Case Name: CONSOLIDATION NAT. BANK v. KIRKLAND
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1904-12-02
Citations: 91 N.Y.S. 353
Docket Number: 
Parties: CONSOLIDATION NAT. BANK v. KIRKLAND.
Judges: 
Reporter: West's New York Supplement
Volume: 91
Pages: 353–356

Head Matter:
(99 App. Div. 121.)
CONSOLIDATION NAT. BANK v. KIRKLAND.
(Supreme Court, Appellate Division, Third Department,
December 2, 1904.)
1. Negotiable Instrument’s—Bona Fide Holder fob Value—Burden ob
Proof—Statute.
Under Negotiable Instruments Law (Laws 1897, p. 733, c. 612) § 98, providing that, when it is shown that the title of any person who has negotiated the instrument was defective, the burden is on the holder to prove that he, or some person under whom he claims, acquired the title as a holder in due course, the burden is on the transferee of a note from the payee to show, before it can recover against the maker, that it was a bona fide holder for value, where the note is shown to have been fraudulent in its inception.
2. Same—Evidence—Sufficiency.
* In an action against the maker of a note shown to have been fraudulent in its inception, evidence examined, and held insufficient to sustain the burden of proof on plaintiff, as transferee from the payee, to show that plaintiff was a bona fide holder for value.
Houghton, J., dissenting. V1. See Bills and Notes, vol. 7, Cent. Dig. §§ 1680, 1683,1084.
Appeal from Special Term, Broome County.
Action by the Consolidation National Bank against Elmer E. Kirkland. From a judgment for defendant, plaintiff appeals.
Affirmed.
Argued before PARKER, P. J., and SMITH, CHASE, CHESTER, and HOUGHTON, JJ.
Maurice E. Page, for appellant.
Hinman, Howard & Kattell, for, respondent.

Opinion:
CHESTER, J.
The finding that the note sued upon was fraudulent in its inception is sustained by sufficient evidence. That being so, the burden was upon the plaintiff, to whom it was transferred by Wilson, the payee, to show, before it could recover against the defendant, that it was a bona fide holder for value. Negotiable Instruments Law, § 98 (Laws 1897, p. 733, c. 612); Vosburgh v. Diefendorf, 119 N. Y. 357, 23 N. E. 801, 16 Am. St. Rep. 836; Grant v. Walsh, 145 N. Y. 502, 40 N. E. 209, 45 Am. St. Rep. 626; Mitchell v. Baldwin, 88 App. Div. 265, 84 N. Y. Supp. 1043. We do not think the plaintiff sustained this burden in this case. It does not appear that the plaintiff paid anything to Wilson at the time it discounted the note in question for him, which was made by the defendant, but it does appear that the entire amount of the avails of the note discounted was placed to Wilson's credit on the books of the plaintiff bank. That credit alone, however, was not a payment for the note or a parting of value on the part of the plaintiff. Albany County Bank v. People's Ice Co., 92 App. Div. 47, 86 N. Y. Supp. 773. Wilson died insolvent the next day after the note was so discounted. It is true that at the time of his death the amount to his credit was a sum much less than the amount of such avails, but there is no proof as to what caused the difference—whether it came from the payment by the plaintiff of an overdraft of Wilson's or by the payment of some other past-due obligation held by the plaintiff against Wilson, or by the payment of checks drawn by Wilson against his account—and we have no right to infer or presume that the difference resulted from any such payments. Spring Brook Chemical Co. v. Dunn, 39 App. Div. 130, 57 N. Y. Supp. 100.
If the avails of the discount were applied to the payment of an existing indebtedness of Wilson's to the plaintiff, it was incumbent on the plaintiff to show that it was expressly agreed between it and Wilson that the avails should be so applied in payment and extinguishment of such indebtedness, in order to establish that the plaintiff was a bona fide holder for value. Case' last cited, and Phoenix Ins. Co. v. Church, 81 N. Y. 218, 37 Am. Rep. 494. But there was no such proof. Nor was there any proof that any checks were drawn by Wilson against his account, and paid by the plaintiff, or charged to his account, after the discount and before his death. We think, therefore, that the plaintiff failed to satisfy the burden resting upon it, and that its complaint was properly dismissed.
The judgment should be affirmed, with costs.
PARKER, P. J., and SMITH and CHASE, JJ., concur.