fense stands upon the same footing as the defenses which may be made as between the original parties, but is cut off when the paper reaches the hands of a bona fide holder. Fairbanks v. Snow, 145 Mass. 153, 13 N. E. 596; Bank v. Butler, 48 Mich. 192, 12 N. W. 36; Clark v. Pease, 41 N. H. 414; Beals v. Neddo, 1 McCrary, 206, 2 Fed. 41; Martineau v. McCollum, 3 Pin. 455, 4 Am. & Eng. Ency. Law (2d Ed.) p. 334. Duress which consists of threats of imprisonment of a husband or child is a species of fraud, which renders the contract made under its influence voidable only and not void. Bank v. Kusworin, 91 Wis. 166, 64 N. W. 843. If it be simply a voidable contract, then it follows naturally that, when the contract consists of negotiable paper, the defense is cut off by transfer to a bona fide purchaser before maturity in the same manner that other defenses upon the ground of fraud are cut off.

Question 502: State the facts in this case and whether the defense of duress can be made as against a holder in due course.

§ 478. (Nego. Instru., Sec. 86.) Illegality of

consideration.

Case 503. Union Trust Co. v. Preston National Bank, 136 Mich. 460.

Facts: The question was whether the laws of Michigan making it unlawful for any employe of a bank to certify a check unless the amount thereof actually stood to the credit of the drawer, made such check void in the hands of a holder in due course.

Point Involved: Whether a negotiable instrument issued in breach of the positive statutory law making the act illegal, is enforceable in the hands of a holder in due

course.

CARPENTER, J.: In accordance with these principles, we would assume, and, as heretofore stated, we do assume, that the legislature intended to make such contract void between the parties; and we would likewise

assume that it did not intend, if the contract took the form of negotiable paper, to affect its validity in the hands of a bona fide holder. But plaintiff's counsel contend that it is settled by authority that, when a contract is prohibited and made a crime by statute, such a contract, if it takes the form of negotiable paper, is void in the hands of a bona fide holder; and they rely upon the following authorities:

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The decisions referred to do not sustain the proposition for which they are cited. The section of Daniel cited has reference to cases where an express statutory provision declares a note void. We cannot follow this authority without repudiating our own decision of Vinton v. Peck, 14 Mich. 287, and the almost unanimous authority of other courts,*

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We conclude, therefore, that, though the making of a contract is prohibited and made a crime by statute, yet that contract, if it takes the form of negotiable paper, is valid in the hands of a bona fide holder for value.

"If the section is construed as the plaintiff contendsif checks duly certified are void in the hands of bona fide holders for value, because the amount thereof did not stand to the credit of the drawer on the books of the bank-this consequence follows: Certified checks, instead of being, as heretofore, the negotiable paper of the bank, and passing as current upon the faith of the bank's credit, will pass, if at all, only upon the credit of the particular bank official who certified it. Every person to whom a certified check is offered will be called upon to determine, not the credit of the certifying bank, not the authority of the certifying official, but the integrity and diligence of that official. Though one may have all confidence in such integrity and diligence, he may hesitate to take the check, because he fears that others to whom he may wish to transfer it lack such confidence. It will result, therefore, that certified checks, instead of being regarded in commercial circles with credit and favor, as heretofore, will be regarded with a degree of suspicion,

and are likely to be discredited. If the legislature intended this consequence-and they must have intended it if they intended that the act should receive the construction contended for by plaintiff-it seems strange that they left their intent to be ascertained as a matter of doubtful inference; it seems strange that they still left to banks the power of certifying checks, without any clear suggestion that such power was so greatly limited. 'If the legislature intended the consequences claimed, we should expect it to say so.' (Press Co. v. Bank, 7 C. C. A., at page 249, 48 Fed. 322.)"

(Note: Some forms of illegality, in some states, make a negotiable instrument absolutely void for all purposes, but this is not true unless the statute positively so declares.)

Question 503: If a negotiable instrument arises out of an illegal transaction between A and B is a holder in due course subject to the defense of illegality?

