Case ID: dc_15/html/0090-01.html
Source: Caselaw Access Project
Author: {"author": "Mr. Justice Merrick", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The Second National Bank of Washington vs. Frank Hume and James K. Cleary, Surviving Partners of Hume, Cleary & Co.
    Law. No. 23,258.
    Decided May 25, 1885.
    Justices Cox, James and Merrick sitting.
    1. “While it is perfectly competent for the holder of commercial paper to rest, in the first instance, upon the proof of the signature of the party to be charged, as in the ease of the last endorser, yet when the defendant in such a case oilers to prove that there was fraud or illegality in the transaction, such proof is admissible, aud when admitted it changes the burden of proof and throws upon the plaintiif the further obligation of accounting for the manner in which he obtained the paper and of showing that it was bona fide and for value received.
    2. In a suit against a partnership firm as endorsers upon a promissory note signed individually by one member of the firm and endorsed by him, first with the name of one of the members of the firm and then with the firm name (which endorsements the defendants alleged to be fraudulent), it is com-I etent for the defence to show that the note had never been the note of the first endorser or of the firm ; that no value had been received for it by either of the parties subsequent to the drawer ; that the note had been discounted by the drawer at the bank (the plaintiff) for his own benefit, and was treated throughout by the bank and the drawer as his own property. And such proof should go to the jury with appropriate instructions from the court in order that they may determine from all the facts and circumstances of the ease whether the accommodation was made for the benefit of the firm or for the benefit of the drawer. And if the jury should find (as is their exclusive province) that the accommodation was for the drawer in his individual capacity, and that the name of the firm was put there as an accommodation endorser) then before the bank could recover it would be necessary for it to establish the fact that the drawer had authority so to use the name of the firm.
    3. It is not enough, however, that the defendants show that the plaintiff had reason to believe that there existed these infirmities in the note. They must show knowledge on the part of the plaintiff; but this knowledge the jury may infer from the testimony.
    STATEMENT OE THE CASE.
    This was an action against the defendants as indorsers of the following paper:
    “$1,200. Washington, D. 0., Sept. 27, 1881.
    “ Thirty days after date I promise to pay to the order of Prank Hume twelve hundred dollars, value received, with 8 per cent, interest until paid. Payable at 2d National Bank.
    Thomas L. Hume.”
    Endorsed:
    “ Frank Hume.
    “Hume, Cleary & Co.”
    Defence: That the endorsements did not bind the defendants, because made by Thomas L. Hume to raise money for his individual benefit without the knowledge or consent of his partners, of which the plaintiff had notice.
    Issue being joined the plaintiff gave evidence tending to prove that on and before the date of the note in suit Thomas 'L. Hume, Frank Hume, and James K. Cleary were partners in trade-under the name of Plume, Cleary & Co., and carried on the business of wholesale and retail grocers and liquor dealers in the city of Washington, D. C.; that the endorsement of the firm name on the note in suit was in the handwriting of Thomas L. Hume, who died a few days before the maturity of the note; that the note was presented by the notary of the plaintiff to its book-keeper at the counter of said bank and payment demanded at 4 o’clock in the afternoon on the 29th of October, 1881, the date of its maturity, and, not being paid, was protested, and the 30th -of October, 1881, being Sunday, notice of demand, non-payment and protest was on the 31st of October, 1881, delivered to Frank Hume, and also, on behalf of the firm of Hume, Cleary & Co., to James K, Cleary. The attorney for the plaintiff then offered to read to the jury the note and certificate of protest, and to such reading the defendants’ attorney objected, because no evidence had been given of the handwriting of the maker and first endorser of the note ; but the objection was overruled and the note and certificate of protest allowed to be read; to which ruling tho defendants excepted.
    The plaintiff then rested.
    Thereupon the defendants offered to prove that the endorsement of the name of Hume, Cleary & Co. was without the knowledge, authority or assent of the defendants, or either of them, and in violation of the articles of copartnership of the firm of Humé, Cleary & Co.; and further, that the first information received by them, or either of them, of said endorsement was the notice of protest of the said note, and neither of said defendants ever confirmed or ratified said endorsement; and, further, that the name of Frank Hume upon the said note was not in the handwriting, nor within his knowledge, authority, or assent, and that the same was a forgery, and that the first information he had of the endorsement was through the notice of protest of the said note •; and further, that no proceeds whatever of the said note ever went to the said defendants, or either of them, nor did any benefit ever accrue to them, or either of them, or to the said firm, from the said note ; and further, that the transaction evidenced by said note never had any existence, but was wholly fictitious, and that the said note was made by the said Thomas L. Hume, and the name of Frank Hume was forged thereon, and the endorsement of Hume, Cleary & Co. was made by said Thomas L. Hume in fraud of his co-partners, and for the purpose of obtaining money for private advantage.
    And the defendants, by their counsel, claimed that the aforesaid evidence was admissible, because the same affected the said note and endorsements with fraud and forgery, and threw upon the plaintiff the burden of showing that it paid value for said note, and, in taking the same, acted in good faith. And the said offered evidence being objected to by counsel for the plaintiff, the court refused to allow the same, or any part thereof, to be given to the jury. And the court decided that the several matters so offered in evidence were, and each of them was, inadmissible in evidence, unless the defendants further proposed to prove that the said matters were known to the plaintiff at the time it discounted the note sued on, or that the plaintiff had notice of the same, or that the plaintiff received the said note in bad faith.
