Geyer v. Lawrence — 19 N.Y. St. Rep. 353

Majority

p. 353

Adam Geyer, Appl’t, v. George Lawrence, et al., Resp’ts.

(Supreme Court, General Term, First Department,

Filed November 24, 1888.)

Headnote

Bills and notes—Payment of a pre-existing indebtedness by tbans^ FEB OF NOTE—RIGHTS OF HOLDEB.

The bolder of a note taken after maturity, not upon any new consideration, but as collateral security for a pre-existing indebtedness, is not a Senos fide holder for value, and cannot claim any greater rights than his transferee had.

Appeal by the plaintiff from that portion of the judgment entered on the report of the referee which dismissed the complaint as to all of the defendants, except Brewster &

p. 354

Becker. The action was brought against Henry D. Brewster, Anson F. Becker, George Lawrence and Newton N. Lawrence, to recover the amount of two notes made by Brewster & Becker, and indorsed by Lawrence Bros. Co.

A. Edward Woodruff, for appl’t; J. L. Bennett, for resp’ts..

In the fall of 1881, the firm of Geyer Bros, who were doing business at Rahway, N. J., were indebted to the firm of Lawence Bros. Co., of Oneida, N. Y., in the sum of about $8,000, a part of which consisted of a note .of $2,000. When this note became due, Geyer Bros, being unable to pay it, Lawrence Bros. Co. who were liable on it as indorsers, having negotiated it, were asked by Geyer Bros, to assist them further in carrying the indebtedness. Geyer Bros, had made a draft on Lawrence Bros. Co. for the amount payable in five days. Lawrence Bros, Co. refused to pay the draft, but made another draft back on Geyer Bros., with the funds of which they were to pay the above draft, and to enable Geyer Bros, to pay this last draft, they loaned the said Geyer Bros, three notes which had been given to them by the firm of Brewster & Becker, of Weeds-port, N. Y., which were the subject manner of the opinion given in the case of this plaintiff against Brewster and others, known as Action No. 1, considered at the present term of court. Ante, p. 357.

When these three notes became due respectively, Geyer Bros, were still unable to pay them, and again called upon Lawrence Bros. Co. for assistance. The result of the negotiations was, that Brewster & Becker executed five notes with which to take up and retire the three notes which had already matured and had gone to protest.

By these several transactions, it appears that the debtors, as between Geyer and Lawrence Bros. Co., were the Geyer Bros, and not the Lawrences. As a part of the arrangement between the parties, the note of $2,000 executed by Geyer Bros, was to be taken up by Geyer Bros, at maturity and the Lawrences were to pay the five notes, of which the’ notes described in the complaint in this action 'are two.

The $2,000 note above mentioned was discounted at the bank of Mack Bros., of Weedsport, N. Y., Geyer Bros, having failed to perform this part of their agreement to pay the $2,000 note at maturity, the same was paid or taken up by Lawrence Bros. Co., by their substituting their own paper to the amount thereof, which they subsequently, in fact, paid.

It will thus be seen that, as between Geyer Bros, and Lawrence Bros. Co., no action can be maintained by Geyer Bros, against Lawrence Bros. Co. upon any of this commercial paper.

Does the plaintiff stand in any better situation than

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Geyer Bros.? He manifestly does not, because it is admitted in this action that the notes in suit were given to him by Geyer Bros, after they were due, and that he took them, not upon any new consideration, but as collateral security for an indebtedness theretofore due and owing him by Geyer Bros. He is not, consequently, a bona fide Bolder of the paper for value, and cannot claim any rights in this action than his transferors had.

The payment by Geyer Bros, of the $2,000 note was, under the arrangement, as shown by the evidence, a condition precedent to any liability as between the parties of Lawrence Bros. Go. upon these several notes. Having failed to pay such $2,000 note, and such failure compelling the Lawrence Bros. Co. to pay the same, the notes in suit became void as between the original parties to the agreement, and consequently they are unavailable to any person who is unable to show himself a purchaser in good faith and for value.

The condition of the defendants Brewster and Becker, who do not appeal, is different. They are the original and principal debtors upon the paper, and the referee properly has given judgment against them for the amount thereof.

The judgment appealed from should be affirmed, with ■costs.

Van Brunt, P. J., and Bartlett, J., concur.