(after stating the facts.) There is nothing upon the face of the note to show the status or relation of the signers to each other. Appellants are not indorsers. They do not sign as sureties, but appear upon the face of the paper as makers. The proof, however, shows that appellants are makers for the accommodation of Hiner. The note was in Hiner’s hands, to be negotiated for his benefit, which appellee knew. This was sufficient notice to it of the character of the instrument. 1 Am. & Eng. Enc. Law, 367.
. Can, appellee, the holder of accommodation paper, having knowledge of its character when it was received, recover of appellants, the makers of such paper? One who signs negotiable paper for accommodation confers authority on the party accommodated to bind him, the accommodation party, in favor of third persons by the issue of the paper. And when such paper has been negotiated, the maker is bound to the payee, indorser, or holder from the date of the instrument, according to the rules of the law merchant. 1 Am. & Eng. Enc. Law (2d Ed.), pp. 340, 350.
The note in suit was a negotiable promissory note, signed by appellants, and turned over to Hiner “for the purpose of getting money on it.” They gave it to him to get the sum of $300 from the bank, but, in the language of one of the appellants, “it was immaterial where he [Hiner] got the money from; they had no objection to where he got the money, and made no restriction; did not tell him from whom he should get it; nothing was said about it.” The note was indorsed by the payee in blank. This transferred the legal title. The note thereafter passed by mere delivery to the one who paid value, the same as if payable to bearer, and the holder thereof had full authority to demand payment of it. Story, Prom. Notes, p. 184. It was immaterial whether the indorsement was procured by Hiner or by the appellee, and that appellee knew the bank had no interest in the note, and only made the indorsement to show title on the face of it. This was done to enable Hiner to do just what the makers designed he should do,— “raise money on it.” The bank declined to take it, and signified the fact that it had no interest in it, and was willing for any one else to take it, by indorsing it in blank without recourse, and delivering it back to the maker in this shape, to be negotiated to whomsoever he pleased. We cannot say that the indorsement was out of the usual course, i.e., “contrary to the usages and customs of commercial transactions.” Tied. Com. Paper, § 294; Kellogg v. Curtis, 69 Me. 212; Daniel, Neg. Inst., § 778.
Was appellee a Iona fide holder for value? The general manager of appellee, who made the negotiation for the note, was informed by Hiner, who had the note, “that the note was •made to get money to pay his indebtedness to appellee- and other money he owed.” There was no infirmity upon the face of the note itself. It had not reached matui’ity. There was nothing in the circumstances of its holding or transfer to excite suspicion, or to give notice of anything except the character of the instrument. Appellee took it to enable Hiner to do what he informed appellee the makers designed that he should do. Appellee paid Hiner in cash the sum of $212 or $213, and applied the balance of the note on Hiner’s debt to it. This court in Tabor v. Merchants National Bank, 48 Ark. 454, said that “one who takes negotiable paper in payment of an antecedent debt, before maturity and without notice, actual or otherwise, of any defect thereto, receives it in due course of business, and becomes, within the meaning of commercial law, a holder for value.” The bona fide holder for value of accommodation paper taken in the regular course of business may enforce it against the makers, although he knew when he received it that it was accommodation paper. 1 Am. & Eng. Enc. Law (2 Ed.), 360, note 6,
We are of the opinion therefore that appellee is a bona fide holder for value of the note in suit, and as such entitled to recover the full amount sued for.
The foregoing, however, is based upon the assumption that the note was not fraudulently put in circulation, or diverted from the purpose designed by its makers. The appellants contend that, as payee bank declined to discount the note, its transfer thereafter was a diversion, and that therefore the note has no validity in the hands of appellee. The learned counsel for appellants has pressed this view with his characteristic vigor of argument and diligence in the citation of authorities. The eases which he cites from Ohio and Massachusetts support the proposition for which he contends (Clinton Bank v. Ayres, 16 Ohio, 283; Adams Bank v. Jones, 16 Pick. 574), and there are others to same effect;" so that it may be said that the authorities are not in accord upon the proposition.
But the weight of authority and the better reason maintain the doctrine we here announce, that an accommodation note put into the hands of the party accommodated solely for the purpose of enabling him “to raise money,” although made negotiable and payable at and to a particular bank, which is named as the payee, is nevertheless good against the makers in the hands of a third party who in good faith received the same be-for due and for value, paying for same the money which the note calls for. Winters v. Ins. Co., 30 Ia. 172; Laub v. Rudd, 37 Ia. 618; Bank of Burlington v. Beach, 1 Aik. (Vt.) 62; Keith v. Goodwin, 31 Vt. 268; Bank of Montpelier v. Joyner, 33 Vt. 481; Bank v. Bingham, 33 Vt. 621; Bank v. Richards, 35 Vt. 281; Farm. & Mech. Bank v. Humphrey, 36 Vt. 554; Bank v. Hyde, 4 Cowen, 567; Powell v. Waters, 17 Johns. 176; Smith v. Moberly, 10 B. Mon. 271; Meeker v. Shanks, 112 Ind. 207; Dunn v. Weston, 71 Me. 270; Bank v. Rand, 38 N. H. 166; Utica Bank v. Ganson, 10 Wend. 315; Moreland v. Bank, 30 S. W. (Ky.) 384; First Nat. Bank v. Wood (Tex.), 28 S. W. 384; Gilbert v. Duncan, 29 N. J. L. 133; Purchase v. Mattison, 6 Duer, 587; Reed v. Trentman, 53 Ind. 433; Morris v. Morton, 14 Neb. 358; Lord v. Bank, 20 Penn. St. 386; Perkins v. Ament, 2 Head (Tenn.), 110. See, also, following text writers: 1 Dan. Neg. Ins. § 792. 2 Pars. Notes & Bills, p. 28; 1 Am. & Eng. Enc. Law (2 Ed.), 381; Bigelow, Bills & Notes, p. .457.