    And to the said ruling that the said evidence, or any part thereof, was inadmissible to shift the burthen of proof as to value or good faith, and unless the defendants should further prove affirmatively knowledge or notice or bad faith on the part of the plaintiff, the defendants excepted severally to the refusal of the court to allow each proposition of fact contained in their offer.
    The defendants then gave evidence tending to prove that Thomas L. Hume had a private account with the plaintiff; that the original note (of which the note in suit was the last renewal) submitted by Thomas L. Hume to the plaintiff for discount was dated August 11, 1881, for $3,000 at five days, which by a series of curtails and renewals reached the note in suit; that the proceeds of said discount was placed to the private account of Thomas L. Hume with the plaintiff; that no portion of the proceeds of said discount went to said firm of Hume, Cleary & Co., or to either of the defendants, nor were the defendants consulted or notified of said transaction; that the renewal notices were always sent to Thomas L. Hume; that Thomas L. Hume never spoke to the defendants or either of them in relation to the transaction; that the first knowledge the defendants had of said renewals was at the trial of this cause and their first knowledge of the note in suit was after the death of Thomas L. Hume, when they received notice of protest; that M. Gr. Emery, president of the 'plaintiff corporation, frequently came to defendants’ place of business, but always asked for Thomas L. Hume, and always talked privately with him; that defendants never spoke to Mr. Emery about this transaction, and never knew until the day of trial that one of the renewal notes was sent to the bank from the store of Hume, Cleary & Co.; that the defendants never knew that Thomas L. Hume was using the original note or any renewals of it for his private benefit, and never ratified his use of it; that the firm of Hume, Cleary & Co. was in good standing August 11, 1880, and never had occasion to borrow money, and that Thomas L. Hume for seven or eight years before his death was engaged in the dairy business and stock raising.
    And, thereupon, the defendants offered to prove by Frank Hume, one of the defendants, that the plaintiff, when it discounted the series of notes mentioned in the evidence, had reason to know and believe that the endorsement of the firm name by Thomas L. Hume was used by him as a mere accommodation endorsement to enable him to get money by the discount of the notes, said money to be used for his private purposes and not for the purposes of the firm, and that the plaintiff, having reason to know and believe that said Thomas L. Hume was acting as aforesaid, failed to make inquiry as to whether said endorsement was made by the authority or with the assent of the defendants, and that such endorsement was not made by and with the authority or assent, and that the plaintiff, by discounting the said notes With such endorsement, and having reason to know and believe as aforesaid, enabled the said Thomas L. Hume to perpetrate a fraud upon his copartners, and had acted in bad faith.
    And the court thereupon inquired of the defenda/hts’ counsel whether he had reason to know or believe, or expected to prove anything other than such grounds for knowing or believing, the matters he spoke of, as were testified to by Mr. Cleary; to which the defendants’ counsel replied: “No, sir; I think not;” and also inquired whether he expected to prove by this witness that the plaintiff had knowledge of the said fact supposed to constitute fraudulent dealing on the part of the said Thomas L. Hume, in procuring the discount of the said note, at the time it was discounted by the plaintiff, to which inquiry the counsel for the defendants replied in the negative.
    Whereupon the court ruled that the said testimony so proposed to be offered was inadmissible, and refused to admit the same to be given by the defendants. To which ruling the defendants excepted.
    The defendants then offered a number of prayers, as follows, all of which were rejected:
    “ 1. If from the whole evidence the jury shall find that the notes in the series given in evidence, beginning with that of the 11th of August, 1880, and ending with the note in suit, were presented for discount by Thomas L. Hume, the maker, for his individual account, and were so discounted by the plaintiff, then the transaction on its face imported that the endorsement of Hume, Cleary & Co. was an accommodation endorsement, and it was not competent for the said Thomas L. Hume to bind his co-partners by such endorsement of the firm name without their authority or assent; and if without such authority or assent the said Thomas L. Hume made the endorsement of the firm name on the note in suit, the defendants were not bound thereby and the plaintiff is not entitled to recover.”
    “2. If from the whole evidence the jury shall find that the plaintiff, in discounting the notes offered for discount by Thomas L. Hume, and among them the note in suit, dealt with and treated the same as his individual property, then he, being the maker of the said notes, the endorsement of the firm name thereon was an accommodation endorsement, and it was not Competent for him to bind thereby his co-partners without their authority or assent; and if the jury shall find that the endorsement of the firm name on the note in suit was made without such authority or assent, the defendants were not bound thereby and the plaintiff is not entitled to recover.”
    “3. If from the whole evidence the jury shall find that in discounting the notes given in evidence, including the note in suit, the plaintiff dealt with and treated the same as the property of the firm of Hume, Cleary & Co., then the plaintiff was not bound to know that Thomas L. Hume could only use said paper in the usual course -of business, and could not apply it to his private purposes without the authority or assent of his co-partners; and if the jury shall find that the said note was discounted by the plaintiff at the instance of the said Thomas L. Hume, and the proceeds applied to his private purposes by the plaintiff and by his direction, then the plaintiff is not entitled to recover.”
    