§ 479. (Nego. Instru., Sec. 87.) Lack of authority of agent known to payee.

(Note: If a person signs as agent of another, the alleged principal can of course repudiate as to all the world unless he has actually conferred authority or created an appearance of authority to do the act in question upon which the person involved relied. If there was an agency in which a general power to bind the principal on negotiable paper was actual or apparent, then a particular instrument executed for improper purposes (as for instance a personal loan to the agent) would be enforceable against the principal by a purchaser whose reliance on the known authority led him to purchase the paper in question.) § 480.

(Nego. Instru., Sec. 88.) Lack of authority of partner.

Case 504. Dowling v. Exchange Bank, 145 U. S. 512. Facts: Suit by holder in due course on note given by a partner of a non-trading concern without the knowledge or benefit of his co-partner. The Court below held that the partners were liable on this note to the holder

in due course, and so instructed the jury. The contention of defendant is that a member of a non-trading partnership is not liable upon the negotiable paper issued by a co-partner, unless authority had been given in the particular instance, or unless the firm had so carried on its business that it might be reasonably assumed that the partner issuing the paper had authority from the other to do so, and that this was a fact to be determined by the jury.

Point Involved: The power of a member of a nontrading partnership to bind the firm on its negotiable paper, in favor of a holder in due course of such paper.

"It is not disputed that the execution by Edward P. Ferry, in the name of F. H. White & Co., of the notes in suit was without express authority of his partners, and that neither of the notes was given or used in the business of that firm. The primary question therefore is, whether, for the protection of the plaintiff a bona fide purchaser for value, it will be conclusively implied, as matter of law, from the nature or course of the firm's business, that Edward P. Ferry had authority from his partners to make those notes or either of them.

"Mr. Justice Clifford, speaking for the Court in Kimbro v. Bullitt, 22 How. 256, 268, said that 'wherever the business, according to the usual mode of conducting it, imports, in its nature, the necessity of buying and selling, the firm is then properly regarded as a trading partnership, and is invested with all the powers and subject to all the obligations incident to that relation,' citing among other cases, Winship v. Bank of United States, 5 Pet. 529, 561. Mr. Justice Story said that the doctrine that each partner may bind the firm by bills of exchange, promissory notes and other negotiable instruments is generally limited to partnerships in trade and commerce, and does not apply to other partnerships unless it is the common custom or usage of such business to bind the firm by negotiable instruments, or it is necessary for the due transaction thereof. Story on Partnership, sec. 102, a.

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"It is very clear that the articles of agreement between Ferry, White and Dowling did not create a partnership, each member of which had, under the settled rules of commercial law, and as between the firm and those dealing with it, authority to give negotiable paper in its name. The firm was of the class denominated in many adjudged cases as non-trading or non-commercial firms, the members of which could not be held, as matter of law, and by reason of the nature of the partnership business, to have authority to execute negotiable instruments in the name of the firm.

"We quite agree with the learned judge who presided at the trial that the liability of a partnership upon negotiable instruments executed by one partner in the name of the firm exists not only where the firm is a trading or commercial partnership, but 'where the actual course of business pursued adopts the practice of issuing the mercantile paper of the firm to accommodate its necessities or convenience whenever the occasions occur.' But the difficulty in this case is that the jury were not permitted to determine, from a consideration of all the circumstances of the case, what, in view of the admitted nature of the business of F. H. White & Co., was necessary and proper to its successful operation, what was involved in the usual and ordinary course of its management by those engaged in it, or what should be inferred from the actual course and conduct of the partnership, so far as it was known, or ought reasonably to have been known, to the parties sought to be charged with liability on the notes in suit. We do not deem it necessary to make a detailed statement of the numerous facts disclosed by the evidence, or to suggest what inference might be drawn from them. It is sufficient to say that the issue as to whether the defendants were estopped to dispute the authority of Edward P. Ferry to make the notes in suit, in the name of F. H. White & Co., was one peculiarly for the jury, under all the facts indicating the nature, necessities, and course of business of the firm, and under proper instructions from the Court as to the legal prin