the same to the plaintiffs on the day of their dates, who then paid to the said payee the full amount of said checks respectively, and that the plaintiffs so received said checks in good faith, and have ever since held the same. That they were presented for payment December 1st, 1854, at defendants' bank, and payment refused. The checks are dated, the one signed by Green, December 31st, 1853; the $5500 by Houghton, February 4th, 1854; and the $10,000 check, February 25th, 1854.

The defendant moved for a nonsuit, when plaintiffs rested. Motion denied and defendants excepted. Farther evidence was then given by defendants and plaintiffs.

As matter of law the referee found that the defendants were liable upon such checks: That the plaintiffs were entitled to judgment for $26,229 thereon.

To which report and finding of law and fact the defendants duly excepted.

The judgment of the referee was affirmed on appeal at the General Term of the first district, and defendants appealed to this Court.

By the Court:

E. DARWIN SMITH, J.-The objection that the cause was improperly referred on the ex parte application of the plaintiffs' counsel at the circuit, cannot now be raised. If there was error in the reference, the defendants should have applied to the circuit judge or at special term to vacate the order. After giving testimony before the referee and trying the cause upon the merits without objection, it is too late to raise the question in the court of revision that the action was improperly referred.

The motion for a nonsuit was properly denied. When it was made the plaintiffs had proved the making of the three checks, and the acceptance by the indorsement thereon by the defendants' president of the word good, and also a by-law of the defendants' which impliedly authorized the president to certify checks, and also the due presentment of the checks thereafter and the refusal of the defendants to pay the same.

This proof clearly at least entitles the plaintiffs to recover upon

the $5000 check made by Thomas Green. The remaining questions relate to the two checks of Houghton, the defendants' president, of $5500 and $10,000, made and accepted by him.

The power given him by the by-law to certify checks clearly did not authorize him to certify his own checks. It is a necessary and universal implication, in all cases of agency, that the power conferred upon the agent is to be exercised for the exclusive benefit of the principal. It is repugnant to the very nature and exercise of such power to hold that it may be used for the benefit of the agent in hostility to the interests of the principal. That a trustee or agent shall not act for his own benefit in any matter relating to his agency or trust, is an old and familiar doctrine of the courts of equity, frequently asserted in this country and in England.

The rule is applicable to all persons standing in a trust relation. The principal is entitled to the exercise in his behalf of all the skill and industry and ability of his agent, to his utmost fidelity to his business.

This rule is well stated and discussed in the opinion of Judge DENIO in the case of The New York Central Insurance Company vs. National Protection Insurance Company, 14 N. Y. 85, and S. C. 20 Barb. 471.

But it is claimed that these rules do not apply in their strictness to negotiable paper; that when there is an apparent authority to execute such paper a bonâ fide holder is to be protected, as in the case of partnership paper in the hands of an innocent holder.

These checks were negotiable, and the certificate thereon indorsed by the defendants' president was equivalent in legal effect, if a valid act, to the acceptance of a bill of exchange to the same amount. Judge SELDEN, in the case of The Farmers' and Mechanics' Bank of Kent Co. vs. Butchers' and Drovers' Bank, 16 N. Y. 128, says of such checks: "Each check, if duly certified, imposes upon the bank an obligation to retain the amount for which the check is drawn, and the obligation assumed is substantially the same as that assumed by the acceptance of an ordinary bill of exchange." Judge DENIO uses very nearly the same language in the same case in 14 N. Y. 625.

These checks, after their acceptance in the manner above stated, were transferred to the plaintiffs for their full face, as the referee finds, and he also finds that he received the same in good faith for value.

This consideration presents all the difficulty in the case. A bona fide holder of negotiable commercial paper is a favorite of the law, and his rights are always guarded by the courts with great care and liberality, from respect to the great interests of trade and commerce.

But I do not think this consideration can be permitted to prevail, to sustain the plaintiffs' right of recovery in this case upon these two checks.

Clearly upon well settled principles Houghton had no power to accept his own drafts or checks in behalf of the bank. The act was a palpable excess of authority, and any person taking the paper was bound to inquire as to the power of the agent so to

contract.

This rule was asserted in the cases of Starin vs. The Town of Genoa, and Gould vs. The Town of Sterling, 23 N. Y. 452 and 464. In these cases the plaintiffs were the bona fide holders of the bonds in suit, had paid their full value for them; but this court held, that they were bound to inquire as to the facts upon which the authority of the agent depended to issue the bonds. Judge SELDEN says, page 464, "One who takes a negotiable note or bill of exchange purporting to be made by an agent, is bound to inquire as to the power of the agent."

Within that rule the plaintiffs were bound to inquire, whether Houghton had authority to accept his own checks in behalf of the bank, so as to bind the bank on the acceptances. But I do not think the plaintiffs can properly be called bona fide holders of these checks. The referee finds that they are holders for value, and that they paid the full amount of the face of the checks and took them in good faith. This is all the referee finds on the facts. In finding as a conclusion of law that the defendants are iiable on such checks, he may perhaps be deemed to find that they were bonâ fide holders thereof within the legal sense of such purchase.

But I think the conclusion of law erroneous, and that the plaintiffs cannot be truly considered in a commercial or legal sense bona fide holders of these checks. A bona fide holder of commercial paper must receive the same in the usual course of business for value, and without any notice of facts tending to impeach the character and validity of the paper as between the original parties.

The plaintiffs cannot claim the protection of this rule. They had distinct notice by the form of the certificate and the signature thereto, that the acceptance was improper and irregularly made. It was patent on the face of the paper that the acceptance was a fraud. That the president of the defendants' bank in accepting such checks, was using his official character for his personal benefit, and thereby perpetrating an act of dishonesty in palpable violation of his trust. No business man of common intelligence could take these checks in good faith and without suspicion or notice of this fraud. Upon this distinct question I would hold, that the plaintiffs are not bona fide holders of these checks, and are not entitled to, recover the same of the defendants; and the fact also, that these three checks of $20,500, were taken and held for the period of nearly a year after their receipt by the plaintiffs, without presentation to the bank for payment, and that this large amount of money was thus left in the bank to the credit of the drawer of the checks, without interest or any arrangement about it,-unexplained, is quite conclusive evidence that the checks were not taken in the usual course of business. But evidence may be given on another trial explanatory of this delay in presenting the checks for payment, which may be quite satisfactory. Evidence on this point was offered, which I think was erroneously excluded by the referee. That this defence, though in its origin and nature of an equitable kind, is now available in an action at law upon the instrument improperly executed by the agent or trustee, is fully asserted and distinctly held in the opinion of Judge DENIO, in the case of The New York Mutual Insurance Co. vs. The Mutual Protection Insurance Co., 14 N. Y. 90, supra, and is, therefore, res adjudicata in this court.

I think the judgment of the court below should be reversed, and a new trial granted, with costs to abide the event.

SELDEN, DENIO, GOULD, and ALLEN, Js., concurred.