Case ID: misc_14/html/0317-01.html
Source: Caselaw Access Project
Author: {"author": "Bischoff, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The Western National Bank of the City of New York, Respondent, v. William W. Flannagan, Appellant.
    (New York Common Pleas
    General Term,
    November, 1895.)
    A promissory note made by the defendant was transferred by the payee to the plaintiff as collateral security for a note of the payee which was given in exchange for a matured note of the latter, which note, with collateral notes of other persons, were surrendered at the time of such transfer. In hn action upon the first-mentioned' note the defendant claimed that it was made for the accommodation of the payee, and 'its use restricted to discount for the purpose of raising money to pay the payee’s debts, and defendant and the payee so testified, and also that the plaintiff’s officers were notified of such fact at the time of the transfer. Held, that the plaintiff-was a holder of such note for value; that the testimony" of defendant and the payee, they being interested in the event of the action, was open to discredit, although not directly' contra* dieted, and that a direction of a verdict for the plaintiff was not erroneous.
    
      Western Nat. Bank v. Flannagan, 11 Misc. Rep. 445; affirmed.
    Appeal from a judgment of the General Term of the City Court of New York, which affirmed a judgment for the plaintiff rendered at Trial Term upon a .verdict directed by the court. ■ ■
    Action upon a promissory note by the indorsee against the maker, the defense being that the note was given for the accommodation of the payee, and diverted by the latter.
    ' Dallas Flamnagam, for appellant.
    
      Charles E. Hughes, for respondent.
   Bischoff, J.

The appeal being from a judgment of the' 'City Court of New York, we can reverse only for an error of law which is presented by due exception. Paige v. Chedsey, 4 Misc. Rep. 183 ; Meyers v. Cohn, Id. 185.

The note in suit was made by the defendant Flannagan to the order of one Pinkham, payable twelve months after date, and upon the trial it was conceded that before the maturity thereof the note was indorsed by the payee and by him delivered to the plaintiff as collateral security for the payment of his own note to the order of the plaintiff and payable sixty days after date, tlie last-mentioned note having been given and accepted ■on the day of its date in exchange for the one first mentioned ■and Pinkham’s matured note, which latter, with the notes of ■certain other persons, held by the plaintiff as collateral security for the payment thereof, was surrendered to him at the time. Viewing the transaction, therefore, as no more than a pledge of the note in suit to secure the pledgor’s antecedent indebtedness to the pledgee, it remains that the latter’s surrender of the matured note with the collaterals therefor, and the

■extension of the time for the payment of the debt, were suffi- • ■cient consideration to constitute the pledgee a holder of the first-mentioned,, note for value. Justh v. Nat. Bank of Commonwealth, 56 N. Y. 478 ; Grocers' Bank v. Penfield, 69 id. 502; Phœnix Ins. Co. v. Church, 81 id. 218; Mayer v. Heidelbach, 123 id. 332; Traders' Nat. Bank, etc., v. Parker, 130 id. 415.

For the defendant Flannagan it was asserted by answer that the note in suit was given solely for the accommodation •of the payee, and its use by the latter restricted by mutual understanding to the purposes of discount, the avails to be turned over to the payee and to be by him applied towards the payment of his debts generally and the demand of the Bank of Alleghany, of Clifton Forge, Virginia, against him, in particular ; and that the plaintiff was aware of the character of the note, and the1 restrictions which were imposed by-the maker upon its use by the payee, when the latter delivered it to the plaintiff for the purposes hereinbefore stated,

It cannot be plausibly urged that the pledge of a note, having twelve months to mature, as collateral security for the payment of another note, maturing in one-sixth of the time, is in any sense a discount of the former, an advance of the •amount, less an agreed compensation for the specified time. Hence, if the facts pleaded as a defense had been established upon the trial they would, beyond all doubt, have defeated the plaintiff’s right of recovery, however immaterial the diversion of the note fyom the use intended by .the maker might seem to others. Benjamin v. Rogers, 126 N. Y. 70; United States Nat. Bank v. Ewing, 131 id. 506.

To substantiate the defense, and thus to impugn, the good faith of the plaintiff as the holder of the note in suit, the defendant, called as a witness in his own behalf, deposed that the note was given by him to the payee for the latter’s accommodation and upon the express condition that it should be discounted by the plaintiff and the avails used by the payee to obtain relief from financial distress upon- making gradual payment of his debts. Pinkham, the payee, as a witness for the defendant, testified that at the time of his delivery of the note in suit to the plaintiff as collateral security for the payment of his own note, he apprised Snyder and Ives, two of the plaintiff’s officers, of the facts that it was accommodation paper and its use restricted by the maker to discount. This comprised all the evidence for the defendant and the same was not directly challenged by the plaintiff.

