruggles and Gray concurred with Justice Bronson. Gar-diner and Jones are to be considered as concurring with Justice Jewett on this point. On various grounds, the decree of the Chancellor was affirmed by a vote of five to three.

I think, also, that a distinction should be made in favor of the currency and transmission of negotiable paper; and that the rule of the English authorities I have noticed is peculiarly applicable to dealings in such paper. These acceptances are indorsed in blank by the cashier of the plaintiffs, sent to the proper officer of the Ohio Company, and indorsed by him in blank. The faith to be attributed to possession, as evidence of title, is greater in such cases than in others. The neglect to make inquiries must, therefore, he more decided and willful.

Goodman v. Simonds (20 How. U. S. Rep. 343) was a case of negotiable paper; and the instruction given to the jury by the court below was in the leading point substantially given by the judge on the trial in the present case. Under such instruction, the jury found for the defendant—the party upon the collateral security transferred for a personal debt of the holder—finding thus: “That the plaintiff knew of such facts as caused him to suspect, or would have caused one of ordinary prudence to suspect, that he (Sigerson, the depositor) had no interest in the bill, and no authority to use the same for his own benefit, and by ordinary diligence he could have ascertained these facts.” Such was the instruction.

The court repeats the doctrine laid down in Swift v. Tyson (16 Peters, 1), that a bona fide holder of a negotiable instrument, for valuable consideration, without notice of facts which impeach its validity between the antecedent parties, if he takes it under an indorsement made before it is 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.

Next, it is declared that the word notice, as used in this proposition, must be understood in the same sense as knowledge; which is one of its usual and appropriate significations.

If the defect is on its face, it is matter of construction whether it conveyed notice, and must be determined as a matter of law.

Nothing less than proof of knowledge of external facts and circumstances which impair the title will suffice, and meet the exigencies of a defence of notice. While the party is not bound to make inquiry, he must not willfully shut his eyes to the means of knowledge which he knows are at hand; that, whether equivalent to notice or not, would be plenary evidence of bad faith.

“ The mere want of care aud caution is not enough to defeat the party taking the paper.

“ The error was of great magnitude in an instruction, that any facts and circumstances which would excite the suspicion of a careful and prudent man would be sufficient to destroy the title. Gross negligence is nob of itself enough, although it may be evidence of bad faith. Bad faith is the criterion.”

It is not to be questioned, that the train of reasoning in the case of Pringle v. Phillips (5 Sandf. R. 157), in this court, is adverse to the propositions thus declared; and the leading cases were carefully examined. It was a case of replevin for goods. And in Williamson v. Brown (15 N. Y. R. 354), upon a question of title to real estate, similar doctrines, with respect to the duty to inquire upon information possessed of facts inducing inquiry, are sustained, as stated in Pringle v. Phillips.

The charge of the learned judge appears to me to be strictly within the rules of law as declared in the cases in our own State; indeed, to be as favorable to the plaintiff's as it well could be consistently with such rules. If the defendants knew that the acceptances were not the property of the Trust Company, they acquired no title, was one proposition submitted, and plainly correct. If they had notice of circumstances which should lead them to suspect they were not the property of the company, was another position; and was sufficiently just to the plaintiffs, and sound upon the cases noticed. If they had knowledge of circumstances creating suspicion, and leading a man of ordinary prudence to make inquiry, and they did inquire, and then the information was such as would naturally be credited, and remove suspicion, then they acted in good faith, was a third proposition equally correct.

But if the law declared by the the Supreme Court of the United States could be deemed the imperative rule here, then the learned judge has given to the jury a rule far more favorable to the plaintiffs than that law would have warranted. We cannot grant a new trial for this. (4 Sandf. Rep. 67.)

The plaintiffs’ counsel, in his fifth point, insists that the jury should have been charged in accordance with the third, fourth, fifth and sixth requests made .by him. He objects also to a portion of the charge, which was not made the subject of an exception at the trial.

It seems to me that, so far as these requests are not substantially covered by the charge itself, they do not arise now in the case. They are negatived by the verdict of the jury, finding that the defendants took the bills for value, honestly believing them to be the property of the company.

It is scarcely necessary to say that the verdict of the jury cannot be set aside as being unwarranted by the testimony.

The subject of the seventh point of the plaintiffs, connected with the Statute of Ohio, was not noticed by the learned counsel of the plaintiffs, and no point was made by him respecting it.

The order denying a motion for a new trial must be affirmed with costs.

Bosworth, Ch. J.

—An indorsee of business paper, who is denied the character of a Iona fide holder, or of being a holder in good faith, merely because it was indorsed to him as security for the payment of a usurious loan, is denied it because he acquired his title under a contract declared by law to be void, a contract for the taking of usury, the taking of which is declared to be a misdemeanor, and punishable as such. In other words, the law does not regard him as a holder in good faith, and in the usual course of business, because he acquired his title under an illegal and prohibited contract, to which he was a party.

But if the usury law is repealed as to. contracts made with a corporation, and if the taking of fourteen per cent, interest from a corporation is as lawful as taking seven per cent., then it would seem to follow that one who loans money in actual good faith to a corporation, on the security of negotiable paper, is not to lose his title on the fanciful construction that the contract is valid as between the corporation and person lending to it, but is void as between the latter and all third persons whose rights may be affected by the transaction, if treated as lawful and valid.

It was not intended that the act of 1850 (chapter 172) should result in the practical absurdity, that the contract with the corporation should be deemed void as previously1 but that the corporation should not be permitted to prove that fact as a defence.

Neither was it designed to make the contract valid as against the corporation, and at the same time leave it, as to the lender to the corporation, a prohibited contract in any respect.

By force of the act of 1850 (chapter 172), the lender to a corporation at more than seven per cent., who holds its obligation to repay the sum lent and the interest agreed upon, may recover judgment for such interest in the courts of this State, and collect the judgment by execution.

