Case Name: THE GROCERS' BANK OF THE CITY OF NEW YORK, Appellant, v. THOMAS D. PENFIELD, BENJAMIN D. STONE and CHARLES H. TRUAX, Respondents
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1876-05
Citations: 14 N.Y. Sup. Ct. 279
Docket Number: 
Parties: THE GROCERS' BANK OF THE CITY OF NEW YORK, Appellant, v. THOMAS D. PENFIELD, BENJAMIN D. STONE and CHARLES H. TRUAX, Respondents.
Judges: Davis, P. J., and Daniels, J., concurred.
Reporter: Supreme Court Reports (Hun)
Volume: 14
Pages: 279–284

Head Matter:
THE GROCERS' BANK OF THE CITY OF NEW YORK, Appellant, v. THOMAS D. PENFIELD, BENJAMIN D. STONE and CHARLES H. TRUAX, Respondents.
Accommodation paper — consideration for, in hands of third party — Extension of credit — when implied — Facts, when renewable by General Term— Gode, §§ 268-272.
A party receiving accommodation notes, without parting with any consideration, cannot recover on them ; but an agreement for an extension of the time of credit of an existing debt will be sufficient consideration, and this may be implied from circumstances without any thing being said concerning the extension. An express agreement for the suspension of the remedy is not necessary.
Where accommodation paper is diverted to some purpose for which it was not to be used, the holder must show that he is the owner in good faith and for value; but where the use made of it is consistent with the object for which it was executed, any valid consideration will sustain an action upon it by the holder.
Accommodation paper, if used for the purpose for which it was given, is available in the hands of one holding it only as collateral security, and for no new consideration. (Brady, J.)
The General Term can review the facts, where the trial has been before the court without a jury, or before a referee.
Appeal from a judgment in favor of the defendants, entered on the report of a referee dismissing the complaint in an action upon a promissory note.
Edmon & B. J. Blankman, for the appellant.
C. H. Truax, for tlie respondents.

Opinion:
Brady, J.:
The defendant Truax was a depositor with the plaintiffs. He procured from them the discount of a note made by Reon Barnes to his order. When it became due he paid a part of it, and gave two notes of Penfield and Stone, the other defendants, payable to his order, for the balance.
These notes were made for his accommodation, but without restriction as to their use. It seems, from the testimony, that they were obtained for the purpose to which they were applied, and it may be said, as also warranted by the testimony, that the plaintiffs knew that they were made for his accommodation. The plaintiffs, when the notes were given, refused to give up the prior note made by Barnes, and parted, therefore, with no new consideration.
The defendants Penfield and Stone think that, under these circumstances, the notes cannot be enforced against them, and the referee agrees with them. They are mistaken. The notes having been given without restriction as to their use are available in the hands of one holding them only as a collateral security. (East River Bank v. Butter worth, 45 Barb., 476; Cole v. Saulpaugh, 48 id., 104; Edwards on Notes, 316.) It is only when a note is diverted from the purpose for which it was made, or fraudulently obtained and negotiated, that such a defense can be successfully interposed. (Bay v. Coddington, 5 Johns. Ch., 637; Farrington v. Frankfort Bank, 24 Barb., 554; Weaver v. Barden, 49 N. Y., 286; Cary v. White, 52 id., 138; Barnard v. Campbell, 58 id., 77; Edwards on Notes, 316.)
In such cases, unless the holder parts from something of value, money, property, or existing securities, or discharges the pre-existing debt for which the note is given, the note cannot be enforced.
It is considered, unless the element suggested be present, that the holder is not one for value within the law-merchant, and the superior equities must prevail.
The statement of the rule is not always accompanied by the qualification mentioned, and leads to confusion in some minds.
The judgment, for these reasons,.must be reversed, with costs to abide the event.
Davis, P. J., and Daniels, J., concurred.