Opinion
February Term, 1896.
William C. Kellogg, for the appellant.
John F. Brennan, for the respondent.
The defendant James was indebted to plaintiff for the balance of an open account which had been some time due, upon which he was threatening suit for collection. The claim was in the hands of plaintiff's attorney, and James applied to him for an extension; thereupon the attorney informed James that if he would procure security they would not "push" him, but would let the matter stand. James then applied to the defendant Gibbons to indorse his note for a sum equaling the claim, stating to him as an inducement for his indorsement that he wanted to use it to buy horses in Canada. Relying upon this representation, Gibbons indorsed the note, and delivered it to James; he immediately delivered it to the attorney. When the note fell due it was not paid; a renewal note was executed, which is the one in suit. This constitutes the entire transaction. At the close of the case, upon motion of plaintiff's counsel, the court directed a verdict for the amount of the note, and the appellant excepted. It appears that James bought no horses, and a jury would have been authorized to find that he fraudulently misrepresented his intention in that regard in order to procure the indorsement of the note. ( Farmers' National Bank v. Van Slyke, 49 Hun, 7; Hart v. Palmer, 12 Wend. 523.)
It is insisted, however, that plaintiff is a bona fide holder for value without notice of the misrepresentation of James, and in consequence is not affected thereby. It may be assumed that plaintiff had no notice of the circumstances surrounding the giving of the indorsement. But this alone would not be sufficient to entitle him to recover. In Phœnix Ins. Co. v. Church ( 81 N.Y. 218) it was held that in order to constitute an indorsee of negotiable paper a holder for value of such paper, sufficient to exclude the equities of antecedent parties, it must not only have been valid between the indorser and indorsee, but the latter, in addition thereto, must have given value, parted with some right or incurred some responsibility upon the faith of the paper at the time of the transfer. Plaintiff seeks to avoid the force of this rule by claiming that he falls within it. In this regard his claim is that there was a renewal note made by James and indorsed by one Smith, upon which, in consideration of the giving of the note of which the note in suit is a renewal, the time of payment was extended and the original note canceled, which was the surrender of a right. This claim is not supported by the testimony. It does not appear that there was any extension of the note indorsed by Smith upon the faith of the note indorsed by Gibbons. Thomas F. Curran, who represented plaintiff's attorney and proposed to James that he should get an indorsed note for the unpaid balance, states that James said something about a note indorsed by Smith, and that he had been to see one Brown about it several times, and that he (James) would like to have that note straightened up. He (Curran) was then asked: "Q. Do you know whether or not that note was extended? A. I heard it was extended." It does not appear from this testimony that the present note had any connection whatever with the Smith note, or that a part of its consideration was an extension of that note. On the contrary, all of Curran's talk with James related to the unpaid balance. If, however, the Smith note had anything to do with it, Curran only knows what he had heard, which avails nothing. The examination of plaintiff upon this subject is significant. He testified that there were two notes indorsed by Smith, and he was asked: "Q. What was the arrangement as to the extension of credit on that note, if he should come in to cover this note here? A. I wouldn't be sure about that. Q. Was that as Mr. Curran has stated — did you hear his statement of it? * * * Do you recall what it was — was there an extension given on the Smith note? A. Yes."
It is quite evident that plaintiff had little, if any, knowledge that the Smith note had anything to do with the transaction, and an attempt was made to make Curran's lack of knowledge a basis upon which plaintiff could found an extension. This palpably failed, and it was with difficulty that plaintiff was brought to testify to an extension. But when he did, it was nowhere made to appear that the extension had any connection with the giving of the present note or its original. Upon this point, therefore, the evidence was insufficient. It is further claimed that the amount of the debt was abated as a consideration for the note. But Curran does not state that he abated anything of the claim, and the amount of the note equaled the amount of the claim that he held for collection. Plaintiff states that James owed him more than the amount of the note. But he also states that this balance had been agreed upon about a year before any note was given. No abatement was made of any legal demand which plaintiff held against James. And finally it is claimed that the surrender of the original note furnishes a good consideration, and constitutes a parting with value, legally sufficient. It may be answered that the original note was never surrendered, and that it remained in plaintiff's possession at the time of the trial. He states that he offered it to James, but that he did not take it, and Gibbons never had an opportunity. However this may be, it is well settled that if the original note be illegal the renewal thereof is open to the same defense, unless the illegality be cured or waived. (1 Daniel on Neg. Insts. [4th ed.] § 205, p. 229; Nat. Bank v. Lewis, 75 N.Y. 516. )
When proof of the fraudulent misrepresentation had been given the burden was upon plaintiff to establish that he became possessed of the note under such circumstances as authorized him to enforce it. ( First Nat. Bank v. Green, 43 N.Y. 298; Canajoharie Nat. Bank v. Diefendorf, 123 id. 191.)
The testimony which tended to defeat the note in plaintiff's hands, and the testimony which tended to sustain it, came from interested parties, and thus presented a case eminently for the jury, and it should have been submitted to them for its determination. ( Joy v. Diefendorf, 130 N.Y. 6.)
A certificate that the case contained all the evidence was not essential to present the exception taken to the ruling of the court. ( Halpin v. Phœnix Ins. Co., 118 N.Y. 165; Winter v. Crosstown St. R.R. Co., 8 Misc. Rep. 362.)
The judgment should be reversed and a new trial ordered, costs to abide the event.
All concurred.
Judgment reversed and new trial ordered, costs to abide the event.