It is beyond the power of the corporation to prevent this result.

It seems to me absurd to say that the corporation may, within one year after the payment of such judgment, sue for, and recover from the lender, the excess of interest over seven per cent., (3 R. S. 5th ed. 72, § 3,) or that such lender can be indicted and punished by fine and imprisonment for collecting his judgment, (Id. 74, § 15,) a judgment to which he was entitled by law, and which the court, therefore, was bound to render and execute.

Inasmuch, therefore, as the act of 1850 (chapter 172) provides that a corporation cannot defend a suit brought against it, on the allegation that it is brought on a usurious contract, it in effect enacts that a lender to a corporation at more than seven per cent, may, in an action on such contract, recover the sum lent and the interest agreed to be paid. Such an act, in effect, necessarily repeals all preexisting laws giving to the borrower a right to recover back the excess paid over seven per cent., or declaring the reception of over seven per cent, on such contracts a misdemeanor.

A law giving the right to enforce the contract and recover interest at the stipulated rate, by necessary implication repeals any and all laws making it unlawful to stipulate for and actually receive more than seven per cent.

This view of the import of the act is sustained not only by the emphatic and pertinent remarks made by several judges in Curtis v. Leavitt, 15 N. Y. 85, and by Pratt, J., in Southern Life Ins. and Trust Co. v. Packer et al., 17 N. Y. 52, to the effect that it is a partial repeal of the usury laws, but .also by the propositions actually decided. The statute was designed to establish a principle, a rule of law applicable to a class of contracts, and not an anomalous rule of practice.

I therefore conclude that the contract between the defendants and the Ohio Life Insurance and Trust Co. is as valid as if the loan had been made at seven per cent., and that the imputation to the defendants of not being 6ona fide holders, is no more predicable of a contract reserving fourteen, than of one reserving seven per cent, interest.

- The judgment pronounced in the Hungerford Bank v. The Potsdan and Wat. Railroad Co. (19 How. Pr. 36), does not necessarily involve the decision of any question adverse to the views I have stated.

It was considered as- settled law, prior to the passage of the act of 1850 (ch. 112), that the discount or purchase of an indorsed note, having no previous legal inception or validity, at a greater rate of interest than seven per cent., made the note void for usury. (Aeby v. Rapelye, 1 Hill, 9.) A statute which repeals the usury laws as to, or declares them inapplicable to the makers of negotiable paper, or to the contracts of a specified class of persons, would not affect the separate and independent contract of the indorser, or the contract of any person not included within the specified class.

The contract of an accommodation indorser is his own contract alone, and not that of his principal. The separate contract of the accommodation indorser, or other surety, whether cotemporaneous with, or subsequent to, that made by his principal, may be void, as contravening the usury laws; while that of the principal is valid, as not reserving more than seven per cent.; or by force of some act, making it legal though a greater interest was received.

The securities taken by the defendants were valid, and obligatory upon the parties to them when received; and the 'question arises as to the right of the defendants to enforce them, if their title is established.

As to the power or authority of the borrowing corporation to make a valid pledge of the bills owned by the plaintiffs, to secure the payment to the defendants of the sums they lent, it is sufficient to say that the defendants’ title does not depend upon the fact of there being any actual authority from the plaintiffs to pledge. That question has no more pertinency now than if the loan had been made at seven per .cent.; or than it has where negotiable paper, lost or stolen, has been passed to persons claiming to be Iona fide holders. The defendants’ title depends upon the question, whether they are holders in actual good faith, for value paid before the maturity of the paper in qxiestion. The jury have found that they are such holders. They must be treated as being such holders, and having acquired a title valid, as against the plaintiffs; unless the law imputes to them the character of mala fide holders, solely because the loan they were taken to secure was made upon an agreement reserving fourteen per cent, interest. The act of 1850 (ch. 112), if the views already stated are correct, prevents any such result.

If the evidence, as to the rate of interest for which the defendants stipulated was rightly excluded, as I think it was, the jxidgment should be affirmed. The other exceptions taken I regard as untenable.

Order affirmed.


source: Caselaw Access Project

author: Robertson, J. Hoffman, J.

license: Public Domain

text:
    Wilmot et al. v. Richardson et al.