Nevertheless, the presumption that the plaintiff acquired the note in the regular course of its business for value cmd in good faith (Underhill Ev. § 230, p. 346 ; Ocean N. Bank v. Carll, 55 N. Y. 441; Canajoharie Nat. Bank v. Diefendorf, 123 id. 191), taken with the testimony of the defendant’s witnesses to the contrary, was sufficient to raise an issue of fact with regard to those matters (Kahn v. lesser, 28 Abb. N. C. 77); and with the weight of the evidence we have no concern, our province upon this appeal being limited to the inquiry whether there was any evidence sufficient to support the recovery. Paige v. Chedsey; Meyers v. Cohn, supra. Besides, both witnesses for the defense were interested in the event of the action, the defendant, as the maker of the note, 'directly so, and Pinkham indirectly, for upon the defendant’s escape from liability to the plaintiff his own release from liability to the defendant was assured. So, also, Pinkham, from ’ a sense of his obligation to the defendant, might, be suspected of bias in favor of the latter; and, lastly, the defense, and Pinkham’s testimony in particular, were affected with some degree of intrinsic improbability of truthfulness. Was it likely that the plaintiff would part with value upon the faitlj of the defendant’s note with knowledge that the note was not available for the purpose for which it was accepted ? The testimony of both witnesses, therefore, was open to discredit, though such testimony was not directly- contradicted or the witnesses’ charactér impeached, and the evidence inconclusive. Pelly v. Onderdonk, 61 Hun, 314; Michigan Carbon Works v. Schad, 38 id. 71; Underhill Ev. § 354, p. 522, and authorities collated in note to Effray v. Masson, 28 Abb. N. C. 213.

Both parties having asked for the direction of a verdict, thereby authorized the court in the place of the jury to determine all disputed questions of fact (Provost v. McEncroe, 102 N. Y. 650; Kirtz v. Peck, 113 id. 222), and in support of the verdict which was directed for the plaintiff we must assume that all such questions were determined in the plaintiff’s favor. Sutter v. Van Derveer, 122 N. Y. 652. Rejecting the testimony of the defendant’s witnesses, there was no evidence to taint the validity of the note in the hands of -the payee, and agreeably to the presumption that the note was acquired by it in good faith the plaintiff was entitled to recover. Mechanics & Traders’ Bank v. Livingston, 6 Misc. Rep. 81. For the reasons stated, therefore, error is not apparent from the exceptions which were taken to the denial of the defendant’s motion for a verdict in his favor, and the direction of a verdict for the plaintiff.

After the verdict was directed counsel renewed his motion for the direction of a verdict for the defendant, coupling with it the inconsistent request that the question of * the plaintiff’s' good faith be submitted to the jury; but as one of the requests, the direction of a verdict for the defendant, was denied upon sufficient grounds, the exception taken to the denial of both requests is unavailable for the predicament of error. Bosley v. N. M. Co., 123 N. Y. 550.

No error appears from the exceptions taken to the trial. court’s exclusion of evidence.

The answer set forth certain matter which tended to show that the alleged restrictions upon the use of the note by the payee were material to the defendant. The materiality of the restrictions,' however, was not open to controversy on the part of the plaintiff. Benjamin v. Rogers; U. S. Nat. Bank v. Ewing, supra. Hence, evidence' of the matter alluded'to was inadmissible. The rejection of the offer of the defendant’s counsel to prove “ everything ” set forth in the answer was proper, because the offer included matter which was inadmissible. Bosley v. N. M. Co., supra. Defendant’s testimony, “ This note was given to Mr. Pinkham for the purpose of having it discounted,” was clearly a conclusion, and the following question, .addressed by the defendant’s counsel to the same witness, called for the like objectionable testimony : State whether Mr. Pinkham ..had authority to use that note for any other purposé than to have it discounted ? ” The same is-to be said of the questions asked of the defendant’s witness Pinkham, as part of the latter’s direct, examination : “ When that note was made and delivered to you, will you state for what purpose it was delivered ? ” “ State whether Mr. Ives knew, or was informed, that that was an accommodation note?” With regard to the last question the witness was permitted to and did state what he said to Mr. Ives, touching the character of the note. Another question asked of Mr. Pinkham by the defendant’s counsel, “'Will you state the conversation you had with Mr. Elannagan touching the use to which it (the note) was to -be put ? ” was objectionable because the conversation was, not limited to one had before •the note was transferred -to the plaintiff; and two further questions upon the defendant’s direct examination, “Will'you state all of the facts and circumstances which occurred- at the time you delivered the note?” “State all the facts 'and circumstances under which the note was given-? ” were properly excluded, because if allowed the witness would have been permitted to testify to wholly irrelevant and immaterial matter, he having previously testified to the conversation between him and the payee at the time of the delivery of the note in .suit. The judgment should be affirmed, with costs.

Bookstavek' and Peyob, JJ., concur.'

Judgment affirmed, with costs.