Whistler v Forster 1863 | Erle, C.J.

The negotiable instrument was fraudulently obtained from the defendant (maker) by Griffiths, and had been handed over by Griffiths to the plaintiff in part satisfaction of a debt of a larger amount. But Griffiths, at the time he handed over the bill to plaintiff, omitted to indorse it. What are the rights of the plaintiff? Held and Ratio: The plaintiff had at the time the bill was handed over the same rights as if an ordinary chattel had passed to him by an equitable assignment; he would have the rights which Griffiths could convey to him Now, Griffiths having defrauded the defendant of the bill, he could pass no right by merely handing over the bill to another; The plaintiffs title under the equitable assignment here was to be valid by endorsement (note it was actually indorsed later but before such, he already had notice of the fraud); But at the time he obtained the endorsement, he notice that the bill had been fraudulently obtained by Griffiths from the defendant, and that Griffiths had no right to make the indorsement; The justice here opines that plaintiff had no title as transferee of the bill at all; BPI v Alfred Berwin & Co 1928 | Romualdez, J. BPI prayed for the CFI to summon Anselmo Diaz (appellant) in order to satisfy the credit of defendant Alfred Berwin & Co (the firm), against him for the purpose of carrying the execution of the judgment in this case. Anselmo appeared and acknowledged his debt to the firm in the amount of 20k. Said debt was evidence by 2 promissory notes issued by Anselmo in favour of the firm. However, it does not appear whether the promissory notes are still in the hands of the firm or whether they had been negotiated by the latter. W/N Anselmo should be liable to pay the firm. No. Held and Ratio: Since the firm does not have the disposal of the notes so that they could return them to the maker Anselmo, the latter cannot be compelled to pay the amount of the notes save that of the holder of such documents in due course for said person is the one entitled to receive it. Its not just to compel Anselmo to pay since it is not known whether the firm is still the holder in due course of the notes, or whether they still have their 20k credit, or whether the same has already been alienated; Compelling Anselmo to pay would expose him to the situation, in which, having paid the amount

without settling the same, a holder in due course may appear and demand its full payment. ELGIN NATL BANK V GOECKE (1920) (net digest) FACTS Elgin National Brewing Company executed two demand notes, one for $3K (Note A) and the other for $2500 (Note B), each payable to the makers order and indorsed in blank ink by it & by 5 accommodation indorsers, including Frank A. Goecke, the company manager. The accommodation indorsers signed on representation that the proceeds were to be used to pay for supplies for the brewery. Both notes were diverted by Goecke from their intended purpose. Note A was indorsed to Elgin National Bank as collateral security for a note (Note C) earlier executed by Goecke as maker, the last renewal of which was made on Nov. 22, 1912 for 6 months. Note B was indorsed to the same bank as payment for 5 other notes earlier executed by the brewing company as maker and purchased by the bank. The bank did not know of the diversion of the two demand notes from their intended purpose. Brewing company defaulted. 5 accommodation indorsers. Bank sued all

TC ruled in favor of the bank. Appellate court affirmed.

W/N the accommodation indorsers are liable to the bank notwithstanding the diversion of the proceeds of the notes. Yes. Ratio: An indorsee of a negotiable note who has taken it, before its maturity, as collateral security for a preexisting debt and without any express agreement, is deemed a holder for a valuable consideration, and that he holds it free from latent defenses on the part of the maker. The accommodation indorsers are liable to the bank on the notes, although the bank at the time of taking the instruments knew that they were only accommodation parties, if the bank is a holder for value, as the notes were indorsed to it before maturity and without notice for their restricted use and purpose. As for Note B, it is clear that the bank is a holder for value. The consideration paid by the bank for this note was the cancellation and surrender by it of the 5 other notes executed by the brewing company. Note A was not delivered to the bank and accepted by it as security until Dec. 10, 1912. There is no proof in the record that at the

time Note C was renewed on Nov. 22 there was an agreement that Note A was to be put up as collateral and in part consideration for the extension of Note C. Thus, it is argued by the accommodation parties that mere delivery of Note A, without agreement for further extension of time or other agreement for Note C, does not make the bank a bona fide holder for value. This contention is without merit. See ratio Dispositive Judgment affirmed.