Manning v. Lyon — 24 N.Y.S. 265

Majority

p. 265

(70 Hun, 345.)

MANNING v. LYON.

(Supreme Court, General Term, First Department.

June 30, 1893.)

Headnote

1. Payment—Accepting Promissory Note op Third Person.

Where a purchaser, pursuant to the contract of sale, delivers to the seller for the price of the goods a note made by third persons, and indorsed by himself, (the purchaser,) and gives to the seller a chattel mortgage on the goods, conditioned for the discharge of all liability as indorser of the note, but containing no acknowledgment of an indebtedness to the seller or promise to pay any sum, it will be presumed that the note was received in payment for the goods, and the seller cannot recover on the original indebtedness.

3. Promissory Notes—Indorsers.

The liability of the purchaser was merely that of an indorser, and could not be enforced, in the absence of demand and notice of nonpayment to him and prior indorsers.

3. Same—Failure to Make Demand.

Evidence that there were several notes of the same makers besides the note in suit, payable at the same bank; that no funds were provided for their payment; and that they were not paid,—does not show that the makers and prior indorsers were insolvent before the maturity of such note, and therefore does not excuse failure to demand payment.

4. Same-Insolvency op Maker.

In New York, mere proof of the insolvency of the maker of a note is not a sufficient excuse for failing to present the note for payment, and to-notify the indorser of the dishonor.

6. Harmless Error—Compelling Election by Plaintipp.

Error cannot be predicated on a ruling which compels plaintiff! to elect on which count of his complaint he will proceed, when he is not entitled to recover on either.

Appeal from circuit court, New York county.

Action by James S. Manning, as surviving partner of the firm, of A 0. Manning & Co., against James W. Lyon, to recover the price of an engine, and to hold defendant liable as indorser of a certain note transferred by him to plaintiff. From a judgment entered on the verdict of a jury directed by the court in favor of defendant, plaintiff appeals.

Affirmed.

On the 20th day of January, 1890, A. C. Manning & Co. and James W-Lyon entered into a written contract by which the former agreed to sell and the latter to purchase an Otto gas engine for 81,250, to be paid for when set up and in running order, as follows: “8350.81 cash on completion of the work, and the balance in a promissory note made by the Salmon River Paper Co, for the sum of 8S99.19, and interest at the rate of five per cent., dated the 2d day of December, 1889, payable to the order of Clark, Neergaard & Co., 12 months after date, indorsed by the said Neergaard Co., also by J. W. Lyon & Co. and James W. Lyon, whose indorsement for the payment of the note is to be secured by a chattel mortgage on said Otto gas engine and fixtures.” On January 27, 1890, the engine was delivered in running order, and on that day the defendant paid 8350.81 in cash, and indorsed and delivered the promissory note described in the contract, which was payable at the American Exchange National Bank. On the date last mentioned, the defendant executed and delivered to the plaintiff a mortgage on the gas engine, as provided by the contract, “for securing the payment of the money hereinafter mentioned.” This mortgage contained the following condition: “Upon condition that if the said party of the first" part shall and do well and truly pay unto the parties of the second part, their executors, administrators, or assigns, and discharge all my liability as indorser of and upon a certain promissory

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note,”—describing the note mentioned in the contract of sale. The note was not presented for payment at the time when and place where payable, nor was it protested.

Argued before O’BRIEN, FOLLETT, and PARKER, JJ.

Kneeland, Stewart & Epstein, (John J. Connelly, of counsel,) for appellant.

Geo. W. Van Slyck, for respondent.

In the complaint the sale of the engine and the indorsement of the note were set out, and the plaintiff sought to recover on the original indebtedness, and also on the contract of .indorsement. Before the case was opened, the defendant moved that the court compel the plaintiff to elect whether he would seek to recover on the original indebtedness or on the indorsement. This motion was granted. The plaintiff excepted, and then elected to recover on the contract of sale. After the case had been opened, but before any evidence was offered, the plaintiff, with leave of the court, reconsidered his election, and elected to seek to recover on the defendant’s indorsement.

Assuming that the court erred in compelling the plaintiff to elect between these consistent causes of action, (Abb. Tr. Brief, § 704, and cases there cited,) we think it was an error without prejudice, causing no harm to the plaintiff. The contract of sale and the chattel mortgage were received in evidence without objection, and no evidence offered by the plaintiff to establish the allegations was rejected. If, under all the evidence, the plaintiff was not entitled to a recovery on the original indebtedness, he was not harmed by the election he was compelled to make. Whether the defendant was liable upon the original indebtedness arose ■upon the original contract, chattel mortgage, and the testimony ■given on the trial, which was wholly undisputed, and was a question of law for the court. It is expressly provided in the contract that $899.19 of the purchase price of the engine should be paid by this note, indorsed by Clark, Neergaard & Co., by J. W. Lyon & Co., •and James W. Lyon. It is recited in the chattel mortgage that it was given for securing the payment of the money thereinafter mentioned. There is no provision in the mortgage acknowledging an indebtedness of the mortgagor to the mortgagee, nor does it contain a promise to pay any sum. The condition is that the party of the first part .shall pay to the parties of the second part, and ■discharge all his liability as indorser upon the note described. When a note made by a third party is exchanged for property, the presumption is that it was received in payment of the price •of the property. Whitbeck v. Van Ness, 11 Johns. 408 ; Noel v. Murray, 13 N. Y. 167 . There is nothing in the evidence which tends to rebut this presumption, and, upon the entire record, we think the plaintiff was not entitled to recover on the original in-debtedness.

Is the defendant liable on his indorsement? The note was not presented for payment when due, and no notice of nonpayment was

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given to either indorser, nor is there any evidence that either indorser waived presentation of the note for payment or notice of its dishonor. The only excuse for not presenting it alleged in the complaint is the averment that, before the maturity of the note, the maker and first indorser became, and ever since have remained, insolvent. This fact was not proved. The only evidence bearing on this question was that several notes of the same character as the one described in the complaint were payable at the American Exchange National Bank; that no funds were provided for their payment; and that they were not paid. It was not shown, nor was it attempted to be shown, that the maker or first indorser had no property out of which the sum due on the note, or some part of it, could not have been collected. Such a state of facts affords no legal excuse for the plaintiff’s failure to present the note for payment, and his neglect to notify the defendant of its dishonor. In this state the mere proof of the insolvency of the maker of a promissory note is not a sufficient excuse for failing to present the note for payment, and to notify the indorser of its dishonor. Smith v. Miller, 52 N. Y. 545 .

Plaintiff did not ask to have any question of fact submitted to the jury, nor did he except to the direction of a verdict for defendant. Of course, this court has power to grant a new trial, even though no exception has been taken, in case the court below has heard or decided the issue on a wrong theory, and it appears that injustice has been done the defeated party; but the case at bar does not call for the exercise of this power.

The judgment should be affirmed, with costs. All concur.

Cases cited

Noel v. Murray 13 N. Y. 167 N.Y. p. 266
Smith v. Miller 52 N. Y. 545 N.Y. 1873-05-06 p. 267