Case ID: ny-st-rep_32/html/1079-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Brady, J. Van Brunt, P. J. \n      Daniels, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Samuel W. Hale, Resp’t. v. William P. Shannon, Impl’d, Appl’t.
    
      (Supreme Court, General Term, First Department
    
    
      Filed July 18, 1890.)
    
    Bills and notes — Fraud—Bona pide holder.
    In an action on promissory notes brought by the endorser thereof, the defense was that they were obtained by false representations in payment for certain stock which the payee represented that he owned, when in fact he did not. Held, that as the notes had been obtained by fraud the action could not be maintained without proof that plaintiff was a bona fide holder for value.
    Appeal from a judgment on verdict
    
      F. F. Bullard, for appl’t; J. P. Osborne, for resp’t
   Brady, J.

This action was based upon four promissory notes drawn by the defendants, Shannon & Bullock, dated May 19th, 1882, whereby they jointly and severally promised to pay to their own order for value received four several sums of $2,287.50, aggregating $9,150.

They were endorsed, as alleged, before maturity to the defendant, Payne, and by him before maturity and after they had been so endorsed, and after endorsement by himself for value, delivered to the plaintiff. The defendant, Shannon, only was served with the summons and complaint. He defended upon the ground that he had been induced by Payne to give the notes in payment for certain shares of stock ana by representations which were false- and fraudulent and so designed to be in order to get the notes. Payne represented himself to be owner of the stock but was not in fact, and the fraud on this proof was accomplished, for he knew he was not the owner of any stock, knew what he said on that subject to be utterly without foundation, made the representation to obtain the notes therefore intentionally, knowing well that he was falsifying and intending to do so with an object in view.

There can be no doubt that on such a state of facts as between him and the maker of the notes they had. no validity. Here all the elements demanded by the adjudications are present. The obstacle, however, in the defendant’s path is that a third person has intervened, in no way connected with the representations, so far as appears, and presumptively a holder for value. The possession of the notes, which were in form negotiable and given for value received, as stated in them, imports that they were acquired for value in the usual course of business without notice of any circumstances impeaching their validity, that they are owned by the person possessing them, and therefore he can recover against all prior parties. Daniels’ Neg. Inst., vol. 1, § 812; Collins v. Gilbert, 94 U. S., 753; Com'rs v. Clark, id., 285 ; Brown v. Spofford, 95 id., 478. To the same tenor see Abbott’s Trial Ev., 389.

' Assuming this to be the rule, is there aught in this case to relieve the defendant from its application to his defense? The plaintiff insists that even if it would be effective in case the defendant’s obligation were not joint, yet being joint he must proceed farther and show that no consideration was received by his joint maker, Bullock. There is, it must be said, no direct testimony on that particular subject, and the presumption of value given may not have been overcome. Kinsman v. Birdsall, 2 E. D. Smith, 395, is an authority on that proposition. See also Randolph on Com’l Paper, vol. 2, p. 5, § 447, in which it is said: “A joint note implies a joint consideration.” See also Abbott’s Trial Ev., 442, in which the author says: It is not sufficient for one-of several joint makers of a note to show that he received no consideration. He must show that neither of the others did.” See-also Daniels on Heg. Inst., vol. 1, pp. 9-D-105; Tiedeman on Com’l Paper, §§ 156, 157.

. This rule is not so imperative however that facts and circumstances tending to overcome the implication of a joint consideration may not be invoked at least so far as .to make it necessary to submit the issue of value to the jury.

Do they present themselves here? It appears that Bullock, the joint maker, was a friend of Payne’s and a relative of one Andrews, who was the manager in possession of the company, the stock of which Payne sold. The defendant had not known Bullock very long, not longer indeed than he had known Payne, and there is no reason apparent why Bullock joined with the defendant in the note unless it was to assist Payne in consummating the fraud. The stock which the notes were designed to purchase was to be the property of the defendant, not Bullock. He was to purchase it and to pay for it, and Bullock, except as a figure head or conspirator, seems to have no relation to the transaction. When the notes were given the arrangement between the defendant and Payne was thus expressed, “ If, said Payne, you will give me long notes for it, the company will be able to make the money, and as they make it you- can take up your notes and I will deliver you the stock.” And again, “ I will deliver you the stock as the notes are paid, as they come due and are paid; I will hold the notes and present them to you myself, and they won’t pass out of my hands, so that when they are due I will bring the notes and stock to you.” Thereupon the defendant said, “All right, I will do it.” He also said that the stock was not delivered to him, an incident which was a part of the scheme in aid it would seem of Payne, who had not the stock to deliver, and therefore his peculiar proposition.

The notes, as already suggested, were fraudulently obtained and unlawfully diverted, Payne having agreed to hold them and to part from them only to the defendant and on their gradual payment by the profits to be derived from the stock. Under all these circumstances, the request to go to the jury on the question whether 'any consideration had been given for the notes should have been granted. There was enough shown to put the plaintiff to proof of value given, the bona fides of the transaction out of which they grew having been successfully assailed, the notes diverted and it having at least been prima facie established that the other maker, Bullock, had not received any consideration for the notes, the whole consideration, if any, having been received by the defend-* ant. The refusal of the court to submit the question stated to the jury was error, the learned counsel for the defendant having coupled his request with the contention that the plaintiff was placed by the evidence in such attitude that he was bound to show value given and a purchase in the usual course of business.

The judgment for these reasons should be reversed and a new trial granted, with costs to abide the event.

Ordered accordingly.

Van Brunt, P. J.

I concur in the result. The note having been obtained by fraud the plaintiff was bound to prove himself a bona fide holder for value. Harger v. Worrall, 69 N. Y., 370.

Daniels, J.

The evidence did not prove that the note had been received for value. That seems to be a mistake in the statement of the case. And as it had been obtained by fraudulent representations the action could not be maintained without proof that the plaintiff had become a holder for value. A new trial should be directed.