Case Name: THE NATIONAL BANK OF GLOVERSVILLE, Respondent, v. JOHN E. WELLS, WILLARD D. BURR and REMUS D. BURR, Appellants
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1878-09
Citations: 22 N.Y. Sup. Ct. 51
Docket Number: 
Parties: THE NATIONAL BANK OF GLOVERSVILLE, Respondent, v. JOHN E. WELLS, WILLARD D. BURR and REMUS D. BURR, Appellants.
Judges: Present — Learned, P. J., Boardman and Tapp an. JJ.
Reporter: Supreme Court Reports (Hun)
Volume: 22
Pages: 51–63

Head Matter:
THE NATIONAL BANK OF GLOVERSVILLE, Respondent, v. JOHN E. WELLS, WILLARD D. BURR and REMUS D. BURR, Appellants.
National bank — indorsements of notes for commissions — title of, to such paper taken by it.
The plaintiff, a national bank, agreed with one Burr to procure to be discounted for him a note, indorsed for Burr’s accommodation by the defendant Wells, on plaintiffs receiving a commission of five per cent, for so doing. The plaintiff indorsed the note, and sent it to a national bank in Albany, by which it was discounted. The note, not being paid, was protested, and notice sent to plaintiff, which subsequently took it up. Upon the trial of this action, brought to recover the amount of the note, it was insisted that the transaction was usurious; that the plaintiff had no title to the note, for the reason that it had no power to agree to sell its indorsement and procure notes to be discounted, upon payment of a commission; and that the taking up of the'note by it, was a purchase of it, which by its charter it had no right to make.
Held, that, the transaction, as a matter of fact, was not usurious; that the plaintiff’s title did not depend upon the alleged unlawful agreement to loan its credit and procure the discount; that it got title through the Albany bank, a bona fide holder for value; and that it must, therefore, be held to be the lawful owner of the note, and entitled to enforce it. (Tappan, J., dissenting.)
Appeal from a judgment in favor of the plaintiff, entered upon the report of a referee.
This action was brought upon a promissory note, in the amount of $2,400, made by the defendants Barr to the order of and indorsed by the defendant Wells, the latter being an accommodation indorser. The referee before whom the action was tried found, among other things:
That on or about the 9th day of August, 1875, the defendants Burr made their certain promissory note, described in the complaint, and upon which this action is brought, whereby they promised to pay, m two months from the date thereof, to the order of the defendant, John E. Wells, at the Metropolitan National Bank, New York, the sum of $2,400, which note was indorsed by the defendant, John E. Wells, for the accommodation of the makers. That said note, so indorsed, was, on or about the 11th day of August, 1875, delivered by the defendants Burr to the plaintiff’s cashier, for the purpose of having it discounted and raising money thereon with which to pay a note of $1,995.45 (indorsed by defendant Wells, and then indorsed by plaintiff, and by it caused . to be discounted by The Dry Goods Bank of Now York, plaintiff charging five per cent, for procuring the discount and loaning its credit), and another note, made by the defendants Burr, of the amount of $300, both of which were then held and owned by the ' plaintiff. That the said note for $2,400, being the note described in the complaint, was thereupon indorsed by the said cashier of ■ the plaintiff, and sent by him to the First National Bank of Albany, tó be by it discounted; and said bank received such note and discounted the same at the rate of seven per cent, per annum, for the time it had to run until the maturity thereof, as interest; and deducting such interest, remitted the said residue of the amount of such note to the plaintiff on or about the 16th day of August, 1875. That the plaintiff, on the said 16th day of August, 1875, applied the proceeds of such note so received from the First National Bank of Albany to the payment of said notes of $1,995.45 and $300, by the direction of the defendants Burr, and surrendered such notes to them. That the plaintiff demanded and received ■ from the deferidants Burr, out of the residue of the proceeds of such note, as a compensation for procuring the discounting thereof, and for the loan of its credit by indorsing the same, the sum of $14.67. That neither of said two notes of $1,995.45 and $2,400 was delivered to the plaintiff', or its cashier, as evidence of, security for, or under an agreement for, a loan of money made or to be made by said plaintiff, or its cashier. That on the 12th day of October, 1875, when the said note for $2,400, upon which this action is brought, became due, it was duly presented at the Metropolitan Bank in the city of New York, the place where it was made payable, and payment thereof then and there demanded, which was refused; whereupon said note was duly protested for non-payment, of all of which due notice was given to the defendant, John E. Wells. That on the 4th day of October, 1875, the defendants Burr made their three several promissory notes, all payable four months after date to the order of the defendant, John E. Wells, one bearing date September 15, 1875, for the