Kohn v. Consolidated Butter & Egg Co.

McAdam, J. The Negotiable Instrument Act (Laws of 1897, chap. 612, § 114), in regard to “ irregular indorsers,” applies only, to those who place their signatures as indorsers to negotiable paper “ before delivery ” to the payee. In such cases the act creates a presumption that having indorsed the instrument before delivery to the payee, that they did so with the intention of becoming liable to the payee, the obligation becoming complete only after such de [726] livery. Those who seek the benefit of this statute must bring themselves within it by appropriate allegations. In this instance the plaintiff has, by the allegations of his complaint, put himself outside of the act, and the attempt to claim the benefit of it now is clearly an afterthought. The complaint specifically alleges that the Consolidated Butter & Egg Company made and delivered the note to the payee, Frank Goldstein, and that “ thereafter ” the other defendants indorsed the note, thereby bringing the ease within the common-law rule laid down in the reported cases. Moore v. Cross, 19 N. Y. 227; Bacon v. Burnham, 37 id. 614, 616; Phelps v. Vischer, 50 id. 69; Coulter v. Am. Express Co., 56 id. 587; Witherow v. Slayback, 158 id. 649; McPhillips v. Jones, 73 Hun, 516; Howard v. Van Gieson, 46 App. Div. 77; Cuming v. Roderick, 16 id. 339. That the plaintiff did this deliberately is manifest from the further allegation (unnecessary under the act in question) that the said other “ defendants indorsed the note for the purpose of lending their credit to the maker and with the intent to charge themselves thereon to the payee,” Goldstein. Prior to the statute of 1897 (supra) the allegation referred to was a necessary one in such cases, and, if denied, the onus of proving the allegation was on the plaintiff, for the payee was presumably the first indorser. Daniels Neg. Inst. (4th ed.), § 704; Wood’s Byles Bills, 151, note, and cases before cited. Since the statute the legal presumption is changed where the complaint alleges that the irregular indorsers indorsed the paper “ before delivery ” to the payee. And when this fact is established the onus is cast upon such indorsers to allege and prove that, notwithstanding such delivery, the payee was to become first indorser according to the customary form of the contract, and that they did not indorse for the purpose of lending their credit to the maker or with the intention of becoming liable to the payee. That this is the proper interpretation of the act is obvious. The true intention of indorsers, as between themselves, can always be shown by oral evidence. Daniels Neg. Inst., supra; 4 Am. § Eng. Ency. of Law (2d ed.), 492 et seq.; Guild v. Butler, 127 Mass. 386; Cady v. Shepard, 12 Wis. 639; Benjamin’s Chambers Bills (2d Am. ed.), 250; Witherow v. Slayback, 158 N. Y. 649. To go further and decide that the statute intended to create an incontestable .liability against irregular indorsers would be to impute to the legislative wisdom a design repugnant to every notion of judicial procedure, especially in a provision enacted in the interest of law reform. The [727] plaintiff, having elected to ignore the statute and avail himself of the common-law rule, was hound to prove affirmatively those allegations of his complaint which charge that the irregular indorsers “ indorsed the note for the purpose of lending their credit to the maker and with intent to charge themselves thereon to the payee.” This allegation the plaintiff not only failed to establish by a preponderance of evidence, but the defendants, under their denial, established the contrary to be the fact by a substantial preponderance, and for this reason the complaint was properly dismissed. Cohn v. Mayer Brewing Co., 38 App. Div. 5. The mode of transferring the note to the plaintiff was unique. ( Goldstein, the payee, first procured the note to be discounted at the Oriental Bank, where he kept his account. By the discount, the bank became the absolute owner of the note. On the morning it matured, and while the bank owned it, Goldstein undertook to sell the note to the plaintiff, and thereafter, and on the same day, Goldstein went to the bank, paid the note, and subsequently handed over the paid obligation to the plaintiff that he might bring the present action upon it, joining not only the maker, but Goldstein and the other indorsers as defendants. Assuming that under the circumstances Goldstein’s title to the note (whatever it was) passed to the plaintiff, he succeeded at best to Goldstein’s equities — nothing more. As Goldstein could not have maintained any action on the evidence against the so-called irregular indorsers, the plaintiff occupies no better position. On the case as presented by the pleadings and proofs, the complaint was properly dismissed, and the motion for a new trial must be denied, but without costs. Motion denied, without costs.