Case ID: ad_66/html/0273-01.html
Source: Caselaw Access Project
Author: {"author": "Spring, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Metropolitan Bank, Plaintiff, v. Adam Engel and John A. Schappert, Impleaded with Mount Vernon Consumers’ Brewing Company, Defendants.
    
      Diversion of a note — it must be pleaded by accommodation indccrsers — notice of tile restriction on its use must be given — notice of protest — when due diligence is used in giving it.
    
    In an action brought by a bona fide holder of a promissory note, against the maker and persons who had indorsed the same before it was delivered to the payees, the defense that the indorsements were made with the understanding that the note was to be used for a specific purpose and that it was delivered to the payees in violation of such purpose, is not available to the indorsers where ■ such defense is not set up in the answer, and where it does not appear that any notice of the restriction upon the use of the note was given to the maker or to the payees.
    Upon the trial it appeared that the maker of the note was a corporation doing business in.the city of New York, and that the indorsers were officers of that corporation; that the payees had a place of business in the city of Buffalo and that the plaintiff was a bank located in that city; that on the maturity of the note, which was made payable at a bank in New York city, the plaintiff sent it indorsed for collection to its New York correspondent; that the note became due on the 19th of January, 1900; that on the afternoon of that day the plaintiff’s correspondent presented the note for payment and that payment was refused; that on the same day notices of protest for each indorser were mailed to the plaintiff; that the succeeding day was Saturday and, as the plaintiff closed its bank on Saturday afternoon, the notices were not received by it until Monday morning; that its officers did not know the address of either of the defendant indorsers or the New York address of the payees, but did know the place of business of the latter in Buffalo, to which place notices of protest were immediately mailed to the payees; that the notices were received at such address on the same day and that an employee of the payees sent, the notices to their New York address with a letter requesting that the notices be served upon the proper parties; that this letter was received by one of the payees on the afternoon of January 23, 1900, and that notices of protest were at once mailed to the defendant indorsers and were received by them the following morning.
    
      Held, that due diligence had been exercised in serving notice of‘protest upon the defendant indorsers.
    Motion by the defendants, Adam Engel and another,'for a new trial upon a ease containing exceptions, ordered to be.heard at the Appellate Division in the .first instance upon the verdict of a jury in favor of the plaintiff rendered by direction of the court after a trial at the Erie Trial Term.
    John A. Schappert and Adam Engel were the only defendants who interposed answers.
    
      Edward L. Jellinek, for the plaintiff.
    
      M. Hallheimer, for the defendants, Engel and Schappert.
   Spring, J.:

This action was commenced January 31, 1900, to recover, upon a promissory note of $3,000 given by the Mount Vernon Consumers’ Brewing Company, a domestic corporation of the city of New York, and dated December 9,. 1899, due forty-five days from its date to the order of Schaefer & Brother, and payable at the Nineteenth Ward Bank of New York city. The signature of the brewing company was attested by John A. Schappert, its president, and by O. A. Schaefer, its secretary and treasurer. The note was indorsed by the defendants Schappert and Engel at the instance of an officer of the brewing company, of which both indorsers were officers. The payees, Who had a place o.f business in Buffalo, indorsed the. note and sold it to the plaintiff before maturity for a valuable consideration and in the usual course of business. The note was not'paid at maturity, was presented for payment, which was réfused, and thereupon protested for non-payment, and two of the indorsers defend-

It is contended that the note had no legal inception, but was diverted and put into circulation? contrary to the purpose which induced its creation. There are.several barriers to.this contention: (1) The answer contains no such defense. (2)- While the defendañts testified the note was given to discharge a precedent debt, which in fact had, been paid, yet the proof is far from convincing as to the manner, in which this payment was made. But passing that question, there is no proof that the payees were cognizant that the nóte was designed for a specific use. It was presented to the defendants for indorsement by the bookkeeper of, the maker, and after their indorsements was taken back to the Office by this clerk, and no restriction as to its use appears to have been given to the bookkeeper or to any officer of the brewing company, or to Schaefer & Brother, Schappert had signed the .note on its face, officially vouching for the signature of the corporation as maker, and it was, therefore, duly executed, indorsed and left at the office of the maker, ostensibly with the expectation that it was to be delivered to the payees and put into circulation as commercial paper. (3) Again, the plaintiff purchased the note from the payees for a valuable consideration and before maturity. The note was regular in form, and there is no pretense that the plaintiff,had any hint or intimation it contained any infirmity, if such existed. It is too-late for these indorsers, who were responsible for putting the note into circulation, to shield themselves from liability against a bona fide holder on the ground that the note was used differently than they expected.

