Warren v. . Haight

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 173 We must assume, in the consideration of the question presented by the appeal to this court, that the matters alleged in the fourth count or division (as it was termed on the trial) of the defendants' answer are true, and if they *Page 174 would have been available as a defence to an action on the note by William E. Warner, the payee named therein and to whom it was delivered, had he continued to be the owner and holder thereof, it may be conceded that they were admissible as evidence against the plaintiff in the present action at the time the defendants offered to prove and establish them. He, at that time, had not shown that he was a bona fide holder of the note for value. His possession of it was, it is true, sufficient to entitle him to a recovery of the amount payable by its terms, in the absence of proof impeaching his title to it or his right to such recovery, but it was competent for the defendants to prove, for the purpose of rebutting the evidence of title and right arising from the mere naked possession of the note, that it was void in its inception, or obtained by fraud or without consideration, or any other fact establishing its invalidity in the hands of Warner; and unless the plaintiff, on such proof being given, showed that he had become the bona fide owner and holder thereof for value in the usual course of business, before its maturity, he would have had no better right to a recovery than Warner if the action had been brought by him. It therefore becomes necessary to consider whether the facts alleged in the portion of the answer above set forth would have constituted a defence to an action by Warner. They are substantially: First. That the note in question was given on and for the loan of the sum of $100 by Warner to the defendants on the representation by him and under the belief by them, in a reliance on such representation, that the money belonged to him. Second. That the money was in fact a part of the avails of certain United States bonds and other property which had been stolen from Elizabeth S. Newton, the owner and holder thereof, and converted into money. Third. That the money arising from such conversion came into the hands of Warner and was received by him with knowledge and notice at the time that it was the avails of the bonds and property so stolen, and the proceeds of such larceny. Fourth. That Warner, on making said loan and taking the note in question therefor, knew that the money loaned was a *Page 175 portion of the said avails and proceeds, and that the defendants had no knowledge or notice whatever of that fact. Fifth. That the said Elizabeth S. Newton had notified the defendants that the money so loaned to them was a portion of the avails of the property so stolen from her, and that she had commenced an action against them and Warner, which was still pending and undetermined when her answer was put in, to compel the defendants to pay the amount for which the note was given to her, in which an injunction had been obtained, restraining them from paying it to Warner or to any other person until the further order of the court in which that action was pending; and, sixth, that the defendants were informed and believed that Mrs. Newton had agreed and undertaken to indemnify them against the complaint either in the present action or in that commenced by her, it being ambiguous which was intended. Assuming, as before stated, that all those facts are true, they fail to establish any defence to the note if it had been held by Warner when the answer was interposed or when the present action was commenced. The money loaned by him to the defendants had not been stolen, but was a part of the avails of stolen bonds, which had been converted into money. The portion received by the defendants on the loan was so received without any knowledge or notice whatever that it was a part of such avails, or that it had come into the hands of Warner illegally, or that he knew that any bonds had been stolen from Mrs. Newton, or that the money was derived from the conversion of those or any other bonds. Hence they, on giving their negotiable note therefor, obtained a good title thereto as bona fide receivers or borrowers thereof for value in the usual course of business. Having such title to the money, which we may assume had been used in the prosecution of their business, and beyond any legal claim thereto or any control over it by Mrs. Newton, they could not, on any principle of right or honesty, retain the benefit of it and refuse to pay the note to Warner, who received it as the consideration for the money he paid therefor on its delivery to him. *Page 176 Their obligation to pay the note was not annulled or discharged, or in any way affected by a mere notice to them given by Mrs. Newton, after its delivery, of the fact that the money lent was a portion of the avails of her stolen bonds, and the temporary injunction restraining them from paying the note to Warner or any other person did not divest him of his title to it or interfere with his right to use and dispose of it as he saw fit. He was not the agent of Mrs. Newton, but he claimed and held the note as absolute owner in his own right. The money loaned by him was nother money. It was, it is true, derived from the conversion of bonds belonging to her, but such conversion was not made by Warner, and it had, moreover, entirely changed and altered the character of the property stolen. Its identity was lost. The legal title to the portion of the avails of the bonds for which the note was given was, before the loan, vested in Warner, and so was that of the note after its delivery. If Mrs. Newton had anequitable right to the money, before its loan to the defendants, and to the note subsequent thereto, that would not have been a legal defence to them if the present action had been brought by Warner. The last statement in the subdivision of the answer above set forth, and constituting a part of the proof offered, alleging that the defendants were informed and believed that the said Elizabeth Newton had agreed and undertaken to indemnify them "against the claim set forth in the complaint" (whether in her action or this is not stated), is idle and wholly immaterial. It is not an allegation that such agreement and undertaking had been entered into; and if it had been proved that such information, as alleged in the statement, had been given to them, and that they believed it, the proof would not have established any material fact; but if it be conceded that the offer had been, in connection with the other matters stated, to prove such indemnity, it clearly could not have relieved defendants from making payment to Warner, or whoever was the bearer of the note. It might secure them against loss for yielding a compliance with Mrs. Newton's notice not to pay, and obeying the injunction issued to restrain *Page 177 them from making such payment; but it did not in any manner affect the right of Warner, or any holder of the note, to enforce it in the present action. Mrs. Newton is not a party to this action, and her rights could not be litigated in it. Whether she could have made herself such, or the defendants could have brought her in as a party and relieved themselves from liability by the payment of the money into court, or from the consequence of conflicting claims thereto, it is unnecessary to inquire. It is sufficient to say, that as the matters offered to be proved would not have been a defence to an action by Warner, it is clear that it could not have been of any effect against the plaintiff. He had, at least, the same, and as good a right to a recovery as Warner had. Hence the rejection of the proof was not erroneous. The views above expressed show that the exception to the rejection of the proof offered is not well taken. There were general exceptions taken to the conclusions of fact found by the judge, and to his conclusion of law based thereon. His findings of fact, having been affirmed by the General Term, are conclusive on us, and they clearly warrant his conclusions of law. It follows that the judgment appealed from must be affirmed, with costs.