    1. Thd plaintiffs sold and delivered to one P.. in New York, 1,897 barrels of flour, and P. consigned the flour to defendants, in Liverpool, for sale, through defendants’ house in New York, receiving advances thereon, and on other flour similarly consigned, amounting in all to 8,164 barrels. The plaintiffs claiming that the flour had been sold to be paid for in cash on delivery, and on P.’s representation that the defendants were to advance cash for the same, and on other representations of P. alleged to be fraudulent; with knowledge of all the facts, and after the defendants had refused to pay any part of the price due from P. to the plaintiffs, accepted an order drawn in their favor by P. on the defendants, (which order was accepted by the defendants,) and directed them to pay to the plaintiffs the proceeds of sales of the 8,164 barrels of flour, after deducting defendants’ advances and their charges, to amount of $10,115.12, P. stipulating, in writing, at the foot of the order, that no further advances should be made to him. Three days thereafter the plaintiffs sued out an attachment against P. on contract, with a view to get,the Liverpool proceeds, and charged in their affidavits that they sold and delivered the goods to P., on his promise to pay cash on the delivery. The defendants subsequently sold the 8,164 barrels of flour, and paid the proceeds, over the specified amount of advances and charges, to the plaintiffs, who accepted the same, and gave a receipt therefor, expressed to be “ in full of proceeds of sales of flour', as per your acceptance of P.’s order in our favor.” Held, that plaintiffs could not subsequently maintain an action against the defendants, either for a conversion of the flour by reason of their having sold it. or to recover the moneys obtained for it, as-for so much money had and received by the defendants to the plaintiffs’ use.
    (Before Bosworth, Oh. J., and Hoffman and Robertson, J. J.)
    Heard December 11,
    decided February 16, 1861.
    Exceptions ordered, at the trial had February 15, 1858, before Mr. Justice Woodruff, and a jury, to be first heard at general term. The plaintiffs are John Wilmot, William Gooderham, William P. Howland, and James G. Worts. They composed the firm of “ J. Wilmot fy Co,” were large dealers in 1854 in Canada flour, J. Wilmot was the only partner in New York; John W. Hull, was their managing agent; the other partners resided at Toronto, and conducted the business of the firm at that place.
    The defendants are Thomas Richardson, James Spence, and Edward F. Patón. They did business at New York under the firm name of “ Thomas Richardson if Co.,” and at Liverpool, under the name of “ Richardson, Spence & Co.” At the time of the sale of the flour in question, Samuel JYimmons was their clerk, but subsequently, became one of their firms. The defendants were in the shipping trade; obtained consignments of flour to their Liverpool house; and made advances on the same.
    The complaint alleges that one Walter Patterson, in May, 1854, bought of Wilmot & Co., 1,897 bbls. flour for $15,104.87, to be paid in cash on delivery, representing that it was for Richardson & Co., and that they “were to advance the cash for the same.” That Wilmot & Co., on 11th May, delivered the flour on board ship, and on 12th May handed ship’s .receipts to Patterson, “ who promised to get the money from Richardson fy Co. at once, and to pay ever the cash to the plaintiffs.” That on 13th May, Patterson paid $5,000, stating that Richardson & Co. “ refused to advance the money as they had promised.” That Richardson & Co. had already received the ship’s receipts from Patterson; and Wilmot & Co., on same 13th May, threatened them to stop the flour, if the cash was not paid according, to agreement; but they replied that the ship had already sailed, and that they need not be alarmed, as the money would be paid. That this threat and response were repeated on 15th May. That J. Wilmot met Patterson by appointment at Richardson & Co.’s office, May 17th, “ for the purpose of receiving the balance,” when Richardson claiming to be busy, requested him to call at 12 o’clock. That Wilmot called accordingly, but in the interim, Patterson, having been induced so to do by the agency of Richardson & Co., sailed for Europe in great haste, all of which Richardson & Co. then carefully concealed from Wilmot & Co. That Richardson & Co. then offered to pay Wilmot & Co. the balance which might be due from them to Patterson, if released, which offer Wilmot & Co. declined. That Richardson & Co. subsequently made certa in payments, leaving a balance of $7,648.96. That Richardson & Co. got possession of the flour, well knowing all the said facts, and contrived this method of obtaining payment of a prior debt from Patterson.
    The defendants’ answer, first, puts in issue the whole complaint, except the existence of their own firm, and that Wilmot and Patterson called when Richardson was busy, at about 10 o’clock, A. M., on 17th May.
    The defendants answered, secondly, that they agreed to advance Patterson $7 per barrel on flour shipped by him to Richardson, Spence & Co., of Liverpool; that between 28th April and 12th May, 1854, he accordingly shipped 8.164 barrels flour, and delivered the bills of lading, &c. ' to Richardson & Co., and took the following advances :
    1854,* April 29,................... $19,000 00
    May 1,.................... 3,388 00
    “ 3,.................... 5,000 00
    “ 8,................. 5,000 00
    “ 9,...... 13,279 00
    “ 10,..... 5,329 90
    “ 12,........ 6,651 10
    That on 17th May, 1854, they accepted,Patterson’s order .in favor of Wilmot & Co., for the net proceeds of the 8.164 barrels flour, after deducting advances, and charges, and that subsequently, on September 13th, 1854, they paid over such net balance to Wilmot & Co., taking their receipt, expressed to be “ balance in full of proceeds of sales of flour, as per your acceptance of Walter Patterson’s • order in our favor.”
    That Richardson & Co. acted in good faith, in the usual course of business, without knowledge whence the flour was obtained, and that, “ with full knowledge of all the circumstances,” Wilmot & Co. sued Patterson for the price of the flour.
    It was proved that the counting rooms of these two New York firms were very near together; each could be seen from the other.
    Patterson began to deal with Wilmot & Co. in April, 1854. He had known Mr. Richardson five or six years.
