$56

Fraud,

etc.

10. Plaintiff purchased from an alleged company 15 bushels of hull-less oats at $10 a bushel, and received the company's bond to sell 30 bushels for him at the same price. Defendant bought plaintiff's 30 bushels, giving his note for $300 and getting the company's bond to sell 60 bushels for him. The company sold defendant's notes to plaintiff. Both plaintiff and defendant knew this was only part of a series of transactions and that subsequent parties would be defrauded, the oats being worth no more than ordinary oats. Held, that the transaction was part of a fraudulent scheme, was contrary to public policy, and plaintiff's action properly dismissed: Bonisteel v. Saylor, 17 Ont. A. R. 505 (1890).

11. A master gave a female servant his note for $1,500 over and above her wages on condition that she would not then marry, but remain in his service as long as he wanted her. Held, not void for being in restraint of marriage for an unreasonable period: Crowder v. Sullivan, 9 O. L. R. 27 (1904).

12. A son having acknowledged to have taken $25 from plaintiff, the latter by threatening to have the son arrested, induced the mother to give a note for $400. Held, that there was violence, fear and illegal consideration and she was not liable: Macfarlane v. Dewey, 15 L. C. J. 85 (1870).

13. Where a broker obtained a note to be discounted by a solicitor who advanced the money and shared the profits with him, and an attempt was made by the solicitor's firm to garnish the proceeds in the hands of the broker, the solicitor was held not to be a holder in due course, the broker's knowledge being his knowledge: Millar v. Plummer, 22 S. C. Can. 253 (1893).

14. Where a creditor secured secretly the notes of the insolvent for the balance of his claim, it was a fraud on the indorsers of the composition notes, and they were entitled to the benefit of this payment: Arpin v. Poulin, 1 L. N. 290 (1878).

15. Where an illiterate man thought he was making his mark to a receipt, and plaintiff concealed the fact that it was a promissory note, plaintiff cannot recover: Benoit v. Brais, 6 L. N. 342 (1883). Where an educated man admits his signature, but sets up such a claim, he must prove it very clearly: Darling v. McBurney, Q. R. 6 S. C. 357 (1894).

16. An affidavit by defendant that no value was received for a note is irrelevant and useless, and will be rejected on motion: Sanford Co. v. McLaren, Q. R. 4 S. C. 467 (1892): Vallières v. Baxter, Q. R. 7 S. C. 286 (1894).

17. Where a person takes a note made or indorsed in a partnership name, knowing that it was not made or indorsed for the purposes of the partnership, the onus is cast upon him of showing that the note was signed with the knowledge or assent of every member of the firm: Union Bank v. Bulmer, 2 Man. 380 (1885).

18. A defence that a note was signed under threats of a criminal prosecution, upheld: Commercial Bank v. Rokeby, 10 Man. 281 (1894).

19. Where the drawer of a bill gave it for a special purpose to a party who, instead of using it as directed, negotiated it after maturity, the person so acquiring it is not entitled to recover: Lloyd v. Howard, 15 Q. B. 995 (1850).

20. Where a son forged his father's name to certain notes and discounted them in a bank, the forgeries being discovered, the bank pressed the father to give security, which he did. Held, that the transaction was void on the ground of duress and illegal consideration: Williams v. Bayley, L. R. 1 H. L. 200 (1866).

21. In an action on a note given for the compounding of a prosecution for perjury, it was held, following Ex parte Wolverhampton and S. Banking Co., 14 Q. B. D. 32 (1884), that the consent of the magistrate did not make the transaction a lawful one: Bull v. Copeland, 4 T. L. R. 139 (1887).

Illegal Consideration.-Considerations are illegal which violate the rules of morality, which contravene public policy, or which are prohibited by statute. If part of the consideration of a bill be illegal the instrument is vitiated altogether. A renewal, or the substitution of a new instrument for the old one will not cure the defect.

ILLUSTRATIONS.

See also illustrations under section 58, s.-s. 2.

1. An agreement not to proceed in a prosecution for permitting unlawful gambling in a tavern, is an illegal consideration for a note: Dwight v. Ellsworth, 9 U. C. Q. B. 339 (1852).

2. To support a plea that a note was given in consideration of forbearance to proceed in a prosecution for felony, the particular nature of the charge should be proved: Henry v. Little, 11 U. C. Q. B. 296 (1854).

3. A note given in consideration of a charge of felony being not proceeded with in Utah, is void and cannot be recovered on in Ontario: Toponce v. Martin, 38 U. C. Q. B. 411 (1876).