      “4. The burthen of proof is upon the plaintiff to show that in discounting the note of the 11th of August, 1880, for the private benefit of Thomas L. Hume, and in renewing the same for such private benefit from time to time with the endorsement of Hume, Cleary & Co., it acted in good faith and with reasonable and proper precaution.”
    “ 5. If from the whole evidence the jury shall find that the plaintiff knew, or had reason to know, that the said Thomas L. Hume was using the endorsement of the firm name in the transactions in evidence not for the purposes of the firm, but for his private purposes, then it was the duty of the plaintiff to know that the said Thomas L. Hume could not so use the firm name without the authority or assent of his co-partners ; and if the jury shall further find that the firm name was so used, and for the private .purposes of the said Thomas L. Hume, in the transactions with the plaintiff, without such authority or assent, then the plaintiff is not entitled to recover.”
    “6. It is for the jury to find, under all the circumstances, whether the plaintiff knew, or had reason to know or believe, that the said Thomas L. Hume was using, in his transactions with the plaintiff, the endorsement of Hume, Cleary & Co. as an accommodation endorsement, or was using the said endorsement, not in the usual course of the business, but for private purposes; and if the jury shall find that the plaintiff knew, or had reason to know or believe, that the said Thomas L. Hume was so using such endorsement, then it was the duty of the plaintiff to inquire whether such use was by the authority or assent of the defendants before making discounts upon such endorsement, and if the plaintiff, instead of making such inquiry, made the discount of the notes mentioned in evidence, and the endorsement of the name of Hume, Cleary & Co. was used without the authority or assent of the defendants, and was used as aforesaid, then the plaintiff is not entitled to recover,”
    “ I. It is for the jury to find, under all the circumstances of the case, whether, in obtaining the discount of the 11th of August,' 1880, and the subsequent renewals, the said Thomas L. Hume was acting in fraud of his copartners, and whether, if he was so acting, the plaintiff knew, or had reason to know or believe, the same. And if the jury from the whole evidence shall find that the said Thomas L. Hume was so acting, and that the plaintiff knew, or had reason to know or believe, the same, then the plaintiff is not entitled to recover.
    8. If the jury find from the evidence that the endorsement of the firm name, Hume, Cleary & Co., on the note in suit, and on those which preceded it, was made by Thomas L. Hume, a member of said firm and maker of said note, without the knowledge or consent of either of the members thereof, and they did not ratify or confirm it, and further find that the plaintiff discounted the note under an agreement with the maker that the proceeds thereof should go to his individual credit, and not to the use of the firm, then the defendants are not liable in this action.
    9. If the jury find from the .evidence that the promissory note in suit, and those which preceded it, was not passed by Thomas L., Hume, the maker thereof, to the plaintiff in the course of the ordinary business and transactions of the firm óf Hume, Cleary & Co., and further find that neither of the defendants had any knowledge or information in relation thereto prior to the maturity of the note in suit, and that no part of the proceeds of any of said notes was applied to partnership purposes, then the plaintiff is not entitled to recover.
    10. If the jury find from the evidence that the plaintiff knew at the time it received the original of the note in suit, and before it gave anything of value therefor, that the partnership name was endorsed thereon by the maker for his sole use and benefit, and the proceeds were so appli%d, and further find that the defendants, or either of them, had no knowledge of the existence of said note, nor of the renewals thereof, and never consented to nor ratified the endorsement of the firm name on said note, nor on any of the renewals thereof, including the note in suit, then the plaintiff is not entitled to recover.