sum of $2,000; one dated October 4, 1875, for the sum of $2,500; one dated October 9, 1875, for the sum of $2,000, and presented the same to the defendant, John E. Wells, and requested him to indorse the same for their accommodation, and the said John E. Wells thereupon indorsed the same. That such indorsement was añade by the said John E. Wells for the piarpose, aaad.with the clirectioaa giveaa to the defendants Burr, that said aaotes’ should be aased exclusively to pay aaad take up the said note for $2,400, upon which this actioia is brought, aaad two other aaotes of $1,000 each, then lyiiag iai plaintiff’s baaak, and one other aaoto of about $2,000, lyiiag at some bank in the city of New York, of all of which the said defendants Burr were the makers aaad the defendant Wells the indoa-ser. That the defeaadaiats Burr, oaa the said 4th day of October, 1875, aiegotiated aaad delivered the first two of said notes to the plaintiff, and the same were discounted by the plaintiff at the request of said Burr, who applied $1,000 of the proceeds thereof to the payment of oiae of the said $1,000 aaotes, of which the defendant Wells was indorser, and the balaiace to the payment of notes and liabilities of theirs other than the said $2,400 and the remaining $1,000 aaote. That on a subsequent day the defendants Burr delivered to the plaintiff the remaiaaing $2,000 note, as indorsed by defendant Wells, for the pua-pose of having it discoomted, aaad the plaintiff procured it to be discouaited at the First National Bank of Albany, -which remitted the proceeds thereof to the plaintiff, and the plaintiff placed the same to the credit of the defendants Burr, in their account with the plaintiff, on its books, on the 26th day of October, 1875, and the same •were subsequently paid by the plaintiff, upon the check of the ■defendants Burr, drawn on the plaintiff’s bank, on the 3d dayof ■November, 1875. That the plaintiff had no notice that the defendant Wells had indorsed the said three notes, or either of them, for any special purpose, or had placed any restriction upon the use to be made of them or either of them. That the interest upon the said $2,400 note, from the time of its maturity to the date of the report, was the sum of two hundred and one dollars and thirteen cents, which, with the sum mentioned in said note, amounted to the sum of two thousand six hundred and one dollars and thirteen cents. That the plaintiff, at the time of the commencement of this action, was and still is the owner and holder of said notes. As conclusions of law he found, that the plaintiff was entitled to recover of the defendants the sum of two thousand six hundred and one dollars and thirteen cents, besides the costs of this action.
■ James M. Dudley, for the appellants.
Parkhurst c6 Baker, for the respondent.

Opinion:
Learned, P. J.:
The defense set up by the defendant Wells is, that a short time before the note became due, on which this action is brought, he indorsed certain other notes of the defendants Burr, for the purpose of renewing or taking up the note in suit; that these notes were, in fact, received by the plaintiff with knowledge of the purpose with which Wells indorsed them; and that they should have been applied to the renewing or taking up of the note in suit; and that these new notes have been paid by him. Of course, a material part of this defense is the knowleiige on the part of the plaintiff of this purpose.
- The learned referee found that the purpose of the defendant Wells was such as is above stated; but he found that the plaintiff had no notice of such purpose, or of any restriction made by Wells as to the use of these notes. The defendant Wells, on this appeal, insists that this latter finding is erroneous.
The direct evidence on this point consists of the testimony given by Remus D. Burr, one of the defendants, and of that given by James M. Wood, the cashier of the plaintiff. Mr. Burr says that when he called at the bank, on the 4th of October, he had with him two of the three new notes' — one of $2,000, and' one of $2,500; that he stated to the cashier that there were the two notes of $1,000 each, shortly to be due, and the note of $2,400 (now in suit) to be taken care of out of this paper; that Wood said he did not think they had the $2,400 note; that Burr said it had to be taken care of, and Wood said: " All right." The third note, being for $2,000, was subsequently left at the bank by Burr.
It appears, however, that on the same day (the 4th of October) Burr gave a check on the bank, in the firm name, for $4,183.15, which, he says, represented part of the two notes then delivered. This check read: "Pay to notes and interest, or bearer." Burr says he cannot remember for what notes that check was given.
Mr. Wood testifies that Burr made no statement to him as to what disposition Wells wanted to have made of the proceeds of the notes; that Burr told him that he wanted to pay a note of Johnson's, one of Wells' for $1,000, and one of Coulton, Ayers & Co.; that he (Wood) figured up the interest and protest, and that Burr gave the check of $4,183.15 for the amount of these notes. He testifies that Burr did not say he wanted to take up Wells' paper.
