Court Opinion

ID: 5218507
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:28:26.832241+00
Date Added: 2024-06-11T08:27:28.901463
License: Public Domain

Laughlin, J. (dissenting):
This is an action on a promissory note made by the appellant on the 14tli day of • September, 1909, for $2,500, payable on the fourteenth day of March thereafter, without interest, to the order of one Lazarus! The defense interposed by the answer was that the note was given in part payment of the purchase price, of certainadvertiscope lamps and the patent therefor, and that the purchase thereof was induced by false and fraudulent representations made by Lazarus to" the appellant and that plaintiffs were not" bona fide holders. The plaintiffs showed on their affirmative case by the testimony of the plaintiff Settel that, representing his firm, lie purchased the note from Lazarus on the 5th day of March, 1910, nine days before it- became due, and paid therefor by a check tire sum of $2,000; that he had been acquainted with Lazarus for about ten years and knew that he was in the advertiscope lamp business, and as he understood it, was - connected with the Advertiscope Lamp Company; that Lazarus came to him the latter part of February, 1910, and stated that he “ was just embarking in the raincoat business or he is embarking in the raincoat business and he is short of funds,” and that lie wanted to sell a note, and asked if the witness could not help.him out by buying it, which, the witness says, “I agreed to do; ” and thereafter and on the 5th day of March, 1910, Lazarus presented the note and Settel purchased it as stated, but before doing so, he obtained a financial report on appellant, whom he did not know ; that the firm owed one Aaron Eisenberg on a “ savings account,” and the note was credited to the firm on that account and *577delivered to Eisenberg, who returned it on the tenth day of the same month for the reason that he did not desire to hold it, and the credit was then canceled. The defendant gave evidence tending to show that lie was induced by false and fraudulent representations made by Lazarus to purchase the lamp and the patent therefor for the sum of $5,000, $2,500 of which was paid in cash and that the note was given for the balance. The court frequently ruled during the trial that it was incumbentupon the defendant to show that the plaintiffs were not holders of the note in due course and for value, and the correctness of such ruling does not appear to have been directly questioned. No express evidence imputing knowledge of the. circumstances under which the note was given to the plaintiffs having been introduced, the court, when defendant rested his case, struck out all the evidence introduced by the defendant, to which an except tion was duly taken, and thereupon granted the plaintiffs’ motion for the direction of a verdict.
I am of opinion that the learned trial justice erred in thus ruling and in striking out the evidence. Section 95 of the Negotiable Instruments Law provides that to constitute notice of an infirmity in a negotiable instrument or a defect in the title of the person negotiating the same “ the person to whom it is negotiated must liav'e had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith.” This statutory declaration of the law, however, as I understand it, affects the numerous decisions of the courts holding that when the •defendant shows that a negotiable instrument on which he is sued has been diverted or that he was induced to execute it by fraud the burden is shifted to the plaintiff to show that he received the same without notice of the facts constituting the infirmity in the instrument. (Vosburgh v. Diefendorf, 119 N. Y. 357; Canajoharie Nat. Bank v. Diefendorf., 123 id. 191; Joy v. Diefendorf, 130 id. 6; Smith v. Weston, 159 id. 194; Citizen's Nat. Bank v. Weston, 162 id. 113; German-American Bank v. Cunningham, 97 App. Div. 244 ; Second Nat. Bank v. Weston, 172 N. Y. 250.) Here the court having struck out the evidence showing that the defendant had a good defense as against the payee of the note, of course there was no evidence in the case which the plaintiffs were *578called upon to meet. The plaintiffs did not on their affirmative case show in detail the facts with respect . to the purchase of the • note. It does hot appear whether or not Lazarus offered to sell the note for the amount at which it -was purchased, of whether that was an offer on the part of the' plaintiffs; nor does it appear whether or not the plaintiffs were informed of the circumstances under which the note was given or the consideration for which it was given. If they had knowledge of the fraud perpetrated on appellant by Lazarus there could he no recovery. .The mere fact that they purchased the note at such a large discount so near its maturity, in. the absence of evidence showing that funds were urgently needed by Lazarus, is a strong circumstance against their bona fielesbut perhaps standing . alone it would not be sufficient to defeat a recovery. . x
Dowling, J., concurred. '
Judgment affirmed, with costs.