President of Troy City Bank v. McSpedon

T. R. Strong, J. “ The note in question was executed with five others under a written contract, whereby the payees agreed to'give the makers $400 weekly in Troy City Bank bills, in payment of the notes, and the makers to take up the notes as they matured. The notes were for the amounts' and payable as follows : One for $1840, payable in two months; one for $1850, payable in three months ; one for $1860, payable in four months; one for $1870, payable in five months; one for $1880, payable in six months; and the other for $1890, payable in seven months. After much consideration, I am satisfied that the transaction was, in substance, an exchange of the notes for the agreement, each being the consideration of the other. The language of the agreement is, that the bank bills were to be received in payment of the notes : .but the fair meaning obviously is, that the bills were to be in payment for the notes. It was contemplated that the notes were to be used by the payees, and it was provided that the notes were to be taken up at maturity by the makers. It is quite clear, I think; J. W. Edmonds, for the appellants. E. L. Fancher, for the respondents. that the makers might have enforced the agreement-of the payees, to give the hills according to its terms, treating the notes as the consideration of the agreement; and I think the case is the same in principle as if, instead of the writing executed by the payees of the note, the payees had at the time given their notes to the makers, in accordance with the provision for the weekly payments. In this view of the case the notes were business paper, (2 Denio, 621; 3 id. 187; 24 Wend. 94; 6 Duer, 538,) and the plaintiffs, under the evidence, are bona fide holders for a sufficient legal consideration of the note in suit, although they received the mote' as collateral security for a pre-existing debt. (1 Sand. S. C. R. 53 ; 5 id. 7.)” Judgment was accordingly entered in favor of the plaintiffs, against the defendants, for $2184.11, damages and costs; and the defendants appealed. By the Court, Bonney, J. The plaintiffs claim to recover the amount of a promissory note made by the defendants, payable to the order of M. L. Samuel & Co. and by them indorsed. The alleged defense is that the note was made by the defendants without consideration, and for the accommodation of Samuel & Co. who indorsed and delivered it to the plaintiffs as collateral security for an antecedent indebtedness. That the plaintiff paid no consideration or value therefor, and consequently cannot compel payment thereof. It was proved at the trial, that on the 18th June, 1857, the defendants made their six notes, of that date, (of which the note in suit is one,) payable respectively at from two to seven months, to the order of Samuel & Co. for different sums, amounting in the aggregate to $11,190, and delivered the same to Samuel & Co. who at the same time agreed, by con [85] tract in writing, to give the defendants, in payment for such notes, $400 weekly in Troy City Bank hills; that Samuel & Co. made one payment of $400 to the defendants under that contract; that on 22d June, 1857, the plaintiff received this note, with others, from Samuel & Co. with a request to place them to their credit; that Samuel & Co. then owed the plaintiff more than the amount of the notes so received, which indebtedness is not yet paid: that the plaintiff did not discount such notes but held them, with the assent of Samuel & Co., as security for their said indebtedness: that Samuel & Co. failed about a month after the making of said notes: that the defendants recovered judgment against them for $3000 and upwards, for other indebtednesses not including this note, and in supplemental proceedings procured the appointment of a receiver and payment of that judgment; and, in their claims presented to said receiver, the defendants included the amount of this and other notes made under the said contract, and also credited four hundred dollars paid by Samuel & Co. under the same contract. Upon this proof I cannot doubt that the note nowin question was, in the hands of Samuel & Co., business, paper made for consideration, and such as would be valid and collectable by any person who received the same from them for a valuable consideration, although such consideration were less than the amount of the note or were a past consideration; and no question of usury could arise upon a sale of the note by Samuel & Co. at any price. (Davis v. McCready, 17 N. Y. Rep. 230. Dowe v. Schutt, 2 Den. 621. Cameron v. Chappell, 24 Wend. 94.) If, then, the note in question was, as I suppose, not accommodation but business paper made for good consideration, in the hands of Samuel & Co., the defense stated in the answer, in my opinion, wholly fails. Samuel & Co. might dispose of the note for any consideration, or use it for any purpose, they pleased, and any lawful holder for value deriving title from them, could collect it. They did transfer the [86] note, before maturity, to the plaintiff, as collateral, security for an antecedent indebtedness which is still unpaid, and exceeds the amount of the note; and I think the plaintiffs are entitled to recover such amount from the defendants. [New York General Term, November 5, 1860. Sutherland, Bonney and Hogeboom, Justices.] The supposed defense rests entirely on the allegation that the note was accommodation paper, made without consideration ; and this allegation being disproved, the defense fails. If Samuel & Co. had retained the note and brought an action for its collection, the makers might perhaps have defended, not on the ground of original want of consideration, but because the consideration for which the note was made had failed; or they might have pleaded a counter-claim, arising out of the same contract or transaction under or in connection with which the note was given. But no such defense has been set up in this action, nor if stated in the answer, could it, in my opinion, have been maintained against these plaintiffs. The judgment appealed from should be affirmed with costs.