Ayrault v. McQueen

By the Court, E. Darwin Smith, J. Confessedly the promissory note on which this action was brought, was made and indorsed for the sole benefit and accommodation of the maker, and was diverted from the purpose for which it was made and indorsed, without the knowledge or assent of the indorser. The defendant, therefore, is clearly not liable upon his indorsement, unless the plaintiffs are holders for value, and received the note in good faith in the- ordinary course of business and without notice of the fraud. (Wardell v. Howell, 9 Wend. 170. Rochester v. Taylor, 23 Barb. 18. Small v. Smith, 1 Denio, 583.) The learned judge at the circuit put the case upon this ground, and the only question for our decision is whether the plaintiff brought himself within the rule defining abona fide holder of negotiable paper. The note was transferred as security for the sum of $200, lent by the plaintiff to John McQueen on the same day of the transfer, the same being part of the sum of $500 then loaned. On the discount of the draft for this $500, it appears that a bill of lading and rail road receipt for 105 barrels of flour were delivered to the plaintiff as security for. the payment of such draft. This bill of lading and receipt bound the flour, and was subsequently surrendered by the plaintiff to John McQueen, to enable him to reclaim the flour then on its way to the city of New York, before it reached the hands of the [309] insolvent consignee. This was effected by said McQueen, and tile flour sent by him to other consignees and the proceeds appropriated to the use of McQueen. Here a security was surrendered by the plaintiffs, amply sufficient to pay the said sum of $200 for which the note in suit was loaned to, and received by them. I cannot see why this did not make’ the plaintiffs bona fide holders of this note, to the extent of the amount remaining unpaid of this sum of $200. For this amount the judge directed a verdict for the plaintiffs at the circuit. [Monroe General Term, September 3, 1860. Smith, Johnson and Knox, Justices.] It is true that the bill of lading was not given up by the plaintiff simultaneously with the delivery of the note, but it was done afterwards, and upon the faith of the security afforded by the note. The plaintiff testified that McQueen told him, when he applied to get the bill of lading, that “we were secure with the note.” This, I think, brings the case within the rule relating to the transfer of such paper, and constitutes the plaintiffs bona fide holders of the note. I think the verdict was right, and the judgment should be affirmed. Judgment affirmed.