    In the spring óf 1854, and prior to May, Patterson engaged largely in purchasing flour; purchasing in New York, and shipping to London and Liverpool for sale. Several of these purchases were from Wilmot & Co.
    On May 5th, 1854, Hull, the agent of Wilmot & Co., through McKean, a broker, sold to Patterson 1,897 barrels flour at $7.93f per barrel. Total price, $15,104.87. On May 11, an invoice was delivered to Patterson. Wilmot & Co., by order of Patterson, sent 200 barrels on board the Bacotah, and 1,697 barrels on board the Washington. The ships’ receipts for these were in Wilmot & Co.'s hands on Thursday, May 11. Hull and Wilmot testify that on Friday, May 12, Patterson first sent his clerk to Wilmot & Co.'s office, then went himself, and finally went with McKean to get the ships’ receipts; that Wilmot & Go. declined giving them without the money; that Patterson said “he could not pay unless he had the ships’ receipts;” that “McKean said it would be all right, but the bills of lading "could not be had without the ships' receipts; we cannot get the money without the ships’ receipts; the flour was consigned to Thomas Richardson & Go.; the money was to come from Richardson, and he could not get it without the ships’ receipts.” That at length, Hull, acting for Wilmot & Co., in presence of J. Wilmot, said to McKean that they would “ trust him with the receipts to go to Richardson’s, and that he should bring them back if he did not get the money.”
    This evidence is "relied on by the plaintiffs either as proving that there was no delivery to Patterson at all, or as proving that the delivery was conditional. Patterson, who was a witness for the plaintiffs, testifies differently, and denies all fraud.
    The ships’ receipts were not returned, and Patterson never made any payment, except a check for $5,000, left for J. Wilmot & Co., on Saturday, 13th May, when he was leaving on a visit to Philadelphia, where his wife and family resided.
    Patterson consigned the flour in question and other flour to Richardson, Spence & Co., the defendants’ firm in Liverpool, through the New York branch, taking up-.advances from the latter. The whole of this dealing is shown in an account dated May 16, 1854. From these accounts it appears that the advances to Patterson on this particular flour were made on May 9th, three days before the shipping receipts were handed to him. Invoices were received before the 9th. Richardson & Co. made a further advance on the 12th, when they received the bills of lading.
    Patterson not having paid for the flour, and having gone to Philadelphia on Saturday, May 13th, without making full provision for payment, Wilmot & Co. became une.asy, and Hull went after him to Philadelphia. Patterson returned to New York on Monday or Tuesday, and on Wednesday, the 17th, at noon, left for Europe by steamer, without prior notice to Wilmot & Co.
    Before parting with the ships’ receipts, Wilmot & Co. had notice “that the flour was to be consigned to the defendants’ Liverpool house ” through their New York branch. On Tuesday, May 16, 1854, J. Wilmot called at Richardson & Co.’s, and saw Nimmons. He saw Richardson & Co.’s account of the advances in their books, and received a correct copy of it. He perceived that the advances had been made before he, Wilmot, had parted with the ships’ receipts. “ I told him,” says Mr. Wilmot, “ that it appeared to me that he had taken my flour to pay Patterson’s debt.” Richardson & Co.’s full account of the consignments and advances, as rendered by them to Patterson on May 16, was also, either on that or the next morning, exhibited by Patterson to J. Wilmot, and he took a copy of it.
    Patterson’s order in favor of Wilmot & Co. on Richardson & Co. for the net proceeds of all their sales was produced. It was in the following words:
    “Messrs. Thomas Richardson & Co. will please pay over to Messrs. John Wilmot & Co., or order, the proceeds of sales of 8,164 barrels flour shipped to Richardson, Spence & Co., Liverpool, after deducting advances made me, and your charges, to the amount of ten thousand one hundred and fifteen dollars and twelve cents.
    “WALTER PATTERSON.
    “It is understood that no further advances have been made further than stated in account rendered by Messrs. Thos. Richardson & Co., nor shall be hereafter made unless with the consent of J. Wilmot & Co. by written order, said account being dated May 16th, 1854, being an advance on above-named flour, say 8,164 barrels.
    “WALTER PATTERSON.”
    A letter from Richardson & Co. to Wilmot & Co., accepting this order, was produced. It was in the following words:
    “ 15 Broadway, New York, May 17, 1854.
    “Messrs. John Wilmot & Co.— Gentlemen: We have received orders from Mr. Walter Patterson to pay to you, or your order, the proceeds of sales of eighty-one hundred and sixty-four barrels of flour consigned through us to Messrs. Richardson, Spence & Co., Liverpool, after deducting his indebtedness to us against same, and we have now to inform you that we accept above-named order, and have written Messrs. Richardson, Spence & Co., Liverpool, informing them of this order and requesting them to hold all proceeds,of said flour subject to our order only.
    “Yours, respectfully,
    “P pro THOS. RICHARDSON & CO.,
    “ Samuel Nimmons.”
    The proceeds, amounting to $2,811.27, were duly paid over on September 13, 1854, and duly receipted for by J. Wilmot, personally, as “ balance in full of proceeds of sales flour, as per your acceptance of Walter Patterson’s order in our favor.”
    On 20th May, 1854, after J. Wilmot knew all that he now pretends to know, after he had received and filed Richardson & Co.’s letter of acceptance, he sued out an attachment against Patterson on contract, with a view to get the London proceeds, charging in his affidavit that the plaintiffs sold and delivered the flour to Patterson on his promise to pay cash on the day of the delivery. The only fraud alleged was the secret departure of Patterson for Europe with intent to defraud creditors or avoid process.
    At the close of the evidence, the complaint was dismissed and the plaintiffs excepted. Exceptions taken to decisions on question of evidence, are stated in the opinions. Some further details of evidence will also be found in the opinions. The plaintiffs’ motion for a new trial on the exceptions taken, was ordered to be first heard at general term. The report of this case, on a previous trial of it, is in 6 Duer, 328.

