Statement of case.

of time they were such bona fide holders as could sue plaintiff thereon. (Fellows v. Prentiss, 3 Den., 512; Bangs v. Mosher, 23 Barb., 478; Alb. Ins. Co. v. Devendorf, 43 id., 444: Place v. McIlvaine, 38 N. Y., 96; Hubbard v. Gurney, 64 id., 466; Tobey v. Barber, 5 J. R., 68; Myers v. Wells, 5 Hill, 464.) When the suit was commenced plaintiff had ceased to be an accommodation indorser and could no longer claim protection as such. (Moore v. Ward, 1 Hilton, 337; Chilton v. Robbins, 4 Ala., 223; Rice v. Mather, 3 W. R., 62; Moore v. Paine, 12 id., 126; Brad ford v. Hubbard, 8 Mass., 155; Cameron v. Chappell, 24 W. R., 94; Daniel on Negotiable Instr., § 794.) The transfer of this note to the defendants involved no wrong on their part, and in the absence of an agreement as to a specific appropriation of the note, they could have recovered the amount thereof from the plaintiff, even though it may have been given in payment for an antecedent debt. (Seneca Co. Bk. v. Neass, 3 N. Y., 442; Aagwam Bank v. Strever, 18 id., 502; Mohawk Bank v. Corey, 1 Hill, 513; Rutland Bank v. Buck, 5 W. R., 170; Cole v. Salpaugh, 48 Barb., 105; Schepp v. Carpenter, 51 N. Y., 602; Hoge v. Lansing, 35 id., 138.) A release or discharge of one of several joint obligors or joint tort-feasors by the voluntary act of the obligee or the party injured operates as a discharge of the other obligors or wrong-doers and a satisfaction of all claims against them. (Barrett v. Third Ave. R. R. Co., 45 N. Y., 628; Bronson v. Fitzhugh, 1 Hill, 185; Merchants' Bk. v. Curtis, 37 Barb., 317; Brown v. Marsh, 7 Vt., 1320; Knickerbocker v. Colver, 8 Cow., 111; Cocke v. Jennor, Hobart, 66; Corbett v. Barnes, Sir Wm. Jones, 377; Livingston v. Bishop, 1 J. R., 290; Kasson v. People, 44 Barb., 347; Lovejoy v. Murray, 3 Wall., 1; Brinsmead v. Harri son, L. R. [6 C. P.], 584; S. C. in Exch. Ch. L. R. [7 C. P.], 547; Joslyn v. Cowee, 52 N. Y., 90; Ruble v. Turner, 2 Hem. & Mumf., 38; 6 Bacon's Abr. Title, Release, G. 625.) A discharge of the acceptor of a bill, or the maker of a note, precludes the person so discharging the acceptor or

Opinion of the Court, per ALLEN, J.

maker from afterwards resorting to the other parties to the bill or note. (Lynch v. Reynolds, 16 J. R., 45; Brown v. Williams, 4 W. R., 360; Newcomb v. Raynor, 21 id., 118; Farmers' Bank of Amsterdam v. Blair, 44 Barb., 641; Joslyn v. Cowee, 52 N. Y., 90; Turner v. Davis, 2 Saund., 150, n. 2; Broom's Legal Maxims, *309; Kowing v. Manly, 49 N. Y., 203.)

ALLEN, J. Upon the undisputed facts proved upon the trial, and found by the referee, there could have been no recovery by defendants as indorsees of the note of Jaycox & Green, against the present plaintiff, upon his indorsement. His defense would have been perfect upon proof of the facts clearly established in the present action, that he indorsed the note for the accommodation of the makers, for a special purpose, to wit, to enable the latter to take up other notes to which the plaintiff was a party, and that the note with the indorsement was fraudulently diverted from the purpose for which it was made, and delivered to the defendants as collateral security for an antecedent debt, they parting with no value therefor.

When a bill or note is void in its creation, or has been unduly obtained, or has been wrongfully diverted from its purpose, and fraudulently negotiated, the party suing on it is bound to show himself a bona fide possessor. The affirmative is with the plaintiff in an action upon such a note, to prove a clear legal title valid as against the parties to the instrument. (Woodhull v. Holmes, 10 J. R., 231.) One who receives it after due, or with notice of the circumstances under, and purposes for which it was made, although he pays a valuable consideration, is not a bona fide holder, entitled to recover thereon. One who receives it before due, and without notice or knowledge of any fraud in its inception or transfer, but for a precedent debt, and without parting with value or any valuable consideration, does not acquire a valid title to the note or bill, but takes it subject to all its infirmities, precisely as if he had taken it after dishonor, or with SICKELS.-VOL. XXVIII.

