Case ID: nys_11/html/0129-01.html
Source: Caselaw Access Project
Author: {"author": "Brady, J. Van Brunt, P. J. Daniels, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Hale v. Shannon et al.
    
    
      (Supreme Court, General Term, First Department.
    
    July 18, 1890.)
    .Negotiable Instruments—Diversion by Payee—Liability of Maker.
    In action on promissory notes brought by an indorsee thereof against the maker, the defense was, and the evidence tended to show, that the notes had been fraudulently obtained and wrongfully diverted by the payee. Held, that there could be no recovery without proof that plaintiff was a bona Ada holder for value.
    Appeal from circuit court, Hew York county.
    Action by Samuel W. Hale against William P. Shannon, Chester Bullock, and Cornelius B. Payne. There was a verdict for plaintiff, and from this judgment entered thereon, defendant Shannon appeals.
    Argued before Van Brunt, P. J., and Brady and Daniels, JJ.
    
      E. F. Bullard, for appellant. J. P. Osborne, for respondent.
   Brady, J.

This action was based upon four promissory notes drawn by the defendants Shannon and Bullock, dated May 19, 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 indorsed as alleged before maturity to ttie defendant Payne, and by him before maturity, and after they had been so indorsed, and after indorsement 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, and by representations which were false and fraudulent, and so designed to he 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 therefor 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 ap- ' pears, 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. 1 Daniel, Neg. Inst. § 812; Collins v. Gilbert, 94 U. S. 753; Commissioners v. Clark, Id. 285; Brown v. Spofford, 95 U. S. 478. To the same tenor, see Abb. Tr. 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 further, 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 an that proposition. See, also, 2 Rand. Cow. Paper, p. 5, § 447, in which it is said a joint note implies a joint consideration. " See, also, Abb. Tr. 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, 1 Daniel, Neg. Inst. §§ 94-105; Tiedm. Com. 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 weredesigned to purchase was to be the property of the defendant, not Buliock. 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 the stock to you.” Thereupon the defendant said: “All right, I will do it.” He also said that the stock was not delivered to him, tin incident which was a part of the scheme, in aid, it would seem, of Payne, who liad not the stock to deliver, and therefore his peculiar proposition. The notes, as already suggested, were fraudulently obtained, and unlawfully diverted, Payrie 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 fldes 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 fertile notes, the whole consideration, if any, having been received by the defendant. 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 att'tude 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.