      Edwards Pierrepont, for Plaintiffs.

      Charles O'Conor, for Defendants.
   Robertson, J.

—Upon the question of a conditional delivery of the merchandise which forms the subject of controversy in this case, my views coincide with those of the learned judge before whom the case was tried. If the delivery of the ships’ receipts to McKean was conditional, and he was not at liberty to part with them unless he got the money, then the plaintiffs did not, by that delivery alone, lose their right to reclaim the merchandise from any one who took it with notice of such condition, or who did not advance anything on the faith of Patterson’s possession of the merchandise, receipts, or bills of lading. A previous advance, in reliance, merely, upon the promise of Patterson that he would place such merchandise in the defendants’ possession, would not be sufficient to protect it against such reclamation; Keeler v. Field (1 Paige, 312); Haggerty v. Duane (1 Paige, 321,) and cases cited by plaintiffs’ counsel;) and subsequent advances upon the faith, merely, of other flour and other bills of lading, against which it was charged, would not protect this flour against the plaintiffs’ reclamation. But I think there are other facts in the case which have a strong bfearing upon the question of the conditional.delivery of the bills of lading, the effect of such bills in inducing the defendants to make advances, and the sanction by the plaintiffs of the delivery of such bills.

The complaint alleges that the flour in question was sold upon the representation of Patterson, that the defendants were to advance the price, and that the holder knew it. It further alleg'es, that 11 on the 12th of May, 1854, ‘ the plaintiff handed the ships’ receipts to Patterson, who promised to get the money from the defendants,’ and pay it to the former; but that, on the next day, 1 he paid only 5,000 dollars instead of the amount agreed;’ and stated 1 that the defendants refused to advance the money.’ ” The advances made by the defendants to Patterson were all made under a general agreement by the former to advance seven dollars a barrel on all flour shipped by him; which agreement was made on the 29th of April, 1854. On the 5th of May, following, the flour in question was sold by a broker (McKean) to Patterson for the plaintiffs, and a sold note delivered to him. From that day until the 11th was consumed in shipping the flour on board of a vessel bound for Liverpool. On the 9th of May, during the time of such lading, the defendants, pursuant to their agreement in April, advanced to Patterson upon such flour an amount equal to that agreed upon. Before the 12th, they advanced no other moneys to him upon the shipment of flour. On the 12th of May, the plaintiffs’ clerk (Hull), with the assent of the plaintiff Wilmot, delivered to the broker who sold the flour the ships’ receipts therefor, directing him “ to bring them back if he did not get the money;” he having stated that “he could not get the money without them, and that the defendants were to advance it.” After such broker left with the receipts, Wilmot told his clerk “he had been taking a risk.” On the same day, Patterson got them from the broker—under what circumstances does not appear — exchanged them for bills of lading of the same merchandise, and delivered them to the defendants; who, upon such delivery, paid him over 6,600 dollars as advances upon other flour. The next day he gave the plaintiffs a check for 5,000 dollars, which was paid. The vessel having sailed on the 13th or 14th of May, the plaintiff Wilmot-—• on the 16th of May, on being shown at his request, by Mr. Nimjnons, who was interested in the defendants’ firm, their account with Patterson in their books — said, “ it appeared to him that they had taken his flour to pay Patterson’s debt;” but he took a memorandum of the payments, on which the advances, on the 9th of May, appeared. Nothing was then said, so far as appears, of the ships’ receipts or bills of lading, or their wrongful delivery; nor was any claim made for the restoration of the goods or bills of lading. On the next day (the 14th), the plaintiff, Wilmot, received, without returning it, an acceptance, by 'the defendants, of Patterson’s order on them for the proceeds, deducting the ■defendants’ advances, of the sale of the flour in question, .and other merchandise, by the defendants in Liverpool; at •the foot of which he himself drew a form of limitation of -the amount of the advances. On the 20th, three days -afterwards, he took out an attachment against Patterson; .and, in the affidavit to obtain it, swore that he delivered the flour to Patterson on the 12th of May, which was the very day on which the broker obtained the ships’ receipts. Wilmot also applied to a Mr. Wallace on the 18th of May, after Patterson left for Europe, to hold surplus proceeds of sales for his benefit; and said that Patterson had given him an order for the surplus proceeds of flour consigned by him to the defendants. There is no evidence in the case that the defendants ever had any notice of any impropriety in the mode of obtaining the bills of lading, or that the plaintiffs ever demanded them or the flour.

Under these circumstances, it is too late for the plaintiffs to set up any absence of authority on their part to MeKean or Patterson to deliver the bills of lading, or that the . defendants were not bona fide purchasers after the goods were sold with their own full knowledge. It does not appear precisely in what capacity the broker received the bills of lading, whether as agent of the -plaintiffs or Patterson; he had an interest in completing the transaction which he had begun, and as there had been a previous refusal to deliver .to Patterson, it would seem that he was looked upon as at most an indifferent party, but clothed with authority at least to use the receipts to get the money, and to such an extent as to induce Wilmot to believe he was running a risk in giving it to him. Why the latter should part with- the custody of such receipts to the broker, as an agent of the buyers, instead of completing the delivery by tendering them and demanding the price, remains a mystery; but he did so, at the hazard of furnishing Patterson with the means of deceiving the defendants. Although it does not appear how Patterson obtained the receipts, or what passed on his delivery of the bills of lading to the defendants, there can be no doubt, from the evidence already alluded to, that when Wilmot told the defendants they had taken his flour to pay a debt to them, he knew that they had the bills of lading, and when he drew the qualification to Patterson’s order for the proceeds, that the money paid by Patterson to him came from them, because at the last period he had the account before him. Silence under such circumstances as to a condition of the delivery of the ships’ receipts, clearly ought to work an estoppel against the plaintiffs as to such condition; for their claim to the flour was based on the non-payment of the price, not on any conditional delivery of the bills of lading, or ships’ receipts. The defendants completed their advances on the 12th of May, (without which the plaintiffs probably would never have received the five thousand dollars paid on the 13th of May, and which they were bound to believe came from the defendants,) upon the strength of receiving such bills of lading; without receiving them, they might have refused to make the last installment of such advances, and claimed that the agreement, being entire to advance on all flour generally, although the advances were applied upon particular merchandise, they having the flour in their possession, might retain it or its proceeds for a general balance due to them as factors. The plaintiffs, therefore, having furnished Patterson with the means of deceiving the defendants, as between two equally innocent parties, ought to be the sufferers. But the case is not left to any such estoppel alone, however strong, for the plaintiffs agreed to authorize the defendants to sell the flour, and to receive the proceeds Of it when so sold, and other merchandise, after deducting the defendants’ advances in part payment, of the amount due from Patterson, thereby waiving all condition in the delivery; for such will be found to be the legal result of the order of Patterson for such proceeds, the acceptance of it by the defendants, the retention of such acceptance by the plaintiff, Wilmot, and his receipt of the 13th of September, 1854.

There can be no doubt what order and acceptance is meant in the receipt of September 13th, and still, less that the plaintiffs were bound, by the receipt of such accepted order and its proceeds, to do something in return, which was to perform the tacit condition on which it was delivered. Any previous dissatisfaction with such order is entirely merged in the accepting both it and its fruits; indeed the appending, by Wilmot himself, of a limitation of the. advances to such order, would have been inconsistent, with a final intent to reject it; the receipt and filing of the acceptance is still stronger, if not conclusive evidence of the intent of taking such acceptance, for the receipt explains itself.

