Case Name: The Homestead B'k, Resp't, v. Frederick Wood, Impl'd, Appl't
Court: New York Court of Common Pleas
Jurisdiction: New York
Decision Date: 1892-11-07
Citations: 48 N.Y. St. Rep. 775
Docket Number: 
Parties: The Homestead B’k, Resp’t, v. Frederick Wood, Impl’d, Appl’t.
Judges: 
Reporter: New York State Reporter
Volume: 48
Pages: 775–777

Head Matter:
The Homestead B’k, Resp’t, v. Frederick Wood, Impl’d, Appl’t.
(New York Common Pleas, General Term,
Filed November 7, 1892.)
1. Bills and notes—Evidence.
As between the endorser and his immediate endorsee, it is always com* tent to show by paroi evidence what the consideration for the endorsement was, and that it has failed.
3. Same.
In an action upon a promissory note, the defendant’s evidence tended to show that the note was transferred for a sum advanced to construct buildings on joint account, and to be repaid out of a permanent loan when the buildings were completed, and that such loan had not been procured. Held, that a direction for a verdict for plaintiff was erroneous
3. Coepoeatiobs—Ultea vibes—Estoppel.
A corporation is estopped from claiming that an agreement made by it was ultra mres, to the extent that it has been acted on by the other party in good faith.
Appeal from a judgment of the general term of the city court, affirming a judgment for plaintiff which was entered on a verdict directed by the trial court, and an order denying defendant’s motion on the minutes for a new trial. Action to recover against defendant, as endorser of a promissory note.
Charles F. MacLean, for resp’t; Artemas B. Smith, for app’lt.
Reversing 43 St. Rep., 675.

Opinion:
Bischoff, J.
J.Plaintiff sued to .recover from defendant Wood, as endorser, the amount of a promissory note made by one Edward E. Teller to the order of Wood, and alleged to have been endorsed, negotiated and delivered before maturity, and for value, by him to plaintiff. Wood did not dispute the facts of the endorsement and delivery of the note, but asserted, as a defense to any liability on his part, that the note was endorsed and delivered to plaintiff to secure it for the re-payment of an equivalent sum advanced to Wood to enable him to complete certain buildings, then in the course of construction, for their joint account; that it was agreed between them that the sum so advanced should be repaid out of the proceeds of a permanent loan upon, or the sale of the buildings, when completed, and not otherwise; and that the buildings were neither completed nor sold, and that the loan had not been procured. Defendant Wood also interposed as a counterclaim to plaintiff's demand damages which he alleged had accrued to him from plaintiff's refusal to make the agreed advances of money required to complete the buildings.
On the trial defendant Wood sought to establish an oral underderstanding substantially in accord with the agreements above mentioned. Some of his testimony was excluded, while in other respects it was admitted, but when both sides concluded the introduction of evidence' the fact of the agreements by plaintiff's officers, with the sanction of the board of directors, sufficiently appeared from defendant's testimony. Thereupon plaintiff's counsel requested the court to direct a verdict for plaintiff, which was-opposed by defendant's counsel, who asked to he permitted to go to the jury on the question of the agreements. The court granted the motion, and directed a verdict as requested, assigning as the ground therefor that the paroi agreements were incompetent to vary or contradict the terms of the endorsement, and defendant's counsel duly excepted.
The exclusion of the evidence offered, and the direction of a verdict, were errors for which the judgment hnd order appealed from must be reversed. As between the endorser and his immediate endorsee it is always competent to show by paroi evidence what the consideration for the endorsement was, and that it has failed. Rice on Evidence, vol. 1, p. 274; vol. 2, p. 1137, and cases cited ; Randolph on Negotiable Instruments, § 565; Bookstaver v. Jayne, 60 N. Y., 146; Isaacs v. Jacobs, 15 Daly, 490; 29 St. Rep., 145.
So, also, it is a familiar rule in equity that paroi evidence is admissible and competent to show that a written instrument which is absolute on its face was given and accepted as security only, Horn v. Keteltas, 46 N. Y., 606; and though equitable relief was not demanded by answer to the complaint, and the court below was without jurisdiction to grant affirmative equitable relief, defendant could, pursuaut to the provisions of the Code of Civil Procedure, § 507, avail himself of a defense purely equitable. Cushman v. Family Fund Society, 36 St. Rep., 856.
It is a sufficient answer to the proposition of respondent's counsel that the verdict was properly directed, though the ground assigned therefor may have been erroneous, because the agreement to build was in violation of plaintiff's corporate authority, and therefore ultra vires, that plaintiff is estopped from so asserting to the extent to which the defendant has performed that agreement on his part. Whitney Arms Co. v. Barlow, 63 N. Y., 62; Lawson's Bights, Remedies and Practice, vol. 1, p. 630, and cases cited.
The judgment of the general and trial terms of the court below, and the order denying defendant's motion for a new trial, should be reversed, and a new trial ordered, with costs to appellant to abide the event.
Daly, Ch. J., concurs.