Court Opinion

ID: 3624938
Source: CourtListenerOpinion
Date Created: 2016-07-06 00:05:45.942584+00
Date Added: 2024-06-11T12:06:21.850718
License: Public Domain

[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 437 
[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 438 
We shall assume that the check in suit was given to carry out an agreement made in contratravention of the forty-fifth section of the bankrupt act, for the payment to Holbrook of a compensation beyond the legal fees allowed by law for services as assignee in bankruptcy of the firm of Biesenthal, Falck  Israel, and was void in the hands of the payee by reason of the illegality of the consideration. But the bankrupt act does not expressly avoid a note or security taken upon such a transaction, and the check, notwithstanding the illegality of the consideration, would be valid in the hands of a bona fide
holder for value, who took it before it was dishonored, without notice of the illegality. (Rockwell v. Charles 2 Hill, 499; Byles on Bills, 139.)
The Marine Bank was a holder for value. It received the check from Clark in payment of a note of the firm of Clark  Hazard, held by the bank of the same amount, and the bank surrendered the note when it received the check. This was a a parting with value. (Brown v. Leavitt, 31 N.Y., 113.) It must be assumed, in the absence of proof to the contrary, that the bank had no notice of the illegality of the check when it acquired title. The transferee for value of a negotiable instrument, tainted by fraud or illegality in its inception, to maintain *Page 440 
his action, is not bound to show, in addition to the fact that he received it for value before due, that he had no notice of the original infirmity in the paper. The burden of showing notice is upon the party who seeks to impeach his title. (Goodman v.Harvey, 4 Ad.  E., 870; Byles on Bills, 118.) But it is claimed that the check was dishonored when it was passed to the bank; and if this claim is well founded then, as Holbrook, the payee, could not have recovered upon the check, neither can the bank, unless it can make an independent title under an intermediate holder, who purchased it for value and without notice before it was dishonored. But Clark's title was no better than that of the bank. He transferred the check to the bank on the same day he received it, and if it was dishonored when the bank took it, it was also dishonored when it was received by Clark.
The claim by the defendant that the check was dishonored when it came to the possession of the bank, rests upon the fact that it was dated March 8, 1871, about fourteen months before the time the bank received it. That such a lapse of time between the date, and transfer of a check affords a just presumption of dishonor, cannot, we think, be doubted. The date of a note or check isprima facie evidence of the time it was made and had its inception. (Chitty on Bills, 148; Byles on Bills, 77.) And a check found in the hands of the payee or third person fourteen months after its date, in the absence of explanation, must be deemed to be discredited. It would not necessarily be implied, from the mere lapse of time, that a check had been dishonored in fact; that is, that it had been presented and that payment had been refused, or that it was overdue, in a strict sense. Usually no time of payment is expressed. It is payable presently, but the holder must in general demand payment of the drawee before he can sue the drawer, and the statute of limitations runs from that time. (Murray v. Judah, 6 Cow. 484.) But the retention of a check by the holder for a considerable time, without presentment, where no defense exists to it, is unusual, and this circumstance is sufficient to put a party taking it upon *Page 441 
inquiry, and a check dated as in this case, several months before its transfer, and which might have been presented at, or soon after its date, will, in the absence of explanation, be treated as overdue and dishonored, whether it has been actually presented or not, so as to let in defenses existing between the drawer and payee. (Gough v. Staats, 13 Wend., 549; Little v. ThePhœnix Bank, 2 Hill, 425; Down v. Halling, 4 B.  C., 330; Daniels on Neg. Instruments, § 1633.)
But the date of a check or note is only presumptive evidence of the time it was issued. A check or note has no inception until delivery, and for all legal purposes it is to be considered as made on the day it is delivered. (Lansing v. Gaine, 2 J.R., 300.) And when the date and the time of delivery are not coincident, the time when it in truth has its inception, may be shown in answer to the plea of infancy or coverture, or to avoid the imputation that it was dishonored when received by the holder. (Pasmore v. North, 13 East, 517; Story on Notes, §§ 48, 491; Daniels on Neg. Inst, 65; Boehn v. Sterling, 7 T.R., 432; Drake v. Rogers, 32 Me., 544.) In Boehn v. Sterling,
the defendants had delivered their check nine months after it bore date. Sometime thereafter it was negotiated by the holder to the plaintiffs who took it for value, and in good faith. As between the original parties there was a defense, and it was claimed that the plaintiffs took with notice of dishonor, and subject to the equities between the original parties, simply because they had taken the check so long after it bore date. LORD KENYON said: "All the difficulty is occasioned by the defendants themselves, who issued this bill with the objection, of which they now seek to take advantage, appearing on the face of it; but I am clearly of opinion on principles of law as well as justice, that it was not competent for them to take this objection." The defense was overruled, and the verdict for the plaintiffs was sustained. The case here is within the principle of Boehn v.Sterling, and the other cases we have referred to. It was *Page 442 
admitted that the check was made on the day it bears date, and by an agreement between Altman and the payee was deposited with one Bowen for safe-keeping, and to be delivered to Holbrook when he was discharged from his position of assignee in bankruptcy of Biesenthal, Falck, and Israel; that it remained in the hands of the depositary until May 2, 1872, on which day Holbrook was discharged, and on the same day Bowen delivered it on Holbrook's order to Clark, who immediately transferred it to the bank, and on the next day it was presented for payment, and payment was refused. The delivery by Bowen was in pursuance of the authority vested in him by the drawer, which so far as appears had never been revoked. It is the case, therefore, of a check delivered by the drawer (through his agent), long after its date to the payee, and on the same day transferred to a bona fide holder for value without notice of any defense. The check when it was taken by the bank appeared to be overdue, and the bank took the risk of the apparent fact being also the real fact. If the bank before taking the check, on noticing the date, had inquired and ascertained that the drawer had delivered the check on the day the bank received it the apparent objection to the check would have been removed. This information would have shown that in fact it was not over-due or dishonored, nor would the bank have been bound to go further. Take the case of a check negotiated on the first day of January of one year, dated on the first day of January of the preceding year. If the party taking it from the holder had upon inquiry been informed that it was delivered to him on the day it was negotiated, and this was the fact, would he be bound to go further, and inquire whether there was not some other objection to the check? We think not. He would have relieved the paper of the only suspicious circumstance attending it. He would take the risk of the information not being true, and this is all; and although he made no inquiry, if he took the check bona fide for value, without notice of illegality or other defense, and it turned out that it was in truth issued on the day it was *Page 443 
negotiated, he would stand in no worse position than if he had first inquired and been informed that it was so issued. In either case he took the risk only of the fact being true, which appeared to be true on an inspection of the paper, viz: that it was overdue and dishonored. If it was not true, and the paper was not overdue, his title would be protected, there being the other elements of a bona fide holding.
Upon the authorities and the reason of the matter, we think this judgment should be reversed. The plaintiff as the transferee of the bank stands upon its title.
The judgment should be reversed, and new trial granted.
All concur.
Judgment reversed.