If the delivery of the merchandise or the bills of lading had been conditional, and the defendants not been bona fide purchasers, any sale by them would have been unauthorized and a tort. The title to the property could not be changed; Palmer v. Hand, (13 J. R. 434;) Andrews. Dieter ich, (14 Wend. 31;) and the purchasers from the defendants would have taken none. But the plaintiffs could not have sued such "purchasers after receiving the proceeds of the sale, as such, from the persons selling. (Outwater v. Dodge, 6 Wend. 391.) Such sale was clearly ratified by them, and such ratification was effected by constituting the defendants either agents of the plaintiffs or valid purchasers from Patterson. Of the former there is no pretence, as this action is not brought for no.t' accounting for such sales. But there is also the still further fact that the plaintiffs were to receive the proceeds of the sales of other flour, as well as their own; and agreeing that the defendants’ advances, on all the flour should be first deducted, they must be held under such circumstances to have parted with something as an equivalent for the right thus acquired of* holding the defendants accountable for the proceeds of the sale of other flour. What else could that consideration under the circumstances have been, except their lien, if any, on the flour sold by them; and that not merely to the extent of the money to be received under the order, but entirely?' It is not the case, therefore, simply of a party defrauded receiving back part of his goods or payment of part of the proceeds, which would not affect his claim to the rest. It is receiving the proceeds of sales, which the plaintiffs induced the defendants to make and promised to ratify, provided the proceeds were paid over to them, on account of their claim for their purchase money.

The law follows the rules of morality in such case, and estops the plaintiffs from denying that ,the delivery to the defendants was complete, and authorized by them; or in any way claiming a return of the goods or their value. The deduction of the defendants’ advances strengthens the argument, as an admission that they were a lien; and although the plaintiff, Wilmot, refused to sign a receipt, discharging the defendants, he himself drew the one actually signed. If he supposed that he could take whatever he could get from any source, and acknowledge it as derived therefrom, and still hold the defendants liable,, he was mistaken in his view of the law. He might have done so if dealing with Patterson alone, or if the defendants had actually incurred a liability to him; but he did not even demand either the goods or bills of lading from them, so as to make them liable before he received the order.

But it is said that the defendants were guilty of fraud in obtaining possession of the goods of the plaintiffs, and that the-latter could not be bound by receiving back a part of what they. had been defrauded. The difficulty with such a proposition is, that the complaint does not allege, or the evidence sustain, such a proposition. JVo collusion is alleged between the defendants and Patterson to bring the case within the principle of Allison v. Matthieu (3 J. R. 235). The complaint is not merely for chattels converted, or goods sold and delivered; but is entirely special, made up of particular occurrences, constituting circumstances of suspicion only; and that only of some covert act or design not expressed. There is no pretence of any sanction by the defendants of any fraud or false representation of Patterson, or of any authority by them to him to procure the flour for them, or to make' any .representa- - tions on their behalf, or any ratification by them of any misconduct of his. Under such circumstances, it is difficult to see how they could be guilty of fraud in the purchase of the goods. . All pretence is equally absent of any combination or fraud by the defendants to procure the delivery of the goods, or to get possession of the bills of lading, or of any other fraud, except that of receiving the flour as security for an antecedent debt; knowing, merely, that it had not been paid for. Such a species of fraud, if one at all, is not incapable of being waived. The allegations in the complaint consist principally of representations by Patterson at the time of the purchase, the delivery to him of the ships’ receipts, and the possession of them, as well as the bills of lading by the defendants. It also avers knowledge by the defendants at some time (but when is not stated) of Patterson’s design to purchase the flour in question, and of his representations, and the delivery of it on the faith thereof; also, that the sale was for cash, and the price not paid. It is true that it contains & charge, that it was so contrived, on the part of the defendants, to obtain such flour through the aid of Patterson, and then apply it to the payment of a prior debt. But as no general mode of contrivance had been mentioned, and no special one, exeept that (if any) contained in the previous allegations, such averment becomes a mere conclusion of law, and is only equivalent to saying, “whereby it was contrived ” that the defendants should obtain the goods. It is to be taken rather as the consequence or purpose of the acts previously narrated than an independent charge of fraud.

There are some allegations in the complaint of artifices used by the defendants to conceal from the plaintiffs an intended departure of Patterson for Europe, and suggestions by them to him so to absent himself; but for what purpose is not stated; and it is difficult to perceive the connection of such allegations with any fraud charged. Patterson did not accompany the goods on the voyage; and he afterwards returned. It is not very plain how his bodily presence would have better enabled the plaintiffs to have recovered their goods, or their value, if entitled to them or it. They might, possibly, have arrested and otherwise punished him; but that would not have compelled the defendants to have delivered the goods which had previously departed, or make compensation for them. Although such acts, like all other evidence of clandestinity, might, if proved, be circumstances of suspicion of some undefined intended wrong, they do not attach themselves to any particular fraud charged, and may, therefore, be disregarded.

Apart, therefore, from any knowledge by the defendants of a misrepresentation by Patterson, at the time of his purchase, that the former were to advance the whole purchase money, and of any fraud by him in obtaining the ships’ receipts, or delivering them to the defendants, the case stands simply upon the receipt by the latter of bills of lading, for goods which they knew to have been bought from the previous owner for cash, and not to have been paid for. This would, at most, make the delivery conditional, and exclude a charge of fraud. Now there is not a particle of evidence in the case to which we have been referred, or that I have been able to find, even in the testimony of the plaintiff Wilmot himself, that the defendants ever knew of any representation by Patterson of an intended advance by them of all the purchase money; or how, or upon what condition, he obtained the bills of lading. Still farther than this; it does not appear that Patterson ever made any representation until after the sale to him, or before he obtained the ships’ receipts; that the defendants were to advance the whole purchase money, so that the sale, at least, was not made on such representations ; and it may be remarked that, as the complaint itself alleges, that the plaintiffs “ handed the ships’ receipts to Patterson, who- promised to get the money; the plaintiffs would hardly be permitted to vary this by evidence, so as 'to establish that they were delivered—not upon a promise, but a condition not to be delivered without-payment of the money.

