Case ID: ad_113/html/0693-01.html
Source: Caselaw Access Project
Author: {"author": "Woodward, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The Nassau Trust Company of the City of Brooklyn, Respondent, v. Stephen Matherson, Appellant, Impleaded with The Baker Tea and Coffee Company and Others, Defendants.
    Second Department,
    June 27, 1906.
    Bills and notes — liability of officer indorsing corporate note before execution — when act of treasurer of corporation in erasing corporate name and signing individually is not forgery — when transferee not chargeable with notice of agreement by prior parties.
    An officer of a corporation, who, in order to enable the corporation to raise funds, individually indorses the corporate note is liable thereon to a tona fide holder in due course, although subsequent to his indorsement the treasurer of the corporation, instead of filling in the space left for his name in the stamp of the- corporation, which was on the note when indorsed,-has erased the stamp and signed the note individually before negotiating it.
    The note at the time of such indorsement was not signed by the corporation as the space for the treasurer’s, signature was blank, and the subsequent act of •the treasurer in erasing the stamp and signing individually did not constitute forgery which invalidated the instrument when the funds raised thereon wiere applied to the corporate business as. originally contemplated at the time of The indorsement.
    Moreover, the transferee is not chargeable with notice of any agreement made between the indorser and the Corporation by the mere fact that the note showed that the stamp had been erased'.
    Appeal by the defendant, Stephen Matherson, from, a judgment of the Supreme Court in favor of the. plaintiff, .entered in the office of the. clerk of the county of Kings on the 12th day of" October; 1905, upon the decision of the court rendered after a trial at the' Kings County. Trial Term without a jury.
    
      Howard R. Bayne, for the appellant.
    
      Welton C. Percy, for the respondent.
   Woodward, J.:

The complaint alleges the liability of defendant Matherson as an indorser on a promissoiy note for $3,500 made by defendant Hobe to the order of deféndant, the Baker Tea and Coffee Company, payable four months after date. The answer denies,-that defendant Mather-son indorsed the note sued on and any liability on account thereof, and sets forth a state o‘f facts which the defendant Matherson here .insists relieves him from obligation. It seems that the Baker Tea and Coffee Company is composed of Stephen Matherson, .Thomas H. Baker and Fred Hobe, these persons owning all of the stock and making .up the board' of directors of the corporation. The defense alleged is that the defendant Matherson being about to leave the State in the month of June, 1904, to be absent some time, was informed by Hobe, the secretary and treasurer of the corporation, that the company would need to borrow from .$2,500.to $5,000 for its use in the extension and development of its business, and Hobe requested Matherson and Baker to indorse a note in blank .'to be drawn by said company and to be used for the purposes of the company as Hobe should determine. It is claimed that Matherson refused to leave a blank note,"but that he did consent to sign a: note which bore a rubber stamp signature in red ink, “ The Baker Tea & Coffee Company,” with a red dotted line below and the word “ treasurer ” at the end of such line, the corporate signature being made complete by the addition of the name of the treasurer whenever such signature was made use.of by the corporation. It is not disputed that Matherson did sign fend leave such a note with Hobe, but it is alleged that after the indorsement by Matherson the defendant Hobe- erased the red ink signature and signed the note individually. There is no suggestion that the plaintiff was informed of this agreement as between the members of the corporation, or that the note itself, at the time of its negotiation, was any different from the one in suit, but the defense insists that the act of Hobe in erasing the words “ The Baker Tea & Coffee Company, treasurer,”. constituted forgery on the part of Hobe, and that as an examination of the note shows that there had been originally a red signature with a dotted line, this constituted notice of the defect in the paper to the plaintiff, who is concededly the owner of the paper in due course, except for this alleged forgery and the notice which this defacement is supposed to have given.

We think that the evidence does not show that the corporation ever signed this note as maker; the signature was not complete until it bore the name of the treasurer, and the paper having been taken to the plaintiff and negotiated for the benefit of the corporation, as the evidence shows, and it being apparently regular upon its face, there was nothing in the appearance of the note' which was calculated to give notice of any defect in the authority of Hobe to make the note and to issue the same' for value. The mere fact that there had been a rubber stamp used did not give notice that there was any agreement between Hobe and Matherson that the note should be made by the Baker Tea and Coffee Company. The note was in the possession of the secretary-and treasurer of the corporation, indorsed by the corporation and by each of its officers and directors, and it was not to be presumed, because, of an erasure which might have been made, that the note had any defect. The proceeds of the note were credited to the corporation and the funds were paid out upon the checks of the corporation in the regular course of business, so that the note in suit accomplished all that the parties contemplated at the time of making the indorsement, and if the defendant Hobe made any improper use of the corporate funds so secured, that is not a reason why the defendant Matheison should be allqwed to defeat the plaintiff’s right to recover in this action, Matherson placed this note in the hands of Hobe for the purpose of 'raising funds' for the corporation; he took the chances of Hobe ‘making a proper, disposition of that note, and the plaintiff having purchased the note in good faith, without any notice of any defect in the same, it is for the indorsers to pay the obligation in accord with the contract of indorsers of negotiable instruments.

The judgment appealed from should be affirmed, with costs.

Hirschberg, P. J., Gaynor, Rich and Miller, JJ., concurred.

Judgment affirmed, with, costs,