Court Opinion

ID: 3495542
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:03:24.520924+00
Date Added: 2024-06-11T14:05:12.945293
License: Public Domain

I am in full accord with the reasoning of Mr. Justice FEAD and the conclusion reached by him.
But in my opinion there is another reason why the defense sought to be interposed is not available. The declaration in this case counted on the note of December 6, 1923, and a copy of it was attached thereto. In the notice attached to defendant's plea of the general issue defendant stated that he would insist in his defense that plaintiff purchased the note sued upon with notice that its execution was procured by fraud in the sale of the Lynch Construction Company stock to him. When examined as a witness, defendant testified:
"Each time I paid a thousand dollars on the old note I got the old note back and I saw the indorsement of the New Jersey Title Guarantee  Trust Company. My old notes were marked paid in each case. I first gave the $4,500 note due 90 days from date and on September 7, 1923, when it fell due the Lynch Construction Company, the payee, accepted $1,000 to reduce the note. They returned the notes to me canceled and marked paid. The same thing was true of the next note for $3,500 dated September 7, 1923. I didn't pay this note in full when it came due either, but paid $1,000 on December 6, 1923. They gave me back my old note which was marked paid, and I gave them a new note for $2,500, which is the note in suit here, dated December 6, 1923. I preferred to pay $1,000 and sign a note for $2,500 rather than pay the whole $3,500 which was due on the face of the note, and that is what I actually did." *Page 566 
It is elementary that as between the maker and payee of a note the consideration may always be inquired into. The note is but evidence of the existing indebtedness. The same rule applies to a holder who has purchased a note from the payee and at that time has knowledge of any fraud inducing its execution. But the holder, by indorsement of the payee of a negotiable note, by accepting a new note in renewal thereof and surrendering the old one, could not bring suit upon the original note which has been surrendered to the maker and was stamped "Paid." His only remedy is by action upon the note he then holds. It is the only evidence of the indebtedness of the maker and the payee to him. A new contract is thereby entered into. The consideration therefor is the surrender and cancellation of the old note, and, unless he have knowledge of the fraud entering into the consideration of the original note, the maker may not contest liability on that ground, if it appear that when the note sued upon became due there were not funds of the indorser in his hands with which to pay it. Otherwise, it would, in my opinion, be unsafe for the holder of a negotiable note by indorsement to renew it if he then had moneys of the indorser in his hands from which payment might have been made. Any other holding will, I think, result, in many cases, in loss to the holders of indorsed negotiable notes of which renewals have been had. There are cases in which it has been held in the interest of justice that the holder by indorsement may rely on the original indebtedness as evidence of the maker's liability. See Molsons Bank v. Berman, 224 Mich. 606
(35 A.L.R. 1289), and cases there cited. While these exceptions may be said to qualify the general rule, they *Page 567 
do not render it inapplicable under the facts here presented.
It is said that plaintiff did not upon the trial, and does not in this court, claim that payment of the original note was had by the renewals.
It is true that plaintiff's counsel discuss at length the effect of a renewal note, and insist that, if the note sued upon be so treated, it was a bona fide holder thereof. This, I take it, was in answer to the claim of the defendant and the ruling of the trial court relative thereto. They do say in their brief:
"The principal question in this case is: Was the plaintiff bank a holder in due course of the note sued on, that being the last of the two renewal notes?"
They also contend that plaintiff was a holder in due course under the provisions of the negotiable instruments law (2 Comp. Laws 1915, § 6093), in which no reference is made to renewals. Be that as it may, the case is before us for decision on the liability of the defendant upon the note sued upon. It was the duty of the trial court to apply the law to the facts in directing a verdict. While plaintiff's counsel are and should be bound by any concession made by them as to the facts, I do not think this court is bound by any statement made by them as to the law applicable to the facts. "A stipulation or admission by counsel as to a matter of law has, however, been held to be of no effect." 2 R. C. L. p. 990. See note in 132 Am. St. Rep. 159.
I concur in the reversal of the judgment and the granting of a new trial.