$ 54

dation bill.

16. Solicitors cannot acquire a lien as against the acceptors on a bill which their client received from the acceptors to discount, when the solicitors received it after maturity with knowledge of the facts: Redfern v. Rosenthal, 86 L. T. N. S. 855 (1902).

17. Accommodation paper may be pledged as collateral: ington Bank v. Krum, 15 Iowa 53 (1863).

Wash

Accommo- 55. An accommodation party to a bill is a person who has signed a bill as drawer, acceptor or endorser, without receiving value therefor, and for the purpose of lending his name to some other 53 V., c. 33, s. 28 (1). Imp. Act, ibid.

person.

A bill may be drawn or endorsed by accommodation parties without being an accommodation bill. It is only when the acceptor of a bill or the maker of a note is an accommodation party, that it is strictly an accommodation bill or note. The person accommodated need not be a party to the bill or note. Where an accommodation bill is paid in due course by the party accommodated the bill is discharged: sec. 139, s.s. 3. Where an accommodation bill is accepted, for the benefit of the drawer or an endorser, he is liable without presentment for payment, protest, or notice of dishonour: sec. 92, (c) and (d), sec. 108 (c), and sec. 110. As to the negotiation of an overdue accommodation bill, see section 70. Every party whose signature appears on a bill is prima facie deemed to have become a party for value, so that any person claiming to be an accommodation party must make clear proof of that fact: sec. 58; Morehouse v. Burland, Ramsay, A., C. 280 (1875); Parker v. Fuller, ibid. 281 (1877).

Where parties exchange promissory notes for the same amount, payable each to the order of the other, and each uses the note of the other, both notes are thereby converted from accommodation to business paper, and the maker of each becomes liable as a principal debtor: State Bank v. Smith, 155 N. Y. 185 (1898).

Where notes were agreed to be made and indorsed indiscriminately by a number of partners and the proceeds go to the benefit of the joint concern, they were held to be accommodation notes, and one partner could not recover as a holder from his co-partners: Bowes v. Holland, 14 U. C. Q. B. 316 (1856).

Where there is a running account between the drawer § 55 and drawee, and a bill is accepted, it is not an accommodation bill, even although the account was against the drawer at the time of acceptance: Re Overend, Gurney & Co., Ex parte Swan, L. R. 6 Eq. 356 (1868).

Where the drawer and acceptor receive a commission for drawing and accepting the bill from a person who does not become a party to it, this is an accommodation bill: Oriental Financial Corporation v. Overend, L. R. 7 Ch. 142 (1871).

An accommodation bill is not issued until it comes into the hands of some person who can sue upon it: Engel v. Stourton, 5 T. L. R. 444; 53 J. P. 535 (1889); Downes v. Richardson, 5 B. & Ald. 674 (1822).

The possession and negotiation by the maker of a note with the indorsement of the payee import that the indorsement was for accommodation: Oppenheim v. Simon Reigel Cigar Co., 124 N. Y. St. 355 (1904).

of party.

2. An accommodation party is liable on the bill Liability t a holder for value; and it is immaterial whether, when such holder took the bill, he knew such party to be an accommodation party or not. 53 V., c. 33, s 28 (2). Imp. Act, ibid.

The rights of a holder for value have been defined in section 54. An accommodation party occupies the relation of a surety with respect to the person for whose accommodation he has become a party, and may set up any defence connected with the bill that his principal could. He may also be released by the holder giving time to the principal, if the holder is aware of the relation between them: Bechervaise v. Lewis, L. R. 7 C. P. 372 (1872).

ILLUSTRATIONS.

1. A second accommodation indorser, who has paid a note, may recover from a prior accommodation indorser: Breeze v. Baldwin, 5 U. C. O. S. 444 (1837).

2. It is no defence by a maker of a note payable to bearer that it was made for the accommodation of a third party, and that plaintiffs hold it without value or consideration: Muir v. Cameron, 10 U. C. Q. B. 356 (1852); overruling on this point Strathy v. Nicholls, 1 U. C. Q. B. 32 (1844).

$55

3. It is no defence by the maker that the plaintiff, indorsee, gave no value to the indorser for his indorsement, or that he took the note knowing that it was indorsed for the accommodation of the Accommo maker, without denying that he is a holder for value: Miller v. Ferrier, 7 U. C. Q. B. 540 (1850).

dation

party.

Holder in

4. The indorser of a note to enable the maker to get goods from the payee is liable on an action by the payee : Moffatt v. Rees, 15 U. C. Q. B. 527 (1857). See also Peck v. Phippen, 9 U. C. Q. B. 73 (1851); Foster v. Farewell, 13 U. C. Q. B. 449 (1855); Gunn v. McPherson, 18 U. C. Q. B. 244 (1859); Smith v. Richardson, 16 U. C. C. P. 210 (1865).

5. The holder of a bill for value, notwithstanding his having subsequently become aware of its being an accommodation bill, may release the drawer without releasing the acceptor : City of Glasgow Bank v. Murdock, 11 U. C. C. P. 138 (1861).

