#### William C. Ilsley *et al.,*Resp’ts, *v.*Thomas M. Smedes, App’lt.1

*(New York Common Pleas, General Term,*

*Filed February 3, 1890.)*

1. Negotiable paper—Equities.

The mere fact that the agreement under which the note in suit was given provided that on the payment of subsequent notes the collateral security should be returned to the maker, creates no equitable defense, in case of a conversion of the collateral, as between maker and payee, so as to prevent recovery by an endorsee of more than he actually paid for such note.

2. Same—Evidence.

Such being the case, evidence to show the alleged conversion of the col lateral is inadmissible in an action on the note

Appeal from judgment of the general term or the city court of New York, affirming judgment in favor of plaintiffs, entered on verdict of a jury.

Action upon a promissory note for $500 made by defendant to one Watkins, who endorsed the same to plaintiffs. On delivery thereof plaintiffs paid $250 and subsequently $116, and the balance was charged on their books against a precedent, indebtedness of Watkins.

This note was one of a series of notes given by the defendant to one Watkins, plaintiffs’ assignor, under an agreement (Defendant’s Exhibit No. 1), the clauses of which, applicable, are as follows:

“ *Second.*The party of the second part agrees to execute to the party of the first part three promissory notes, the amount of the consideration expressed herein, and bearing date November 5th, 1888, as follows: One for $500, payable ninety days after date; one for $1,250, payable twelve months after date; and one for $1,750, payable eighteen months after date; all of said notes bearing interest at six per cent, per annum, and all payable at the Vicksburg bank, Vicksburg, Mississippi

“ *Third.*As collateral security for the payment of the notes executed by the party of the second part, the party of the second part agrees to place in the hands of the party of the first part five hundred shares of the capital stock of the American Cotton Seed Company; upon the payment of the above mentioned note for *418$1,250, the party of the first part agrees to deliver to the party of the second part 225 shares of the stock deposited with him as collateral security as herein provided and the remaining 275 shares upon payment of the above mentioned note for $1,750.’’

The answer set up that the note was given pursuant to such, agreement, and a conversion of said collateral security.

*L. H.*Andrews, for app’lt; *Robert L.*Harrison, for resp’ts.

1

 Affirming 26 N. Y. State Rep., 938.

Larremore, Gh. J.

The argument of the learned counsel for the appellant is principally directed to the proposition that an endorsee of negotiable paper may not recover more than the sum actually advanced by him, on the credit of a note, when there are equities which would serve as defenses between maker and payee.. It appears that at least part of the consideration moving from plaintiff for the note here in suit was the payment of an antecedent debt, owed by the payee to plaintiffs, which plaintiffs accordingly cancelled. But, conceding the abstract principle of law which appellant has fortified by the citation of many authorities, two questions remain for determination.

*First.*Is there any evidence in the case tending to establish an equity defense, as between the original parties to this particular note for $500 ?

*Second.*If no such evidence appears in the record, was defendant debarred from offering the same, through any incorrect rulings ' on the part of the court ?

The first of these questions must, without hesitation, be answered in the negative. The written agreement under which this note was given attaches no condition to the enforcement thereof, although it does prescribe that, upon the payment of two subsequent notes of the same series, certain stock, which was delivered to the payee as collateral security for all the notes, should be returned. There is nothing in such agreement to prevent the transfer of this first note for $500 in the usual manner, as an independent obligation for the payment of money, regardless of said stock.

The second inquiry must also be answered in respondent’s favor. All the exclusions of evidence complained of, including that of the judgment roll in the action in Mississippi, related to attempted proofs of the alleged conversion of the collateral Under our construction of the agreement, the transfer of such stock would not have been any defense to the payment of the first note. By the express terms of the agreement this note was collectible, irrespective of any return of collateral, and by the time the second note fell due the payee might have repossessed himself of such collateral and been in a position to perform the contract All considerations of such alleged conversion were, therefore, immaterial in an action upon the first note, and the evidence was properly excluded.

The judgment should be affirmed, with costs. ‘

Bookstaver and Bischoff, JJ., concur. ‘