Case Name: Duncan et al., Plaintiffs and Appellants, v. Gösche et al., Defendants and Respondents
Court: New York Superior Court
Jurisdiction: New York
Decision Date: 1861-06-01
Citations: 8 Bosw. 243
Docket Number: 
Parties: Duncan et al., Plaintiffs and Appellants, v. Gösche et al., Defendants and Respondents.
Judges: (Before Bosworth, Oh. J., and Moncrief and White, J. J.)
Reporter: Reports of cases argued and determined in the Superior Court of the city of New York
Volume: 21
Pages: 243–248

Head Matter:
Duncan et al., Plaintiffs and Appellants, v. Gösche et al., Defendants and Respondents.
1. AVhere a promissory note is made to be used for a specified purpose and is misapplied, no recovery can be had thereon by a party receiving it as security for a precedent debt.
2. Where the evidence upon the questions of its misapplication, and of the plaintiffs’ taking it, Inna fide, for value, is conflicting, it must be-submitted to the Jury, and their verdict will be conclusive.
(Before Bosworth, Oh. J., and Moncrief and White, J. J.)
Heard, May 7th, 1861:
decided, June 1st, 1861.
Appeal by the plaintiffs, Alexander Duncan, Watts Sherman, William Butler Duncan, Charles H. Dabney and David Duncan, (comprising the firm of Duncan, Sherman, &. Go.,) from a judgment &c., in favor of the defendants, Jacob Gosche and Henry D. Palmer.
The suit is upon two notes for $1,000 each, at four and six months respectively, dated 7th June, 1859, made by Gosche and indorsed by Palmer.
The defense was, and there was evidence tending to show, that defendants, about June 7th, 1859, contracted with B. Ullman for the sole privilege of selling librettos, operas, &c., at the Academy of Music, for one year, for $2,000 to be paid therefor, Avhich contract was modified and reduced to writing June 20th, 1859, by which defend ants were to pay $4,000, and to make payment to D. Kingsland. That about June 7th, 1859, Isaac Jacobsohn falsely represented that he was authorized by Ullman to receive for Ullman the said two such notes, for the price, under the verbal contract as first made, and thereupon they were made and delivered to him for that purpose and on that account; but he neither delivered them to Ullman or Kingsland, but deposited them with the plaintiffs as collateral security for a precedent debt; and that defendants had paid all of the $4,000, except about $200 thereof.
Jacobsohn, on the other hand, testified that Ullman, in Boston, asked him if he could use two notes made by Gosche and indorsed by Palmer; that Ullman said he was to have them for sale of librettos for the coming year. Witness, ‘ eight or ten days after that, received the notes from Gosche. Ullman and Palmer met him in July, “ told me it was all right; that they had the contract, and I could use the notes. I then got the notes discounted by Mr. Sherman-.”
It appeared that the. plaintiffs furnished two letters of ■credit to Jacobsohn, one of July 16th, 1858, for £1,200, in .all, and the other of August 3d, 1858, for £400; and one .Samuel French guaranteed to plaintiffs, performance by Jacobsohn, of his part of the contract on which such letters of credit were granted. The plaintiffs also took and held as further security, two shares of Academy of Music stock, and claimed to have subsequently received from Jacobsohn, the notes in suit, in payment of a like amount of the indebtedness of the latter to them, growing out of .transactions under said letters of credit.
At the close of the testimony, plaintiffs requested the -Judge to charge that they were entitled to a verdict, which he refused to do, and they excepted.
Judge Woodbitff, before whom the cause was tried, March 29th, 1860, charged the Jury as follows, viz.:
1. “ That if upon the evidence they were satisfied that the notes in suit were business notes, given on the terms .stated by witness, Jacobsohn, then there was no defense, and the plaintiffs would be entitled to their verdict; but if, on the other hand, the notes were fraudulently obtained from the defendants, or given for a special purpose, and misapplied, then, unless the plaintiff's parted with the money, or some valuable thing or security, they could not recover.
2. “That if plaintiffs made a transaction with Jacobsohn on receipt of these notes, which amounted to a discharge of French from his liability on his guarantees of the credits, the consideration for the notes would be good; and therefore, if the plaintiffs actually received the notes, by agreement with Jacobsohn, as payment of the amount due on account of the letters of credit, and gave an unqualified credit to Jacobsohn therefor on receipt of the notes, this would operate to discharge French’s liability; and such an arrangement, if made in good faith, without any notice that the notes were not valid notes, fairly procured and for value, was sufficient to make the plaintiffs holders for value, entitled to recover. But that if the plaintiffs received them only as further security, that would not discharge French, and they could not recover if the notes were without consideration, or were procured by false representations or fraud, or were misapplied.”
The Jury found a verdict for the defendants. No exception was taken to the charge.
The evidence, so far as it is deemed material to state it, is contained in the opinions following. From an order denying a motion for a new trial, and from the’ judgment, entered on the verdict, the plaintiffs appealed-
Jeremiah Larocque, for the appellants.
E. Blankman, for the respondents.

Opinion:
By the Court—Moncrief, J.
The case was one proper to be submitted to the Jury. There were questions of fact to be determined, and it would have been error to have granted the motion made on behalf of the appellants, and directed a verdict against the defendants. (Cobb v. Cornish, 16 N. Y. R., 602 ; 4 Bosw., 528 ; 3 Id., 474 ; 2 Id., 365.)
The Jury were properly instructed as to the principles of law applicable to the case. There is no exception to the charge made by the Court. The Jury, among other things, were charged " that if the plaintiffs received the notes in suit only as further security, that would not discharge French, and they could not recover if the notes xvere without consideration, or were procured by false representations or fraud, or were misapplied." The testimony clearly warrants the finding of the Jury that the notes were without consideration; they were made in pursuance of the verbal arrangement of June 7th, which became <\ inoperative by the subsequent written agreement of the 20th of June, by the terms of which the payment was to be and actually has been made to another party than he. to whom the notes were given. It is, therefore, unnecessary to examine the question whether or not the transaction, as between the defendants and Jacobsohn, was fraudulent or not. The Jury were warranted by the evidence, in finding that the notes in suit were accepted, discounted and passed to the credit of Mr. Jacobsohn upon s the books of the plaintiffs, only as a further and additional security for the payment of the sum due to them from Jacobsohn. The transaction between the plaintiffs and Jacobsohn was not presented to the Jury by the testimony of either Mr. Sherman, one of the plaintiffs, or of Mr." Jacobsohn, so clear- and unmistakable as to lead me to believe they erred in not finding that the notes were taken as an absolute payment of such an amount of the Jacobsohn indebtedness. Mr. Sherman says: "We consider both Ullman and Jacobsohn liable to us." Again, qualifying the previous statement ("we took the two notes now in suit as payment "): " If I should not realise anything on the notes toe received, I shall hold these shcvres (of stock of the Academy of Music, received prior to the notes and transferred to the plaintiff as collateral for the indebtedness of Jacobsohn) as collateral." Jacobsohn says, " The understanding was, that if these notes were paid, I was to get back the stock." Again, " The understanding was, when I delivered them to Sherman, that when these notes were paid, I was-to get back my stock." In my opinion the verdict is not against evidence, and the exception taken to the refusal of the Judge to direct a verdict is untenable. The judgment and order refusing a new trial should be affirmed.