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Opinion of the Court, per ALLEN, J.

knowledge of all the circumstances affecting its validity. This is the well-established rule in this State, as well as the recognized rule in England. (Skilding v. Warren, 15 J. R., 270; Wardell v. Howell, 9 W. R., 170; Coddington v. Bay, 20 J. R., 637; Small v. Smith, 1 Den., 583; Turner v. Treadway, 53 N. Y., 650; Weaver v. Barden, 49 id., 286; Covell v. Tradesmens' Bank, 1 Paige, 131; Goggerly v. Cuthbert, 5 B. & P., 170; Evans v. Kymer, 1 B. & Ad., 528; Ch. on Bills, 248, 264, 274; Jones v. Fort, 9 B. & C., 764.) An innocent holder of negotiable paper which he has received in the usual course of trade, for a valuable consideration, though from a person having no title, and no authority to transfer, it will be protected even against the claim of the true owner. (Stalker v. McDonald, 6 Hill, 93.) And he may acquire a good title and be protected as the holder of paper, although used for a different purpose from that intended, if there is no restriction as to its use, or the particular use is a matter of indifference to the parties. (Seneca Co. Bank v. Neass, 5 Den., 329; affirmed 3 Comst., 442.) But when a note is made and indorsed to take up another note, to which the indorser is a party, its use is not a matter of indifference to the indorser, and if diverted he may defend himself except as against a bona fide holder for value. The defendants taking the note subject to all the infirmities resulting from the fraudulent delivery of it to them acquired no better title to the same as against the plaintiff than Jaycox & Green the makers had. They occupied precisely the position in respect to the accommodation indorser as did the makers. There was no legal liability on the part of the plaintiff to the defendants by reason of his indorsement. The plaintiff was not only under no obligation to the defendants as a party to the note, but at any time before the note came to the possession of a bona fide holder for value, he could have reclaimed the note, and in equity prevented its negotiation, and compelled its surrender. (Chitty on Bills, 248; Jones v. Fort, supra.) Could then the defendants put themselves in a better situation, and secure to themselves the full benefit of the plain

Opinion of the Court. per ALLEN, J.

tiff's indorsement, and all the advantages of bona fide indorsers for value, by negotiating the note to an innocent transferee for value, before maturity? By such a transfer they could and did subject the plaintiff to all the liabilities of an indorser, and compel the payment of the note by him. But having no title or right to the note, they could have no legal right to transfer the same, and the sale of it by them was a conversion. It is immaterial that they may have acted in good faith and in ignorance of the plaintiff's right. One dealing with the property of others, although under the mistaken belief that it is his property, docs so at his peril, and must answer to the true owner for his acts. The defendants have no equities superior to those of the plaintiff, and if the equities are equal the legal title must prevail. It would be illogical, conceding the invalidity of the note in the hands of the defendants, and the non-liability of the plaintiff to them, to hold that the defendants would acquire a title to the proceeds of the note by a transfer of the same to a third person. A party cannot fortify his title to property by a sale, as the title to the proceeds upon sale will be the same as to the property before sale, A wrong-doer cannot, by converting the property into money or some other species of property, cure defects in his title. I am of the opinion that the plaintiff had an election of remedies, trover for the conversion of the note, or an action for money had and received for the amount which the defendants realized upon the sale of the note. This follows from the conceded rule that the defendants were without title to the note, or authority to dispose of the same. No rights whatever to the note, or any right of disposal thereof, were or could be acquired by the unauthorized delivery of the same to the defendants by Jaycox & Green. Jaycox & Green could confer no power over the note inconsistent with the restrictions upon its use imposed by the plaintiff.

The complaint contains the necessary averments to sustain the action in either form, and precedents are not wanting for both forms of action. Coddington v. Bay (5 J. C. R., 54),

Opinion of the Court, per ALLEN, J.

and Coddington v. Bay, in error (20 J. R., 637), is in principle a controlling authority in support of the plaintiff's claim. It is true in that case the negotiable paper, fraudulently transferred, was made by other parties, and was the property of the complainant, and valid as the obligation of third persons in his hands. The action was by bill in chancery against the defendants, who had received it from the factor of the complainant for an antecedent debt due from him, to recover the notes, or for an accounting for the proceeds. The defendants were held to account for the proceeds. The title to the proceeds was affected by the same infirmities which attached to the paper in their hands. The present plaintiff was as absolutely the owner of the note in this case, and entitled to its surrender to him, as was the plaintiff of the bill or notes in the case cited, and although it may have been of no value in the hands of the defendants, so long as the facts impeaching its validity were susceptible of proof, in the language of Sir JAMES MANSFIELD, Ch. J., in Goggerly v. Cuthbert (5 B. & P., 170), "it was of importance to the plaintiff to get it back again." The objection that a note or bill which has no legal inception until it has been negotiated upon a valuable consideration has no value as property which will sustain an action of trover, and that an accommodation indorser has no property in paper indorsed by him, is not tenable. It cer tainly is not logical to say that negotiable paper is of no value, and in no sense property for which trover will lie, for which upon a transfer thereof the transferee can receive, as the defendants here have received, $2,500, and which is of that value to the purchaser, and to get back which the accommodation indorser is compelled to pay the same amount. It is difficult to see why it has not all the elements of property which any negotiable paper has. It can make no difference in principle that the proceeds for which the defendants in Coddington v. Bay were made to account were payments made by parties to the bills, and in satisfaction of them, rather than the proceeds received upon their negotiations to third persons. In either case the party has received moneys to