Mohawk Bank v. Corey — 1 Hill & Den. 513

Majority

p. 513

Mohawk Bank vs. Corey & Livermore, impleaded, &c.

Headnote

A note drawn payable at the bank of A., was endorsed by C. and L. for the accommodation of the maker, to enable him, as he told the endorsers, at the time, to taise money at the bank for purchasing barley; instead of which, the maker caused the note to be applied in payment of a debt which he and V. owed at another bank: Held, not such a diversion of the note from its alleged object as to discharge the endorsers, it not appearing that, at the time of endorsing, the use to which it might be applied was at all important to them.

Otherwise, semble, had the note been made for the purpose of taking up another note in the bank of A. to which the endorsers were parties.

Where a bank received B.’s note, endorsed by C., L. and V., before it became due, in payment of other notes of B. endorsed by V. alone, thereupon delivering up the latter and discontinuing a suit commenced thereon; held, a sufficient parting with value to entitle the bank to the rights of a bona fide holder.

Assumpsit, on a promissory note, tried at the Schenectady circuit, March 11th, 1840. The defendants were Borst, Corey, Livermore, and Voorhees—Borst being the maker of the note in question, Corey and Livermore first endorsers, and Voorhees second endorser thereof. Corey and Livermore alone defended the suit. On the trial they called Borst, the maker, as a witness, who testified to the following facts:

The defendants Corey and Livermore endorsed the note for his (Borst’s) accommodation, to enable him to get it discounted at the Albany City Bank, with a view of raising money to buy barley: They (C. and L.) enquired what he was going to do with the money, and he tol'd them he intended to buy barley. Corey hesitated some about endorsing, but whether before or after being told what the object of the note was, witness Was unable to state. The note was offered at the Albany City Bank, and they •refused to discount it. Subsequently, and before the note became due, he (Borst) transferred it to Voorhees, to be applied on a judgment which the latter held against Borst. It was endorsed by Voorhees and by him delivered to the plaintiff’s attorney and agent," in payment and satisfaction

p. 514

of two other notes which Yoorhees had endorsed for Borst’s accommodation, and which were then held by the plaintiffs. Yoorhees and Borst had suffered the last mentioned notes to be protested and sued by the plaintiffs; and these were delivered to Borst, and the suit thereon discontinued, on the plaintiffs’ attorney and agent receiving .from Yoorhees the note in question. The judgment which Yoorhees held against Borst was given to secure him as endorser of one of the notes so delivered up to Borst.

Upon the above facts the defendants’ counsel asked the court to instruct the -jury,' that the diversion of the note in question, as testified by Borst, from the purpose .for which Corey and Livermore endorsed it, was a defence as respected them; and that the plaintiffs, having taken it for a pre-existing debt, and parted with nothing valuable on the faith of it, were not entitled to recover as against C. and L. The circuit judge, however, held that the facts proved did not constitute a defence, and directed a verdict for the plaintiffs; to which the defendants’ counsel excepted, and now moved for a new trial on a case.

S. Stevens, for defendants.

M. T. Reynolds, for plaintiffs.

The endorsers, Corey and Livermore, lent their names to Borst, the maker, for the purpose of- giving him credit, and he was at liberty to negotiate the note in any way he thought proper. Borst says, he got them to endorse it for the purpose of enabling him to get it discounted at the Albany City Bank, to raise money to buy barley. But it does not appear that the endorsers had any interest in having it discounted by the Albany City Bank, or that the use which Borst should make of the money was in any way important to them. They merely asked Borst what he was going to do with the money, and he told them he was going to purchase barley with it. If

p. 515

the note had been made for the purpose of taking up another note in the Albany City Bank, to which the endorsers were parties, it would have presented a different question. But here, although the endorsers had the curiosity to enquire what use the maker designed to make of the note, they had no interest in the question; and, so far as appears, they would just as readily have lent their names if the maker had told, them he wished to take up his notes in the plaintiffs’ bank—the use which he afterwards made of the paper. Within the proper legal sensé of the term, there has been no diversion of the note from the purpose for which it was made and endorsed. The endorsers lent their names for the purpose of giving the maker credit generally, and without any concern.with the use which should be made of that credit.

But if .there had been a diversion of the note from its proper use, the plaintiffs would still be entitled to recover. They not only took the note in payment of two other notes which they then held against Borst endorsed by Yoorhees, but they gave up those securities. They also gave up, of course, the suit which had been commenced and was then pending on the two notes. This is a stronger case than that of the Bank of Salina v. Babcock, ( 21 Wend. 499 .) There have been several other' decisions to the same effect, which are not yet published.^[1] It is not denied that the plaintiffs are bona fide holders of the paper, and it is equally clear that they paid a valuable consideration for it.

New trial denied.

(a) (a) See Bank of Sandusky v. Scoville, ( 24 Wend. 115 .)

Cases cited

Bank of Salina v. Babcock 21 Wend. 499 N.Y. Sup. Ct. p. 515