The testimony of appellants themselves makes it clear that they did not make the discount of the note by the bank a condition precedent to the validity of the note. Simply naming the bank as payee did not have that effect. The reasoning of the Ohio court in Clinton Bank v. Ayres, supra, which holds the contrary doctrine, is as follows: “The makers [sureties] might be willing to loan their credit and become indebted to some particular creditor, but not to another. They might be willing to lend their name to procure a loan from a party who would advance to their principal the full face of the note, when they would be entirely unwilling to go security to one who was their personal enemy, or who would exact harsh terms or heavy interest of their principal. They" might have been willing to aid him in procuring a loan of ready cash, when they would have been unwilling to become his surety for an old debt,” etc. This reasoning is not satisfactory to us, for when one makes his paper negotiable he contracts with reference to the law applicable to such paper. Even had the bank in the case at bar discounted the note, the next instant, by an indorsement such as we have here, it might have passed it into the hands of the very persons with whom, according to the reasoning of the Ohio case, the makers were unwilling to contract.
In Keith v. Goodwin, 31 Vt. 274, it is said: “When a note is executed for the purpose of raising money in the market, although made payable to a particular firm or bank, it is well understood that this is generally regarded by business men as rather a formal than a substantial part of the note. If the note were made payable at a particular bank to the order of the makers, it would be much the same thing. So, too, if made payable to bearer generally. The name of the person to whom the note is payable is mere form. It is understood that it is going into the market as money, and in exchange for money to any party who will make the discount. If negotiated at the bank, it may pass into other hands the next hour.” This is the sound doctrine, where the law merchant is untrammelled in its operations by statutory enactment.
But it may be said that the note was used in part to pay a pre-existing debt of $88 or $89, and that this constituted a material diversion. If this were true, it could only defeat appellee’s right of recovery pro tanto. But the payment of the antecedent debt by Hiner, under the circumstances, was not a diversion. The gravamen of appellants’ ease, as they show by their proof, is not that the Speer Hardware Company purchased the note, for they were willing for any one to purchase who would pay the money for it, but that Hiner failed to pay over the proceeds according to promise. Had Hiner paid over the $212 or $213, all the debts which he agreed to pay as the condition upon which appellants signed would have been fully paid. He agreed to pay, for one of the appellants, a sum amounting to $190, and for the other, a sum amounting to $50; besides, for both, interest on certain notes, amount not stated. He paid the amount of $120. So that the .balance on the debts which Hiner agreed to pay as a condition upon which the appellants signed the notes does not equal the amount which Hiner received from the appellee after paying to it his debt. Appellants are not prejudiced, therefore, by reason of appellee’s not paying to Hiner the sum of $88 or $89, but by reason of Hiner’s failure to apply the $211 or $212 to the debts which he promised appellants to pay.
Moreover, appellee had no notice of any limitations upon the irse of the note. In fact, there were none, except that it was to “raise money.” If appóllee had paid to Hiner the sum of $300 in cash, and Hiner had immediately paid back to appellee the sum of $88 or $89, the amount of his debt, no one could contend that this would defeat appellee’s right to recover. What actually took place was tantamount to this. Hiner informed appellees that the real purpose of the note was to raise money to pay off his debt to appellee and other debts; so appellee deducted the amount of its debt, and paid Hiner the balance. Appellee was in no sense responsible for the misappropriation of the proceeds of the note by Hiner. Appellants trusted Hiner with the note to raise the money. They must be held to have trusted him to make proper application of it. Tabor v. Merch. Nat. Bank, 48 Ark. 454: Brooks v. Hey, 23 Hun, 372; Gray v. Bank of Kentucky, 29 Pa. St. 365; Moreland v. Bank, 30 S. W. (Ky.) 637; Dunn v. Weston, 71 Me. 270. Especially is this the case as against one who had no notice that the accommodation makers were interested in the application of the proceeds. As was said in one of the above cases, to hold otherwise “would be against the plainest principles of equity, as well as subversive of the commercial law.” See, also, Stoddard v. Kimball, 6 Cush. 469; Goodman v. Simonds, 20 Howard, 343, and note the same case, in Bigelow’s Bills and Notes.
In this view of the case, the other interesting questions pass out, and the judgment must be affirmed. It is so ordered.