As, therefore, there was no evidence of any such fraud in this case as would make the defendants privy to the original fraudulent purchase, or a subsequent fraudulent delivery of the evidences Of title, there was no such liability for any fraud by the defendants to the plaintiffs, at the time of the delivery of the order of the 14th of May to the latter, as to prevent the acceptance of such order and its fruits by the receipt of the 13th of September, 1854, from operating as a waiver of all claims against the defendants. Indeed, the charge of fraud, if it consisted only of a contrivance by the defendants to obtain possession of the flour to pay a prior debt, falls to the ground. For such a purpose, the contrivance could only be adopted after the debt was incurred; whieh, in this case, was after the sale of the goods, and on the faith of a promise to deliver the bills of lading therefor. Those bills, as emblems of ownership and warrants .for possession, were obtained without the slightest artifice by the defendants, or -any knowledge by them of any fraud employed by Patterson in obtaining them, so far as appears in evidence; and no charge of such artifice or demand of such bills, or possession of such property, was made until the beginning of this action. It would have been an extraordinary speculation for the defendants to have advanced 13,000 dollars on the expectation of getting the bills of lading by fraud.

I Have not deemed it necessary to refer to the proceedings taken by the plaintiffs in the attachment suit and the affidavits on which they were founded; as, however strong, they may amount to mere evidence of a recognition of the contract with' Patterson, as intimated in the opinion of the present Chief Justice of this court, on the former argument of the case. (6 Duer, 328.)

Some exceptions were taken to the exclusion of testimony, which require to be considered, with the exception of the competency of Nimmons as a witness, which was disposed of when this case was before the court before-. They principally relate to conversations between the plaintiff Wilmot and Patterson respecting the order of the latter upon the defendants for the proceeds of the sale at the time Wilmot saw it, and also between Wilmot and the broker McKean as to the ships’ receipts after they had been parted with; and to the absence of any suggestion by the defendants or on their behalf to Patterson to leave for Europe. As to the first, there was no evidence to establish any agency of Patterson for the defendants, or any participation of the latter in any fraudulent acts of his, so as to make them confederates; a mere charge of such confederacy is not enough. The derivation of title through Patterson, by the defendants, does not make his declarations evidence, and any representations made by him respecting the order could not constitute any part of the res gestee, which consisted either of "the sale and delivery of the goods or their evidences of title, or the acts of the plaintiffs in receiving and retaining the acceptance of the order. The same principles apply to McKean’s conversations; there was* no allegation to be sustained of fraudulent representations by him; the directions given to him, were conceded, and had already been proved in the strongest manner for the plaintiffs. As to the suggestions to Patterson to leave, the defendants had a right, by evidence of the negative, to repel the charge.

I do not find, therefore, any error in any of the rulings complained of. Judgment should be rendered in the action for the defendants, dismissing the complaint with cost's.

Hoffman, J.

—The first observation to be made upon this case, is the entire failure of the plaintiffs to prove the least authority from the defendants to Patterson'to purchase the flour, or to make any engagement in their behalf respecting it, or their knowledge of such purchase before they had obtained the ships’ receipts and bills of lading, and made advances.

The slight evidence which connects the plaintiffs and defendants in the transaction is, that the former were informed that Patterson expected to get the money from the latter; that he' could not get it without the receipts; they (the plaintiffs) trusted his agent, McKean, with the receipts to go to Richardson to get the money; he was to bring them back if he did not get it. The sale, it is to be remembered, was made through Hull, clerk of the plaintiffs. The bill made out by him, is to Patterson. The evidence as to Nimmons examining the flour is very unimportant and slight. Hull’s account of it is, that they were talking of flour. Wilmot had his hand on some, and said it was good Canada flour. Nimmons says he went to Wilmot to inquire as to the character of brands, with a view to advancing on Patterson’s consignments, and Wilmot says he exhibited samples to Nimmons, and gave it a recommendation; very little was said at the time.

This is the substance of all the evidence of any dealing or negotiation, directly or indirectly connected with the flour, between the plaintiffs and defendants, prior to the 16th of May, 1854.

And another branch of the plaintiffs’ case may be dismissed with the observation, that there is not any evidence which can warrant the imputation of complicity between the defendants and Patterson to defraud the plaintiffs.

It is clear that the plaintiffs sold to Patterson, and to no.one else; looked to him and no one else for payment; and .relied upon his getting the money, and from the defendants, to pay them. They trusted Patterson’s agent, after repeated refusals, with the ships’ receipts, on the representation that the money could not otherwise be obtained, and on his promise to get it.

The remark appears here obvious, that when the receipts were required as the means of obtaining the money from the defendants, the plaintiffs could not but have been led to the conclusion that the defendants wanted and meant to rely on them for their security, and would not advance without them. They put them in Patterson’s power to use them; advisedly to get money upon them.

It may b.e conceded that, as between Patterson and those, like creditors, who could stand in no better position, and' the plaintiffs, the delivery was conditional, so that no property to the flour passed to him; Smith v. Lynes (1 Seld. 41; 3 Sandf. S. C. R. 203) appears to me to cover the case.

The next point raised upon the pleadings is the true character of the dealings between Patterson and the defendants, connected with the flour in question. The following facts are established; I believe they are all that are material on this part of the case.

In April, 1854, an arrangement was made between those parties, through Nimmons, by which shipments of flour, to a considerable but then undefined amount, were to be made to Liverpool, consigned to the defendants’ house there, and they to advance to Patterson, at the rate of seven dollars per barrel, on brands which should suit them. The defendants were to have bills of lading for their advances.

