Opinion
February, 1909.
Schenkman Brown (Edward A. Brown, of counsel), for appellants.
Hillquit Hillquit, for respondents.
The action is brought by the holders of a promissory note, made by the defendants Appelbaum to the order of P. Sack Co., and indorsed by the latter and by the defendants Shalita.
The note bore upon its face the following clause: "This note made and delivered subject to agreement indorsed on back hereof."
On the back of the note, above the indorsements, the following was printed: "In consideration of the within note and check simultaneously herewith delivered, both evidenced by our acceptance hereof, we herewith assign, transfer and set over to Shalita Bros. all our claims and demands against the firm of Applebaum Bros., with full power and authority to enforce and collect the same as fully as if we had duly executed and delivered a more formal assignment."
The plaintiffs had judgment below and the defendants have brought on this appeal.
The note in question was made and delivered by the defendants Appelbaum and indorsed by the defendants Shalita, in pursuance of a composition agreement with the creditors of the former, among whom were P. Sack Co., the payees of the note. At the time, two notes of the Appelbaums in favor of P. Sack Co., each for $300, were outstanding; and the defendants claim that the agreement indorsed on the note contemplated the surrender of these outstanding notes, which, however, instead of being surrendered by Sack Co. were by them negotiated to the plaintiffs, who were admittedly bona fide holders thereof for value.
The defendants claim that this failure to surrender the prior notes was a defense to an action upon the note now in question, as between them and the payees, Sack Co.; and they contend that this defense is equally available to them as against the plaintiffs, for the reason that the latter are shown not to be holders in due course.
The plaintiffs proved, however, that the note was taken by them before maturity in part payment of an antecedent indebtedness of Sack Co. to them, and the testimony on this point was not contradicted. This was sufficient to constitute them holders for value (Neg. Inst. Law, § 51; Sutherland v. Mead, 80 A.D. 103, 107; Roseman v. Mahony, 86 id. 377, 378) and in due course, unless they had notice of the matters of defense which are now asserted against them.
I do not think that the agreement printed on the back of the note amounted to such notice or fairly put them on inquiry. That agreement purported to be an assignment of all claims or demands of the payees against the makers of the note, and the consideration for such assignment was therein stated to be the note upon which the agreement was written and the check therein mentioned. It would surely not be reasonable to expect strangers to the transaction to infer that the assignment for which the note and check were given might be intended to include outstanding notes. If such was in fact the intention of the parties, ordinary prudence would have required that such outstanding notes be surrendered before the note and check, intended to carry out the terms of the composition, were delivered to the creditor. The other course was so obviously ill-advised and reckless that I do not think the plaintiffs were required to consider it, or that any duty of inquiry rested upon them.
I am, therefore, of the opinion that the plaintiffs were entitled to recover and that the judgment appealed from should be affirmed, with costs.
GILDERSLEEVE and SEABURY, JJ., concur.
Judgment affirmed, with costs.