Manhattan Co. v. Reynolds and Another. — 2 Hill & Den. 140

Majority

p. 140

Manhattan Company vs. Reynolds and another.

Headnote

Though the plaintiffs’ cashier, by a special endorsement of the note sued upon, had ordered it to be paid to another, yet it appearing this was done merely by way of transmitting it to the latter, as agent, for the purpose of collection; held, that the endorsement constituted no objection to the plaintiffs’ right of recovery, and might either be stricken out at the trial, or on the final hearing of the case at bar.

The endorsee of a negotiable note to whom it has been transferred,, simply as collateral security, is not entitled to be regarded as a bona fide holder in the commercial sense.

If, however, the maker afterward pays the note to the payee, though in entire ignorance of the transfer, it will constitute no defence for the former as against the endorsee.

p. 141

Where a transfer passes only an equitable interest in a chose in action, the debtor may safely treat with the payee till he has notice: otherwise where the legal interest passes by the transfer.

Assumpsit, tried at the Albany circuit, on the 20th of October, 1840, before Cushman, C. Judge. The action was brought to recover the amount of a promissory note, of which the plaintiffs claimed to be endorsees. The note was payable ninety days after date, to B. Fenner & Co., or order; and was dated March 27th, 1837. The defendants were makers thereof When received by the plaintiffs, the note ivas endorsed in blank by B. Fenner & Co. On its being produced at the trial, there was an endorsement over the signature of B. Fenner & Co., made by the plaintiffs’ cashier, thus: “ Pay to E. E. Kendrick or order.” It appeared that the cashier put this endorsement upon the note before the commencement of this suit, for safe remittance to Kendrick, to whom it was sent for the purpose of collection; and that Kendrick never had any interest in the note.

After proving the making of the note, and the other facts above mentioned, the plaintiffs rested; whereupon the defendants moved for a nonsuit on the ground, that the legal title to the note was not in the plaintiffs when the action was commenced. The court, however, overruled the motion.

The defendants then proved that the note was delivered to the plaintiffs on the 3d of April, 1837, and was received by them as collateral security for a then existing debt due from B. Fenner & Co.; that the debt was still unpaid; and that the defendants had paid the note to R Fenner & Co. after the transfer to the plaintiffs, and before having any knowledge of it.

A verdict was taken for the plaintiffs , subject to the opinion of the court. The defendants now moved for a new trial on a case.

S. Stevens, for the defendants.

JIT. T. Reynolds, for the plaintiffs.

p. 142

By the Court,

The motion for a nonsuit was properly denied. The endorsement to Kepdrick was to create an agency; and might have been stricken out at the trial.^[1] It may now be done nunc pro tune.

The transfer to the plaintiffs being for collateral security, did not, it is true, render them bona fide holders in a commercial sense, so as to preclude a defence existing at the time of the transfer; but it carried a qualified property to the plaintiffs, which the payees had no power afterwards to divest or affect in any way. Of this, we think the defendant was bound to take notice at his peril; and that the payment, if any, to B. Fenner & Co. the payees, was therefore in the defendants’ own wrong. The distinction lies between the transfer of a legal and an equitable interest in a chose in action. In the latter case, the debtor may treat with the payee till he has notice; in the former, not.

New trial denied.^[2]

(a) (a) A special endorsement by the plaintiff, appearing on the note at the trial, prima facie the right of action is in the endorsee, and unless the former shows title by a re-transfer, or that the endorsee had no interest beyond a mere agency, the action will fail. Possession of the note by the plaintiff, will not be sufficient to overcome the presumption arising from the endorsement. (Hart et al. v. Windle, 15 Lou.. Rep. (Curry) 265.)

(b) (b) Benedict v. Dix, (cited 2 Cowen’s Treat. 742, 2d ed. 8. C. p. 462,1st ed.) seems by this case to have been overruled.