The advances of the defendants were as follows:

April 29,1854............... ...............$19,000 00
May 1, ____________... 3,388 00
May 3, ______________ .............. 5,000 00
May 8, _______________ .............. 5,000 00
May 9, _______________ .............. 13,219 00
Mav 10. ______________ 5.329 90
$50,996 90

They had bills of lading on hand at the following dates for the following amounts in barrels:

Bbls.
April 29, per Dacotah,_________________ _______1,682
April 29, per Garrick,.........................1,040
May 1, do (presumed),_______________ 509
May 3, 8 and 10, per Guy Mannering,. ...........2,036
May 9 or 10, Tuscarora, dated 5th May,.......... 1,000
May 8 or 9, by Dacotah, 200 bbls., part of plaintiffs’
flour; bill lading dated 6th May,____________ 200
6,467
5,467, at $7 advance, is...... ............$38,269 00
1,000, at $7.50 advance, is________________7,500 00
$45,769 00
May 10, over advanced,____________________ 5,227 90
$50,996 90
May 12, advanced .1...................... $6,651 10
May 11 or 12, received bill of lading per Washington for 1,697 barrels, dated 11th May,
Advances as above,___....................$50,996 90
Add,.'.................................. -6,661 10
$57,648 00.
Barrels, .............................. 6,467
Add ......... ........................ 1,697
Total,............................ 8,164
Of which 7,164, at $7, is____■.............. $50,148 00.
1,000, at $7.50, is'.’........;...... 7,500 00
$57,648.00

Thus, on the 11th of May, or before the bill of lading by the Washington was in hand, the defendants had advanced $50,996.90, and had received bills of lading for 6,467 barrels, including the 200 by the Dacotah; 5,467 of these were at the advance of $7, which makes $38,269, and 1,000 at $7.50, being $7,5.00. The total, $45,769. The difference is $5,227.90; an excess of advance on this basis. The 1,697 barrels at $7 is $11,879, and deducting such excess, there remains the sum of $6,651.10, paid by the check of May 12, 1854.

It is then clear that the defendants did not, and would not consummate their agreement to make advances until the delivery of the bill of lading for the 1,697 barrels on the 11th or 12th of May. They had over-advanced $5,227.90 on the faith, of a promise to deliver bills of lading to cover it. It is warranted by the evidence to say, that this promise referred to the 1,697 barrels in question. They advanced $6,651.10 when they got such bill of lading. They never would have advanced that sum without it, or an equivalent.

This appears to me to show that,, as to this sum of $6,651.10, the defendants were, in the utmost strictness of the rule, bona fide holders of the bill of lading by the Washington, and entitled to a lien upon the flour to that extent, as for present advances on the faith of the documents. Coupling these facts with the fact that the receipts were delivered for the avowed purpose of enabling Patterson to raise money, and from the defendants, that circulation was given to them, and the bill of lading procured by them for such a purpose, the case séems to me entirely within the range of the rule as laid down in the leading-authorities. (See Caldwell v. Bartlett, 3 Duer, 341; Keyser v. Harbeck, Id. 373 ; Brower v. Peabody, 3 Kernan, 121 ; Dows v. Perrin, 16 N. Y. R. 325.)

What would be the rights of the parties on this basis ? The defendants have a first lien on the flour for this advance. The plaintiffs, a claim for the balance of their account. The net proceeds of the flour were, say, $13,740. The advance and charges would be about $6,851; marine insurance being $190, which would leave, say, $6,889; of which, $2,811.27 has been paid. The balance is, say, $4,077.73.

But, again, on the facts of this case, my impression is, that the defendants could have sustained their claim for the whole of the balance of $5,227.90, found as the excess of their advances by the 11th of May. We are perfectly warranted in saying that this excess was advanced on the faith of the flour shipped in the Washington; and that the title to it would be acquired by Patterson, and given to them. The flour was either actually on board on the 9th of May, or going on board. By the 11th it was all shipped. On the 12th May, the documentary papers were delivered; the contract to obtain them, on which the advance was made, was performed; and on the 12th of May they credit Patterson with the exchange on the Liverpool house, Whether this transaction thr'ew them upon the flour consigned, solely, for their repayment, or left Patterson ultimately liable, it is clear that it left the avails of the flour as the fund first to be looked to; and the exchange was an order for their application.

The cases which hold that the taking of securities for an antecedent debt, when that debt is not extinguished, does not constitute a bona fide holder for value, are cases in which the prior debt was wholly disconnected from the particular transaction. See the cases cited by the plaintiffs’ counsel. I find no case hostile to the position, where the party advances on the credit of an engagement to get and deliver property; and the real owner has placed the promisor in the position to fulfil his agreement; and he has done so.

But be this accurate or not, as a naked question, it is of moment in construing the acts of the plaintiffs. The vessel had sailed on the 13th or 14th of May. On the •16th or 17th, one of them is apprised of the claim of the defendants on the flour for an advance of $13,279 on the two parcels; of $11,879 on the 1,697 barrels by the Washington. A transcript of the account is given to him. He saw there that the advance was on the 9th of May. He knew he had not delivered the receipts till the 11th; and then, instead • of placing himself on his legal rights, he makes no such demand; takes the order of Patterson; waits till the account sales arrive, which are dated in August; receives, on the 5th of September, $2,500; and on the 15th of the same month $311.27 more; and gives the strong receipt produced in evidence.

I regard all this as an unequivocal recognition of a claim of the defendants; which, as to $6,661.10, was strictly legal; and as to $5,227.90, was as equitable as his own.

But again, upon the point of ratification, the case has not been in any material point varied from the former case; and the opinion of the general term upon that subject is not open to dissent, and is unanswerable if it were so. (See 6 Duer, 328.)

Bosworth, Ch. J., concurred in ordering judgment for the defendants, on. the ground that the acceptance of Patterson’s order by the plaintiffs, and their subsequent acts, are a bar to their right to maintain this action.

New trial denied, and judgment ordered in favor of the defendants.