Case Name: Arlando Marine, Resp't, v. Simon Peyser et al., Applts
Court: New York City Court, General Term
Jurisdiction: New York
Decision Date: 1894-01-18
Citations: 58 N.Y. St. Rep. 13
Docket Number: 
Parties: Arlando Marine, Resp’t, v. Simon Peyser et al., Applts.
Judges: 
Reporter: New York State Reporter
Volume: 58
Pages: 13–16

Head Matter:
Arlando Marine, Resp’t, v. Simon Peyser et al., Applts.
(New York City Court, General Term,,
Filed, January 18, 1894.)
1. Appeal—Direction of verdict.
A case must be clear and certain in order to sustain a direction of a verdict by the court.
3. Bills and Notes—Diversion.
Where a note is wrongfully diverted from its purpose, the party suing upon it is bound to show himself a bona fide possessor.
3. Same—Amount of recovery.
In case of diversion, the holder can recover only to the extent of the value he paid for it, and not even for that sum if he had notice.
Appeal from a judgment entered upon a verdict directed by the court.
Fromme Brothers for app’lts, Ormiston & Dorsett, for resp’t.

Opinion:
McCarthy, J.
This is an appeal by the defendants Peyser, Eisenberg, Wolfe from a judgment rendered against them in favor of plaintiff upon a verdict given by direction of the court. The action is brought to recover upon a promissory note of $1,000.00 and interest and the complaint alleges in substance the making of the note by Peyser and delivery thereof by him to one Dempsey and Smith, named as defendants herein, and their delivery thereof to Eisenberg and by him to Wolfe, .and thereafter by mesne endorsements to plaintiff. The action was defended by Peyser, Eisenberg and Wolfe, and their answers in substance admit the making of the note, but put in issue the other material allegations of the complaint. They allege that the note was given without consideration and deny that is was endorsed and delivered by Dempsey and Smith to Eisenberg, and then by him to Wolfe, but allege that the note was purely an accomodation note, and the endorsements purely accomodation endorsements, with the use of said note restricted to a special purpose, to wit, to enable Dempsey and Smith to procure discount thereof to raise money wherewith to be enabled to carry on certain work and for no other purpose. But that after procuring the note and endorsements in this way, Dempsey and Smith diverted the same fraudulently from the purpose for which it was given, and passed the same in payment of or as security for a precedent indebtedness of them to the plaintiff, of all of which plaintiff had knowledge. On the trial these appellants claimed and were conceded the affirmative and established the following facts. That Dempsey and Smith were contractors and had contracted to do certain store work on buildings in which the appellants were interested, and upon performing such work in the manner provided for in agreement, Exhibit A, between them and Peyser would* be entitled to certain payments and at certain times and under certain conditions. That at the time of the giving of the note in suit there was nothing due or payable to Dempsey and Smith, they not having done their work and not able to prosecute the same by reason of their financial embarrassment, and that admitting their inability, and without •being entitled to any payment they requested and " begged " the note in suit, and some cash upon their promise that they would raise money on the note and thus be enabled to prosecute the work. That upon the express understanding "that the note was thus to be used, solely for the purpose of enabling "Dempsey and Smith to raise money on it, the note and endorsements were given. That instead oE using the note for such agreed purposes, Dempsey and Smith fraudulently diverted the same ana gave it for an old debt to the plaintiff. It further appeared that the note was endorsed by Eisenberg and Wolfe before its delivery to Dempsey and Smith. On cross examination of Wolfe the plaintiff offered in evidence Exhibit B which was an agreement upon the part of the defendant Wolfe to endorse notes specified in the original agreement with Dempsey and Smith, but in no wise altered the conditions of the said original agreement, still holding Dempsey and Smith to their performance of the contract, .and even requiring them to furnish a bond for such faithful performance. And this agreement established beyond doubt corroboration of defendants contention that Dempsey and Smith were not doing their work. The plaintiff offered no evidence whatever, and moved for a direction iu his favor upon the ground of this last mentioned agreement to endorse notes, but which simply required additional endorsement when Dempsey and Smith became entitled to a payment. No proof in contravention of defendants testimony was offered, nor did the plaintiff attempt to show that he was a bona fide bolder. The court granted the motion and directed the verdict, to -which exception was taken, as also to the refusal of the court to grant defendants' request to go to the jury.
We think the trial justice erred in directing a verdict in this case. A case must be clear and certain in order to sustain a direction of a verdict by the court. It is easy to move for such direction and in the hurry, excitement and mass of evidence received at the trial, the justice relying on his own recollection, must also depend considerably on the statement of counsel as to the facts presented. It is therefore dangerous for counsel to urge a direction, unless the case is clear and unquestionable. For, when the facts are uncertain or there is a conflict in the evidence, the question must be submitted to the jury. Potts v. Mayer, 74 N. Y. 595 ; and this seems clearly so in the case at bar. There was sufficient evidence of the cause, manner, condition and purpose for which the note was given and of its diversion therefrom and the application to another and entirely different purpose to have put the plaintiff to the proof of his good faith and that he was a bona fide holder for value before maturity or without notice and in such a case the burden is always on the plaintiff. See Hickerson v. Ruger, 76 N. Y. 279, 282 ; Farmers and Citizens' National Bank v. Noxon, 45 N. Y. 762, 765 ; the law in such a case as this is fully discussed by Ruger, C. J., in The Canajoharie National Bank v. Diefendorf, 123 N. Y. 191, 202, 204. 205, 206 ; 33 St. Rep. 389. At the evidence stood it was shown that the plaintiff received it for a back debt and did not release or relinquish any legal right or security he had and that shortly after he had notice of the conditions and purpose for which the note was given and therefore the plaintiff was not entitled to recover. Allen, J., in Comstock v. Hier, 73 N. Y. 273, says: " When a bill or note is void, in its creation, or has been unduly obtained, or has been wrongfully diverted from its purposes, and fraudulently negotiated the party suing on it is bound to show himself a bona fide possessor. The affirmative.is with the plaintiff in an action upon such a note, to prove a clear legal title as against the parties to the instrument. Woodhull v. Holmes, 10 Johns. 231. One who receives it after due, or with notice of the circumstances under and purposes for which it was made, although he pays a valuable consideration is not a bona fide holder, entitled to recover thereon. One who receives it before due and without notice or knowledge of any fraud in its inception or transfer, but for a precedent debt, and without parting with value or any valuable consideration, does not acquire a valid title to the note or bill, but takes it subject to all its infirmities, precisely as if he had taken it after dishonor or with knowledge of all the circumstances affecting its validity. See also Atlantic National Bank of New York v. Franklin, 55 N. Y. 235. The evidence of an action being brought against these defendants by the New England Brown Stone Company was material on the question of the bona fides of the plaintiff and should have been received. It could not be set up a defence of the pending of another action because it was not between the same parties but seems to us, could be raised under the issues of bona fides. Under all the circumstances, it was the duty of the court, to submit the questions to the jury in order that they might determine whether the note was diverted, as the defendants alleged and if so, to what extent the plaintiff had paid value for it. For only to that extent could the plaintiff recover and not for that even, if the defendants could affect him with notice. For these reasons, the judgment should be reversed and new trial granted with costs' to the appellant to abide the event.
Fitzsimons, P. J., concurs.