348 HIGH COURT OF CHANCERY.

the complainants, or from suing thereon, to recover the amount
thereof, was not granted upon the alleged fraud charged to
have been practised by Baughman, upon the complainants in
obtaining the note; because it was not charged that the de-
fendant had any knowledge of such fraud or imposition, at the
time he received it; but upon the ground, as I understood the
bill, that it was pledged with the defendant to secure a pre-ex-
isting debt, due from Baughman, Nicholson and Cannon to him,
the allegation being, that it was placed with the defendant by
those parties, to secure (he payment of a large sum of money
Which they had borrowed from him; which language was un-
derstood by me to mean, which they had borrowed prior to the
pledge, and, with that understanding, I thought he might not
be entitled to all the rights which attach to a party who had
taken a negotiable security, bona fide, and without notice, and
in the usual course of business. Story on Promissory Notes,
sec. 195, note 1.

If Baughman committed a fraud, or practiced an imposition
upon the complainants, that was a matter between him and
'them, with which the defendant. Lee, had nothing to do, and
for which he could be in no way responsible, unless he had
'notice thereof when he received the note. Baughman was
'trusted by, and made the agent of, the complainants, and if he
abused their confidence, surely they, and not third parties, ig-
norant of the fraud, must bear the consequences, and this claim
to the protection of the court, was the weaker, seeing that after
they discovered the imposition, they did not take the usual and
proper course to warn the public by advertisement, or in some
other way.

U'nquestionably, as between them and innocent third parties,
who might obtain -their note before its maturity, and in the
ordinary course of business, there could not be a doubt as to
who should bear the loss.

There can be no doubt that a bona fide holder of a negotia-
ble instrument for a valuable consideration, without any notice
of facts which affect its validity as between the antecedent par-
ties, if he takes it by indorsement before it comes due, acquires