    11. If the jury find from the evidence that the original of the note in suit was made by Thomas L. Hume, without the knowledge or notice of the defendants,, or either of them, endorsed the name of the firm, Hume, Cleary & Co., on said note, and appropriated the proceeds thereof to his own use, without the knowledge or consent of the defendants, or either of them, then he acted in violation of his obligations and duties to the firm and in fraud of the firm; and if the jury further find from the evidence that the plaintiff had knowledge or notice, before it paid value for said note, that said Thomas L. Hume intended to appropriate the proceeds thereof to his own use, and not to the use of the firm, and further find that the defendants, or either of them, derived no benefit from said note or either renewal thereof, including the note in suit, and never consented to nor ratified such use of the name of the firm, then the plaintiff is not entitled to recover.
    12. When a party takes negotiable paper, made, accepted or endorsed by one of several partners, in or with the partnership name, and the fact that such name was not signed or endorsed in the regular course of the business of the firm 'is apparent on the face of the instrument, or necessarily implied in the nature of the transaction, such party cannot though he may have parted with value on the faith of the paper, charge the other members of the firm, except upon proof that they assented to the transaction. In every such case he is chargeable, as matter of law, with notice of want of authority in the individual partner to bind the firm without their express assent.
    18. When the fact, though existing, that such name was not signed or endorsed in the regular course of business of the firm is not apparent from the face of the instrument, and the nature of the transaction appears to be susceptible of different conclusions, the question of notice is one of fact, to be determined by the jury under all the circumstances. In every such case the burden is again upon the plaintiff, though he may have parted with value, to satisfy the jury, either that the circumstances of the case did not constitute notice to him, or that, if they did, the other members of the firm assented to the transaction.
    14. When the fact, though existing, that such name was not signed or endorsed in the regular course of the business of the firm is not apparent from the face of the instrument, and the nature of the transaction appears to have been of such a character as to give the plaintiff a right to suppose that it was a partnership transaction, the members contesting their ability must not only show that in fact it did not constitute such a transaction, but also that the plaintiff had in some way actual notice. In every such case the burden is shifted upon the defendant to establish notice.
    And thereupon the court having severally refused to give each of the said prayers, and the defendants having excepted severally to such reufsals, the court charged the jury as follows :
    Gentlemen oe the Jury: In your absence I have decidedly expressed my opinion as to the prayers which were offered by the defendants, and have rejected all of them. I have also considered it my duty to withdraw from your consideration a large mass of evidence, which was adduced by the defendants, tending, as they insisted, to prove some fraud in connection with this note. All of that class of evidence has been withdrawn from you. I therefore instruct you that if you shall find from the evidence that Thomas L. Hume was a partner of the firm of Hume, Cleary & Co., within the period from August 11, 1880, down to this date, that on the date of this note he signed it, and afterwards endorsed the name of Hume, Cleary & Co. upon the back of the note; that that note was discounted by the plaintiff, the Second National Bank; that after that note became due, notice and due demand was made upon the defendants in this action and protest was made upon its non-payment, according to the evidence given here by Mr. Balloch in the case, then, if you shall find those facts, the plaintiff is entitled to a verdict upon that note according to its face. There is no dispute that this gentleman was a member of that firm,. for it was proved by the defendants as well; that this note was discounted by the bank; and also there is no dispute about the protest. If you find those matters which I have just stated to you, then your verdict should be for the plaintiff.
    