4. It is no defence to an action on a note that the consideration was for pork speculations in Chicago, which are illegal by the laws of Illinois, the contract which was made in Ontario not being against its laws: Bank of Toronto v. McDougall, 28 U. C. C. P. 345 (877).

5. Defendant, a J. P., was arrested for embezzling fines belonging to the township. Plaintiff gave his note to the township and took the note of defendant and his wife, and the prosecution was abandoned. Held, that the plaintiff was in no better position than the township, and the note was void for illegal consideration: Bell v. Riddell, 2 O. R. 25 (1882); affirmed 10 Ont. A. R. 544 (1885).

189

$56

Fraud, etc.

$56

Illegal consideration.

6. A note given for an agreement to release from and for stifling a prosecution for defrauding creditors is void: Leggatt v. Brown, 80 O. R. 299 (1899).

7. Promissory notes to creditors for the balance of their claim for signing a deed of composition or discharge are void: Blackwood v. Chinic, 2 Rev. de Lég. 27 (1809); Sinclair v. Henderson, 9 L. C. J. 306 (1865); Decelles v. Bertrand, 21 L. C. J. 291 (1877); Martin v. Poulin, 1 Dorion, 78 (1880); Gervais v. Dubé, M. L. R. 6 S. C. 91 (1890); Greene v. Tobin, Q. R. 1 S. C. 377 (1892); Collins v. Baril, ibid.; Ross v. Ross, ibid.; Garneau v. Larivierè, Q. R. 1 S. C. 491 (1892); Fisher v. Genser, Q. R. 15 S. C. 605 (1898); Budden v. Rochon, Q. R. 15 S. C. 322 (1898); Bellemare v. Gray, Q. R. 16 S. C. 581 (1899). Also a renewal of such note: McDonald v. Senez, 21 L. C. J. 290 (1877); Arpin v. Poulin, 22 L. C. J. 331; 1 L. N. 290 (1878); Wilkes v. Skinner, Ramsay A. C. 82 (1882); Bury v. Nowell, Q. R. 10 S. C. 537 (1896). They are void even when given by a third person: Brigham v. Banque Jacques Cartier, 30 S. C. Can. 429 (1900), following McKewan v. Sanderson, L. R. 20 Eq. 65 (1875), and Re Milner, 15 Q. B. D. 605 (1885).

8. A note given to raise money for corrupt purposes at an election where the maker was a candidate, is null: Gugy v. Larkin, 7 L. C. R. 11 (1857).

9. A note given as a wager on an election, held to be void: Dufresne v. Guevremont, 5 L. C. J. 278 (1859).

10. Notes given in excess of composition, held not to be void for illegal consideration: Greenshields v. Plamondon, 8 L. C. J. 192 (1860); Perrault v. Laurin, 8 L. C. J. 195 (1863); Martin v. Macfarlane, 1 L. C. L. J. 55 (1865); Bank of Montreal v. Audette, 4 Q. L. R. 254 (1878); Chapleau v. Lemay, 14 R. L. 198 (1886); Lefebvre v. Berthiaume. 18 R. L. 325 (1889); Racine v. Champoux, M. L. R. 6 S. C. 478 (1890); Lamalice v. Ethier, Q. R. 1 S. C. 377 (1890); Tees v. McArthur, 35 L. C. J. 33 (1891).

11. A note of a third party given by an insolvent to a creditor, to obtain his consent to the discharge of the insolvent, is null and void : Prevost v. Pickel, 17 L. C. J. 314 (1872); Leclaire v. Casgrain, M. L. R. 3 S. C. 355 (1887).

12. A trader obtained from his creditors an extension of time, and a party indorsed the last instalment extension notes, on condition that he would pay into a bank a certain sum per week. He made an assignment before the indorsed notes became due, when about half their amount had been deposited. Held, that the consideration was not illegal, and the assignee could not claim this money without relieving the indorser from his liability: Normand v. Beausoleil, 2 Dorion 215 (1882); affirmed, 9 S. C. Can. 711 (1883).

13. A note given to the collector of revenue for a fine is not null, although the fine belongs in part to the provincial treasury: Bois v. Gervais, 10 L. N. 195 (1887).

