Case Name: Mary L. Durbrow, Appellant, v. Swedish Iron and Steel Corporation, Respondent
Court: New York Supreme Court, Appellate Term
Jurisdiction: New York
Decision Date: 1916-05
Citations: 95 Misc. 160
Docket Number: 
Parties: Mary L. Durbrow, Appellant, v. Swedish Iron and Steel Corporation, Respondent.
Judges: 
Reporter: New York Miscellaneous Reports
Volume: 95
Pages: 160–162

Head Matter:
Mary L. Durbrow, Appellant, v. Swedish Iron and Steel Corporation, Respondent.
(Supreme Court, Appellate Term, First Department,
May, 1916.)
Corporations — negotiable instruments — when not accommodation makers of note — trial.
Where a corporation becomes a party to negotiable paper for accommodation, the burden is upon the holder of showing that he became such for value and without notice that the corporation was an accommodation maker.
In an action on the note, evidence that the corporation gave it to one of its debtors under an arrangement pursuant to which it took a mortgage on the payee’s machinery, tools, etc., and an assignment of accounts together with certain notes of the payee received in exchange for the note in suit, by which arrangement it was hoped that defendant through financial assistance given the payee would receive full payment of its indebtedness to defendant, if believed by the jury, would authorize a finding that the note in suit was not an accpmmodation note, upon which finding plaintiff, a holder for value, would be entitled to recover.
Appeal by the plaintiff from a judgment of the Municipal Court of the city of New York, borough of Manhattan, first district, dismissing the complaint.
Albert W. Meisel, for appellant.
Blair & Rudd (Arthur B. King, of counsel), for respondent.

Opinion:
Guy, J.
There were two questions to which plaintiff directed her proof at the trial: (1) whether the execution and delivery of the note in suit signed in the name of the defendant corporation by its vice-president only was authorized or ratified by the defendant; (2) whether the note was an accommodation note.
While the note was not signed by the treasurer and countersigned by the president, as prescribed by defendant's by-laws, the evidence given and offered in support of plaintiff's case was sufficient prima facie to establish that the execution of the instrument was authorized or ratified by the defendant.
Although, as a rule, corporations are without power to bind themselves as accommodation parties, so that where it appears that a corporation became a party to a negotiable paper for accommodation the holder has the burden of showing that he became such holder for value and without notice that the corporation was an accommodation party (Abbot v. LePrevost, 166 App. Div. 40; Jacobus v. Jamestown Mantel Co., 211 N. Y. 154), the proof given and offered in support of the cause of action tended to show that the note in suit, to the order of the Gr. W. Bradley Ax and Tool Co., Inc., was given to the payee in exchange for notes of the tool company as part of a plan which included the execution and delivery to the maker by the payee of a chattel mortgage upon its machinery, tools and equipment, and an assignment of the payee's accounts against third persons, by which arrangement it was hoped that the defendant, through financial assistance given the payee, would receive full payment of the indebtedness of the tool company to defendant. This testimony, if believed by the jury, would authorize a finding that the note in suit was not an accommodation note, upon which finding the plaintiff, a holder for value, would be entitled to a recovery.
In Carlaftes v. Goldmeyer Co., 72 Misc. Rep. 75, the indorsement was not made or given in connection with any business transaction with the defendant in that action, and this court, following the decision in National Park Bank v. German American M. W. & S. Co., 116 N. Y. 281, held that, although collateral security was given to that defendant in consideration of its indorsement, the transaction was ultra vires and no recovery could be had. Here, however, as before stated, the note, according to the evidence given and tendered, appears to have been given for a valuable consideration, which included notes of the payee not returned at the time of the trial, in connection with the business transactions of the defendant and for the purpose of enabling it to collect its indebtedness against the payee.
It follows that the dismissal of the plaintiff's complaint was error, and the judgment must be reversed and a new trial ordered, with thirty dollars costs to appellant to abide the event.
Cohalan and Whitakeb, JJ., concur.
Judgment reversed and new trial ordered, with thirty dollars costs to appellant to abide event.