      And to the withdrawal of the evidence from the jury, except in the particulars stated by the court, and to the instruction as given by the court, the defendants excepted severally.
    W. F. Mattingly for plaintiff.
    W. D. Davidge, L. GK Hiñe and John E. Norris for defendants.
   Mr. Justice Merrick

delivered the opinion of the court.

In the case of Frank Hume and James K. Cleary, against whom a suit was brought by the Second National Bank of Washington, the plaintiff was the holder of a piece of supposed commercial paper in this form of words:

“$1,200. Washington, D. C., Sept. 27, 1881.

“Thirty days after date I promise to pay to the order of Frank Hume twelve hundred dollars, value received, with eight per cent, interest until paid, payable at Second National Bank.

“Thomas L. Hume.

Endorsed:

“Frank Hume.

“Hume, Cleary & Co.”

At the trial of the cause the plaintiff offered in evidence the promissory note and the protest and proved the signature by Thomas L. Hume, the drawer, who was himself a member of the firm of Hume, Cleary & Co., of the firm name as the last endorser, and then rested.

In that state of the case the defendant offered to prove that the note had originated in fraud; that the name of Frank Hume, the first endorser, was forged; and that the name of the firm, Hume, Cleary & Co., had been placed there by the drawer without authority, and that the firm knew nothing whatsoever of the existence of the transaction and had derived no benefit whatsoever from it.

The court upon that offer of proof rejected the testimony as inadmissible in that stage of the case. In this we think there was manifest error. The rule of law has been laid down by a concurrence of all the great authorities in this country to this effect: that, while it is perfectly competent for the holder of commercial paper to rest, in the first instance, upon the proof of the signature of the party to be charged, as in the case of the last endorser (which carries proof of the others and of the notice of protest — and that proof raises a prima facie case of good consideration and bona fide ownership), yet when the defendant in such a case offers to prove that there was fraud or illegality in the transaction, such proof is admissible, and, when admitted, it changes the burden of proof and throws Upon the plaintiff the further obligation of accounting for the manner in which he obtained the paper, and of showing that it was bona fide and for value received.

This doctrine is very clearly laid down by the Supreme Court of the United States in the case of Commonwealth against Clark, 94 U. S., 285. But there is a later case, which was not referred to in the argument of the case at bar. It was decided in the State of Maryland, at October Term, 1881, and it so well expounds the rule of law and the reason of it — not that it is better authority, but being later and quoting and relying upon the decision in 94th U. S. which sets forth the rule of law clearly — that I may he pardoned (in giving the opinion of this court) for using the language of that eminent tribunal for the purpose of showing what the opinion of this court is in that respect. I read from the case of Cotton vs. Pusey in 51th Maryland, p. 452. The court says in its opinion:

“By the fifth prayer the court was asked 'to instruct the jury that if the note was transferred to the plaintiff before its maturity, then the onus was on the defendant to show by evidence that the plaintiff had notice of the want of consideration for the note, and the fraud in its procurement from the defendant, and that, in the absence of such evidence of notice to the plaintiff, he was to be presumed to be the holder of the note for value without notice. This clearly is not in accordance with the law. It is true that the endorsee or transferee in an action against the maker of a negotiable note has nothing to do in the opening of his case but to prove the signatures to the instrument and introduce it in evidence, for the instrument goes to the jury with the legal presumption that the plaintiff became the holder of the same for value at its date or before maturity, in the usual course of business, without notice of anything to impeach his title. He is at liberty to rest upon this presumption, and is not bound, in the first instance, to show the circumstances under which he obtained the note or that he paid value for it, but for the defendant to show, by such proof as may be properly left to the jury to consider, that the instrument was procured by fraud, or was fraudulent in its inception, or that the consideration was illegal, or that it had been.lost or stolen before it came to the possession of the holder. The burden of proof is changed and it is then incumbent upon the plaintiff to show that he acquired the note bona fide for value, in the usual course of business, before maturity and under circumstances that create no presumption that he knew of the existence of the facts that impeach the validity of the instrument. This is a well established rule applicable to negotiable instruments, and it is said to be wise and salutary in the protection it affords. It proceeds upon the presumption that the person who has been guilty of the fraud or illegality in obtaining the instrument would dispose of it and would place it in the hands of another person to sue upon; and it is because of such presumption that the proof of fraud, illegality or loss casts upon the holder the burdén of showing that he is a bona fide holder for value or under what circumstances and for what value he became the holder of the note.”

There the rule is laid down emphatically, and clearly assigns the reasons upon which the well founded rule is based in morals, and refers to 94th U. S., among others, and all the late authorities sustaining fully the position of the court in that case.

That being the rule of law it is manifest'then that the court below erred in its first ruling in rejecting the offered proof on the part of the defendants to show that the note originated in fraud and illegality and the forgery of the name of one of the parties.

