Court Opinion

ID: 6121394
Source: CourtListenerOpinion
Date Created: 2022-02-04 18:48:26.893023+00
Date Added: 2024-06-11T08:23:28.142282
License: Public Domain

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 *55Wells 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 *56think, 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 *57by 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.
*58The 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.