The book-keeper of the bank also shows that the check was, in fact, given by Burr, to take up the notes above mentioned.
Thus, it may be seen, that Burr himself" does not state that he. told Wood of Wells' purpose in indorsing. He told Wood only what he (Burr) wished to do; that is, that the $2,400 note was to be taken up out of that paper. And after having first made this statement of his wishes, he then immediately gave a check, by which he applied nearly all of the proceeds of the new notes to take up what is called the Johnson paper. He was at liberty to change his intention as to the application of the new notes, even assuming his own statement of the transaction to be correct. Wo think, therefore, that the referee was right in holding that the bank had no notice of Wells' purpose. The bank should not be held liable for a misappropriation, without clear evidence of notice to them of" the purpose with which Wells indorsed.
In regard to the third new note — that of $2,000 — Burr testifies that he left it at the bank the next day with the teller. The teller denies this. It appears to have been discounted some time in October, as the avails were credited to the Burrs on the 28th. On the 3d of November, the Burrs gave a cheek on the bank for $2,731.62.
There is no evidence for what notes this check was given. The defendant Wells insists that, inasmuch as the Burrs had this amount to their credit in the bank, it was applicable to the note in suit, and must be so applied. But it is not shown that the Burrs owed no other money to the plaintiff. They had the right to apply the money as they chose. The presumption is that they did not apply it to the note in suit, because that note has not been, in fact, taken up. And this check shows that the Burrs did make some application of the money; nor is it certain that this money was the avails of the discounting of the $2,000 note.
The remaining defense is common to all the defendants, and is that of usury. The referee has found, in respect to the notes, that they were not discounted by the plaintiff, but that they were delivered to the plaintiff, to be sent to other banks, and that they were discounted by such other banks at the legal rate of interest; that the plaintiff or the plaintiff's cashier demanded and received of the defendants a certain sum as a compensation for procuring the discounting, and for the loan of credit by indorsing.
An arrangement of this kind might, of course, be a mere cover for the taking of usury. If it were, then, on familiar principles, the notes would be usurious. But the referee finds, on the contrary, that the arrangement was as stated above, and that the notes were not evidence of security for or under an agreement for a loan made or to be made by the plaintiff or its cashier. And we see no reason to question the correctness of his findings in this respect.
If, then, there was no loan in any way by the plaintiff to defendants, for which these notes were evidence or security, the payment by the defendants of money to the plaintiff for any services, or for no services, did not render the notes usurious.
The defendants urge that the plaintiff had no power to indorse for their accommodation. Even if that be so, still the notes are not usurious, unless the plaintiff made a loan to the defendants. If the indorsements were void, and, therefore, valueless, possibly the defendants may recover what they paid for the indorsements, on the ground of a want of consideration; but the notes remain valid.
The defendants further insist that the plaintiff cannot recover, because it is not the owner of the note in suit. The note is in plaintiff's possession, duly indorsed by the payee. That is sufficient prima facie. The defendants insist that the note was discounted by the First National Bank of Albany, and came into the plaintiff's possession only after protest; and that the plaintiff could not purchase this paper. [First Nat. Bank of Rochester v. Pierson, 16 Alby. L. J., 319.)
The note, however, when it was discounted by the First National Ban!?: of Albany, had the indorsement of the plaintiff, by its cashier. That bank, therefore, taking the note in good faith, could look to the plaintiff as an indorser; and no reason is suggested why the plaintiff would not be liable after due protest.
If the plaintiff' had then taken up the note, it could not be said that the plaintiff had purchased the note for speculation, or for " note shaving." That is the kind of transaction condemned in the case last cited.
The case of West St. Louis Savings Bank v. Parmelee (6 N. Y. W. Dig., 251), cited by defendants, was where a cashier indorsed his individual note, adding his official title, without authority from the bank. It was held that this did not bind the bank. That has no application to the present case, where the act of the cashier was done by the authority of the plaintiff'.
And it should further be noticed' that the answers of the defendants do not allege any violation of the banking law other than usury. They do not allege any receipt by the plaintiff of a commission for indorsement. On the contrary, they allege a usurious discounting at twelve per cent. This point, therefore, urged by the defendants on the argument, was not within the issues, except as the answer denies plaintiff's title to the note.
The plaintiff's title to the note does not depend on the alleged unlawful transaction. The plaintiff gets title through the First National Bank of Albany, a bona fide holder for value; and the plaintiff must be held to be the owner of the note, unless we adopt the principle that, under no circumstances, can a national bank get title to a note, except by discounting it.
The judgment should be affirmed, with costs.