6. Accommodation indorsers, after the note on which they were liable had matured, filed a bill against the holder and maker to enforce payment against the latter. The relief prayed was granted, and the maker was ordered to pay the costs both of the plaintiff and the holder of the note: Cunningham v. Lyster, 13 Grant, 575 (1867).

7. The holder of accommodation paper, knowing it to be such, may rank upon the estate of and discharge the indorsers, and then Lyman v. recover the balance from the accommodation maker: Dyon, 13 L. C. J. 160 (1868).

8. The holder for value can recover from the accommodation maker the amount of a note although he was aware of the fact when he took it, and was interested in the transaction out of which it arose: Beique v. Bury, 3 L. N. 160 (1880); Scott v. Quebec Bank, 7 L. N. 343 (1884); Bankers' Iowa Bank v. Mason Lathe Co., 90 N. W. Rep. 612 (1902).

9. A manufacturing corporation has no power to bind itself as an accommodation party. The plaintiff must show both that he paid value and also that he did not know of the accommodation claracter of the instrument: National Bank v. Snyder Co., 117 App. Div. 370, 136 N. Y. St. 478 (1907).

56. A holder in due course is a holder who has due course. taken a bill, complete and regular on the face of it, under the following conditions, namely:

Notice.

(a) That he became the holder of it before it was overdue and without notice that it had been previously dishonoured, if such was the fact;

(b) That he took the bill in good faith and for § 56 value, and that at the time the bill was ne-Good gotiated to him he had no notice of any defect faith. in the title of the person who negotiated it. 53 V., c. 33, s. 29 (1). Imp. Act, ibid.

"Holder in Due Course" is used in the Act as an equivalent for the old expression, "bona fide holder for value without notice." Holder has been defined in section 2 as the payee or endorsee of a bill or note who is in possession of it, or the bearer thereof; and bearer as the person in possession of a bill or note which is payable to bearef. The rights and powers of a holder, and holder in due course respectively, are set out in section 74. A holder for value, who has taken a bill under circumstances that do not meet all the conditions of the present section, has all the rights of an ordinary holder, and in addition, those mentioned in sections 54, 55, and 74.

It was laid down by Lord Russell, C.J., in Lewis v. Clay, 67 L. J. Q. B. 224, and 14 T. L. R. 149 (1897), that the payee of a note could not become a holder in due course, as it could not be said that the note had been "negotiated" to him in accordance with this section and section 31 (now s. 60). In Herdman v. Wheeler, [1902] 1 K. B. at p. 371, this was questioned, and attention was called to the fact that in the former case the definition of the word "holder" which includes the payee had been apparently overlooked, but it was held that in neither of these cases was it necessary to decide the point.

This latter case was in turn considered by the Court of Appeal in Lloyds' Bank v. Cooke, [1907] 1 K. B. 794. The Master of the Rolls and Cozens-Hardy, L.J., did not think it necessary to base their decision on the sections of the Act, as the defendant who denied his liability to the bank which was the payee of the note there in question was in their opinion liable on the common law doctrine of estoppel which they held still applied to negotiable instruments. Fletcher Moulton, L.J., while agreeing as to the estoppel, was of opinion that the note was negotiated to the bank and that it became a holder in due course.

$56

due course.

In Glenie v. Bruce Smith, [1908] 1 K. B. 263, the defendant had agreed to become responsible for goods sold Holder in to the acceptor, and indorsed two blank bills, which were filled up by the drawer for the proper amounts, payable to his own order, and duly accepted. One bill the drawer indorsed above the defendant's signature; the other below. He subsequently died. The plaintiffs, his executors, were held by the Court of Appeal entitled to recover, as they were holders in due course of both bills, the same having been filled up in a reasonable time and strictly in accordance with the authority given: see also Watson v. Russell, 5 B. & S. 968 (1864); Thorpe v. White, 188 Mass. 333 (1905); Robinson v. Mann, 31 S. C. Can. 484 (1901).

In the negotiation of a bill to a holder in due course, the transferrer frequently conveys greater rights than he himself possesses. The bill may have been without value in his hands, or void for fraud, illegality or other defect, but these are cured on its coming into the hands of a holder in due course: Whistler v. Forster, 14 C. B. N. S. 248 (1863).

Complete and Regular on the Face of It. Such a bill must meet all the requirements of the definition in section 17. An undated bill is not invalid: sec. 27 (a); but it is incomplete and irregular if payable at a fixed period after date. A person taking an incomplete bill, even before maturity, and for full value in good faith, does not acquire the rights. of a holder in due course, unless it be filled up in a reasonable time, and strictly in accordance with the authority given: sec. 32, and Glenie v. Bruce Smith, supra.

The fact of a cheque being post-dated does not prevent its being regular within the meaning of this section: Hitchcock v. Edwards, 60 L. T. N. S. 636 (1889); Carpenter v. Street, 6 T. L. R. 410 (1890).

Plaintiff received an overdue bill accepted and indorsed, but not signed by the drawer. He was not a holder in due course: South Wales v. Underwood, 15 T. L. R. 157 (1899).

As to a bill bearing marks of cancellation, see section 143 and notes thereon.

Not Overdue. The maturity of bills not payable on demand is determined by the rules laid down in sections 42 to 46; those payable on demand are deemed to be overdue when