Lalor v. Yetter

Per Curiam. The application of the following settled principles of law requires the reversal of the judgment appealed from: . 1. Where a person is induced to sign or indorse a note by false representations, he is only liable to one who takes the note in good faith, and for a value. Hart v. Palmer, 12 Wend. 523; Stewart v. Small, 2 Barb. 559; Bank v. Diefendorf, 25 N. E. Rep. 402; Bank v. Green, 43 N. Y. 298. As a general rule, the indorsement of a negotiable note is, in itself, prima facie evidence that the indorsee has paid value for it, but when the payee has procured the note by fraud, this presumption is rebutted, and the holder cannot recover [639] without proving that lie has paid value. 1 Daniel, Neg. Inst. p. 612; Edwards, Bills & N. 686; Bank v. Green, supra; Wilson v. Rocke, 58 N. Y. 642; Seymour v. McKinstry, 106 N. Y. 240, 12 N. E. Rep. 348, and 14 N. E. Rep. 94; Hale v. Shannon, ante, 129. 2. To entitle a party to the character of a bona fide purchaser, without notice of a prior right or equity, he must not only have obtained the legal right to the property, but he must have paid the purchase money or some part thereof, or have parted with something of value. Clark v. Gallagher, 20 How. Pr. 308; Morton v. Rogers, 14 Wend. 576. Receiving a note which has been fraudulently put In circulation merely as payment for a preceding debt, no new credit being given, and no security being discharged or relinquished, nor any new responsibility incurred, is not parting with value such as to enable the holder to enforce the bill against an accommodation party, or to hold it against a true owner, orto hold it free of equities against his transferrer. Coddington v. Bay, 20 Johns. 637; Stalker v. McDonald, 6 Hill, 93; Farrington v. Bank, 24 Barb. 555; Moore v. Ryder, 65 N. Y. 438. See cases collated in 4 Lawson, Rights & Rem. § 1581. Receiving negotiable paper in payment of a debt, giving a receipt for it, and balancing the account on the creditor’s books, no securities being surrendered, do not constitute a parting with value. Spear v. Myers, 6 Barb. 445; Paine v. Cutter, 13 Wend. 605; Lawrence v. Clark, 36 N. Y. 128. 3. The purchaser of dishonored paper takes it subject to all legal or equitable defenses which existed against it in the hands of the person from whom he received it. DeMott v. Starkey, 3 Barb. Ch. 403. One who receives an overdue note is but the assignee of a chose in action, and takes only such title as was possessed by his assignor. Farrington v. Bank, 39 Barb. 645; Britton v. Hall, 1 Hilt. 528. 4. Rejecting the evidence, which would have defeated the right of recovery under the principles stated, was error for which the judgment appealed from must be reversed, and a new trial ordered, with costs to the appellant to abide the event.