Grocers' Bank v. Buffalo & Penfield

Rapallo, J. We think that the order in this case must be affirmed on the ground stated by Brady, J., in his opinion delivered at General Term. Whatever confusion may have existed upon the point, we think that we may now safely say, in the language of Professor Parsons (1 Parsons on Notes and Bills, 296), that it is universally conceded that the holder of an accommodation note, without restriction as to the mode of using it, may transfer it either in payment or as collateral security for an antecedent debt, and the maker will have no *505 defence. (See, also, Story on Bills, § 192, note m, and Story on Notes, § 195, and authorities cited.) The existing debt is a sufficient consideration for the transfer, and no new consideration need be shown. It is only where the note has been diverted from the purpose for which it was entrusted to the payee, or some other equity exists in favor of the maker, that it is necessary that the holder should have parted with value on the faith of the note, in order to cut off such equity of the maker. (Cole v. Saulpaugh, 48 Barb., 104; Bank of Rutland v. Buck, 5 Wend., 66; Lathrop v. Morris, 3 Sandf., 7.) It has been held by high authority that an antecedent debt is sufficient even in the case of a note fraudulently diverted to constitute the holder a bona fide holder for value without any extension of time or surrender of securities or other new consideration. (Swift v. Tyson, 16 Peters, 1.) But in this State that doctrine does not prevail. (Stalker v. McDonald, 6 Hill, 93.) The leading authorities upon the subject are reviewed in the case of Maitland v. Citizens' Bank (40 Maryland, 540.) Whatever difference of opinion may have existed, as to the case of a note diverted or fraudulently put in circulation, it must be regarded as settled that an indorsee of a negotiable note made for the accommodation of the indorser, but without restriction as to its use, taking the note in good faith as collateral security for an antecedent debt, and without other consideration, is entitled to the position of a holder for value, and not affected by the defence of want of consideration to the maker. We should not have deemed it necessary to discuss the point so much at length, but for the reason that it does not appear ever to have been previously expressly adjudicated in this court. The order should be affirmed, and judgment absolute, etc. All concur. Order affirmed and judgment accordingly.