In the further progress of the cause there was evidence offered on the part of the defendants, and admitted subject to exception, for the purpose of showing that the note had never been the note of the partnership or of the first endorser, and that no value had been received for it by either of the parties subsequent to the drawer, and further that the note was discounted by the drawer at the bank for his own benefit, and was treated throughout by the- bank and the drawer (although the drawer was one of the parties composing the firm), as his own property.

It was proper upon that form of proof to submit the whole case to the jury to determine, as a matter of fact, whether the holder of the paper, at the time he discounted it on behalf of the drawer, was dealing with the drawer in his individual capacity or was dealing with him as a member of the firm for the benefit of the firm. Occupying the double character of drawer of the note and also one of the members of the firm endorsing the note, it would have been competent for him, notwithstanding the unusual form of the note, to have treated it as a note offered for discount by him in his character as a member of • the firm for the benefit of the firm; and if he had professed to be dealing with the discounting bank in his character as a member ot the firm for the benefit of the firm, the form of the paper, when it stands thus in the peculiar dual relation of a partner so dealing, would not have been as in the case in the 95th U. S. — the cashier of the Shawnee bank dealing with the paper of the bank — satisfactory proof that it was only accommodation paper on the part of the bank who was put there as an endorser, and that the party was therefore charged legally with knowledge and notice of the infirmity of it and bound to see whether the accommodation endorsement was for the benefit of the party offering it and duly authorized, but, on account of his dual character, he would still have had the right to deal with it as partnership paper if he had so dealt with it.

But tlio proof here goes on to show that he dealt with it as his individual paper; that the credit went to him; that he was charged as drawer, and his co-partner, Frank Hume, was charged as endorser, and the firm was charged as endorser; the whole course of dealing therefore indicating, or furnishing proof so to speak, that he was dealing with it as for his own benefit and using the firm as an accommodation endorser. All that proof was proof competent, therefore, to go to the jury notwithstanding he was a partner in the house, and notwithstanding he presented it and signed the name of the partnership. It was proof competent to go to the jury with appropriate instructions from the court, in order that they might determine, from all the facts and circumstances of the case, whether the discount was made for the benefit of the firm or for the benefit of the drawer. And if the jury should find (as a matter of fact it was for them exclusively to find) that the accommodation was for him in his individual capacity, and that the name of the firm was put there as an accommodation endorser, then, before the bank could recover, it would be necessary for it to establish the fact that he (the drawer) had authority so to put the name of the firm as accommodation endorser.

The court, therefore, under these views, erred in rejecting that mass of testimony, erred in its charge and erred in rejecting a large proportion of the prayers of the defendant based upon the theory of the law which I have indicated. Some of the prayers of the-defendant are erroneous for various reasons, but there were prayers enough to justify them to go to the jury upon the theory that I have indicated.

The fifth, sixth and seventh prayers of the defendant were erroneous in this; That they put it to the jury to find that the plaintiff knew or had reason to believe there were these infirmities. That, under the rule as laid down by the Supreme Court of the United States, is not enough. In the case of Goodman vs. Simons, the Supreme Court of thv. United States have said it must be knowledge and not reasonable belief. The facts I have adverted to were competent to go to the jury from which they would have the right, according to the weight they would give to' the testimony on the one side or the other, to determine whether, in point of fact, he had knowledge of the infirmity of the paper, and they had the right to make the deduction, if they so pleased, that he had knowledge, and if they should draw the inference of knowledgé from this evidence, which was competent evidence to establish the fact of knowledge, then the plaintiff was not entitled to recover.

With this explanation of the prayers I need not criticize them any further than to say that upon a review of them the court finds, in view of this testimony which ought to have been admitted, that the court below should have granted the first, second, eighth and tenth prayers of the defendant. Those prayers covered the rule of law that I have just announced as being the true rule applicable to such a case, and would have given the defendants the benefit of standing before a jury to argue upon all the testimony as to whether or not the plaintiff, at the time he dealt with this negotiable paper,i knew that it was not negotiated for the benefit of the firm and that the firm was an accommodation endorser, and therefore the firm was not to be bound unless knowledge was brought home that the firm had authorized the endorsement for that purpose.

The judgment of the court below will therefore be reversed and the case will be remanded for a' new trial in order that on a second trial it may be conformed to the rules which we have laid down as the true rules which govern a case circumstanced as this one is. There were other exceptions in the case, but it is not necessary to advert to them.