Broderick & Bascom Rope Co. v. McGrath

The action was to recover upon a promissory note made by the defendant and delivered to the Henry J. McCoy Company in payment for a steam hammer, and by the Henry J. McCoy Company indorsed and delivered before maturity to the plaintiff in payment of a pre-existing debt. The trial justice admitted evidence, over plaintiff’s objection and exception, tending .to prove that- the steam hammer was not as represented and had been returned by Mary McGrath to the Henry J. McCoy Company. Judgment was given for the defendant upon the theory of a failure of -consideration.

From the decision of Coddington v. Bay, 20 Johns. 637 , 11 Am. Dec. 342 , until the enactment of the Negotiable Instruments Eaw (Laws 1897, c. 612; Consolidated Laws, c. 38), it was the law of this state that, in order to constitute one a holder for value, it was necessary that he part with some present consideration. Therefore, where a holder received a note as collateral security for a pre-existing indebtedness, without discharging the debt or granting extension or forbearance on account thereof, such a holder was not a holder for value, and was subject to the equities existing between the original parties. The decisions in this state in this regard were not in harmony with the decisions in the federal and many state courts. The Negotiable Instruments Law was proposed by the Commission for the Promotion of Uniformity of Legislation in the United States. That law provides:

Section 51: “What Constitutes Consideration.—Value is any consideration sufficient to support a simple contract. An antecedent or pre-existing debt constitutes value, and is deemed such whether the instrument is payable on demand or at a future time.”

Section 52: “What Constitutes Holder for Value.—Where value has at any time been given for the instrument, the holder is deemed a holder for value in respect to all parties who became such prior to that time.”

. Courts of this state at first refused to recognize in this enactment the legislative intent to change the rule that had been recognized and enforced in this state since 1822 and held that this provision of the Negotiable Instruments Law had not abrogated the rule announced in Coddington v. Bay, supra. See Sutherland v. Mead, 80 App. Div. 103 , 107, 80 N. Y. Supp. 504 ; Roseman v. Mahoney, 86 App. Div. 377 , 378, 83 N. Y. Supp. 749 ; Bank of America v. Waydell, 103 App. Div. 28 , 33, 92 N. Y. Supp. 666 , affirmed 187 N. Y. 115 , 79 N. E. 857 . But the later cases, without expressly overruling these decisions, have held that the Negotiable Instruments Law has changed the rule in this state, and brought our law in harmony with that of other jurisdictions, and a pre-existing debt, without extension or forbearance, is a sufficient consideration to constitute a holder for value. King v. Bowling Green Trust Co., 145 App. Div. 398 , 402, 129 N. Y. Supp. 977 ; Maurice v. Fowler, 78 Misc. Rep. 357 , 138 N. Y. Supp. 425 ; Martin L. Hall Co. v. Todd, 139 N. Y. Supp. 111 . The desirability of uniformity in the laws of various states with reference to negotiable instruments is so

In the case at bar the plaintiff was a holder of the note for value, and the equities that might have existed between the_ maker and payee were not available to the maker as a defense against the indorsee. Negotiable Instruments Law, § 96. Failure of consideration is not ■ one of the defenses specified in section 94 of the Negotiable Instruments Law, which throws upon the plaintiff the burden to establish his bona fide position.

Judgment reversed, and new trial ordered, with costs to appellant to abide the event. All concur.