14. A note given as a subscription to an election fund for pro- $ 56 vincial elections is null: Dansereau v. St. Louis, 18 S. C. Can. 587

(1890). Also a renewal of such a note: St. Pierre v. L'Ecuyer, Q. Illustra

R. 23 S. C. 495 (1902).

15. No action lies on a promissory note given by the proprietor of what is commonly termed a "bucket shop" to plaintiff, a customer, in settlement of speculative transactions between them, i.e., speculations on the rise and fall of prices of goods and stocks, without intention of delivery: Dalglish v. Bond, M. L. R. 7 S. C. 400 (1890). See Forget v. Ostigny, [1895] A. C. 318.

16. A note given for smuggled whiskey is null, and where the holder does not make the proof required by clause (b) the action will be dismissed: Banque Jacques Cartier v. Gagnon, Q. R. 5 S. C. 499 (1894).

17. Where a year after a composition, the debtor applied to the creditor for a new credit, and then gave a note for the old unpaid balance there was held to be a valid consideration: Bedard v. Chaput, Q. R. 15 S. C. 572 (1899).

18. A father is liable for his notes given to cover the defalca-tions of his minor son: Corbett v. Murray, 7 R. J. 203 (1900).

19. A note given for the insurance of the furniture in a house of ill-fame is an illegal and immoral contract, and will not be enforced by the courts: Bruneau v. Laliberté, Q. R. 19 S. C. 425 (1901).

20. The maker of a note who had forged an indorsement upon it and discounted it in a bank, induced defendant to indorse a note for him to retire the first. The bank was aware of the forgery; defendant was not. The latter was held liable: Banque Nationale v. Drolet, Q. R. 28 S. C. 146 (1905).

21. A note given for a gambling debt (bucket shop) is null, and the action will be dismissed, although this is not pleaded: Allan v. Robert, 2 E. L. R. (Que.) 556 (1907).

22. A note given in part for illegal sales of liquor is wholly invalid: Smith v. McEachren, 7 N. S. (1 G. & O.) 299 (1868). 23. A note given to a hotel-keeper in part for liquor is wholly void : Benard v. McKay, 9 Man. 156 (1893).

24. A cheque given in payment of bets on a horse-race is void in hands of a holder for value with notice of the consideration: Woolf v. Hamilton, [1898] 2 Q. B. 337.

25. A promissory note given as collateral security for an illegal contract or agreement, and in effect as part of the same transaction, is tainted with the same illegality, and an action cannot be maintained upon it: Byrne v. O'Callaghan, 13 V. L. R. 924 (1887).

26. It is no defence to an action against an acceptor, that the bill was given for bets on horse races, made by the drawer as his agent, and paid without his request: Oulds v. Harrison, 10 Exch. 572 (1854).

tions.

$56

Right of subsequent holder.

27. A cheque on a London bank given for a gambling debt in a country where gambling is not illegal, cannot be collected in England: Moulis v. Owen, [1907] 1 K. B. 746.

28. Defendant gave a cheque for a bet won by plaintiffs, made a partial payment on it, and requested plaintiffs to hold it over and not declare them defaulters and so injure them with their customers, giving a verbal promise to pay the balance in a few days. Held in an appeal that refraining from posting defendants as defaulters was a sufficient consideration to pay the balance. Moulton, L.J., dissented on the ground that the cheque being void, the giving of time was not a good consideration: Hyams v. King, [1908] 2 K. B. 696.

57. A holder, whether for value or not, who derives his title to a bill through a holder in due course, and who is not himself a party to any fraud or illegality affecting it, has all the rights of that holder in due course as regards the acceptor and all parties to the bill prior to that holder. 53 V., c. 33, s. 29 (3). Imp. Act, ibid.

A holder for value is defined in section 54; a holder in due course in section 56.

It is only one who has been a party to the fraud or illegality, that is precluded from acquiring all the rights and privileges of a holder in due course. Previous notice or knowledge of the original defect in the bill is not sufficient. See Embrey v. Jemison, 131 U. S. 336 (1888).

ILLUSTRATIONS.

1. The indorsee of a note given for lottery tickets, who received it from a bona fide holder for value without notice before maturity, can recover from the maker, even although he knew what the consideration was when he acquired the note: Wallbridge v. Becket, 13 U. C. Q. B. 395 (1855).

2. Where a bona fide holder for value transferred a note to plaintiff, the latter was entitled to recover although he may have known of previous fraud in connection with the note: Clarkson v. Lawson, 14 U. C. Q. B. 67 (1856).

3. B. indorsed a note for C. to renew another note indorsed by him for C.'s accommodation. C. transferred the note for value to plaintiff, who knew no more than that B. was an accommodation indorser; there was no bad faith on plaintiff's part. Held, that he was entitled to recover: Cross v. Currie, 5 Ont. A. R. 31 (1880).