It is urged that the note was not properly presented or protested to bind these defendants. On January 8,1900, the plaintiff indorsed the said note, “ Pay to J. F. Thompson, cashier, or Order, Metropolitan Bank, Buffalo, N. Y., Jacob Dilcher, Cashier ” (said Thompson was cashier of the Seaboard National Bank of-New York), and sent the same to the latter, its New York correspondent, for collection, although the indorsement in terms was not so restricted. The note became due on the nineteenth, and on the afternoon of that day a messenger of the Seaboard Bank presented it for payment to the Nineteenth Ward Bank, where it was made payable, and payment was refused because of insufficient funds to meet it. During the afternoon of that day the note was delivered to the notary, who attended to protesting notes on behalf of the Seaboard Bank, ánd notices of protest were prepared by him for each indorser, and they were all mailed to the plaintiff late that evening, who appeared as last indorser upon the note. The succeeding day was Saturday, and as the plaintiff is closed on Saturday afternoons the notices Were not received until Monday morning at the bank. The officers of the bank did not know the address of either of the defendants or the New York address of Schaefer & Brother, but did know the place of business of the latter in the city of Buffalo. The notices were immediately mailed to this address and received about noon of the same day. The accountant of that firm at once inclosed the notices of protest in an envelope directed to Mr. Schaefer at his New York address with a letter requesting him to forward the notices contained in the envelope to the proper parties. This letter, with the inclosures, was received by Mr. Schaefer in the afternoon of January twenty-third, and he at. once directed the shipping clerk of the receiver of the brewing company to mail one to Mr. Engel and thother to Mr. Schappert, which was done, and they were received by these gentlemen the following morning. The notary Abraham did not know the residence or place of business of any of the indorsers except the Metropolitan Bank, the last indorser, and he' forwarded all the notices to that bank in strict compliance with section 175 of the Negotiable Instruments Law (Chap. 612 of the Laws of 1897). From that time on there was no delay, and the duty imposed upon the indorsers to notify those antecedently liable was fully met..

To summarize our disposition of the material questions raised by the defendants’ counsel we are satisfied (1) that the plaintiff is a bonafide holder of the nóte; (2) that the defendants are liable to the payees as well as to all subsequent parties to the note. (Neg. Inst. Law, § 114, subd. 1.) The payees were accordingly the agents of the defendants to -negotiate the note, and the allegation in the complaint that it was delivered to the plaintiff by the defendant Engel is strictly correct according to the face of the paper and the tenor of the indorsements. (3) The fact .that the note was presented for payment by the notary to the bank where payable after it had closed, it being in the evening, is unimportant. The note had, during banking hours of the day it -matured) been duly presented for payment at that bank and payment refused, thus complying fully with the Negotiable Instruments Law, sections 131 and 135. (4) The plaintiff being the last indorser on the note, and the notary not knowing the address of any of the other indorsers, very properly mailed all the notices to the plaintiff , thus shouldering the responsibility upon the bank to protect itself by sending manifests of protest to the prior indorsers, which it did. (5). Even if the plaintiff was not in fact air indorser, neither defendant had given his address upon the note, and the notary not knowing it might well assume that the indorsers all resided in Buffalo, and so mailed them to the party who would be most likely to notify them. The object of the requirement as to giving notice is to insure to. the indorsers prompt and timely information of the default of their principal, and the course adopted by the notary was: effective to cany out that purpose. There is a legion of other, exceptions which we do not regard of sufficient moment to call for- independent discussion.

The exceptions of the defendants should be overruled and motion denied, and judgment ordered for the plaintiff on the verdict, with costs and disbursements.

All concurred,- except Rumsey, J., not sitting.

Defendants’ exceptions overruled, motion denied and judgment ordered for the plaintiff on the verdict, with costs.