Lombard v. Central National Bank — 22 N.Y. St. Rep. 268

Majority

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Isabella K. Lombard, Resp’t, v. Central National Bank of Troy, App’lt.

(Supreme Court, General Term, Third Department,

Filed March 16, 1889.)

Headnote

1. Bills and notes—Title to bond as against owner—When question FOR THE JURY.

The plaintiff was the owner of a certain railroad bond which she left with one Justin Kellogg for safe keeping. Kellogg pledged the bond to

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tlie defendant as security for a note of one Giles B. Kellogg, and endorsed by Mm. Upon payment of the note, he demanded back the bond, which the bank refused, claiming to hold it as collateral for other debts. Evidence was offered tending to show that when the bond was pledged, it was pledged for other debts of Justin and Giles B. Subsequently the bank did renew notes of Giles endorsed by Justin. Upon those facts a verdict was directed for the plaintiff: Held, that the case should have been submitted to the jury.

3. Same—Effect of acceptance of new security for old debt.

Where a creditor surrenders an old note and takes a new note in its place in consideration of a negotiable security put into his hand, he deprives himself of the valuable right of suing the debt at once, accepts a new liability instead of the old one, and does this in consideration of a negotiable security delivered to him for the purpose of inducing this delay.

The plaintiff, prior to April 24, 1877, was the owner of a Troy and Boston Railroad bond, $1,000, which she had left with her brother Justin Kellogg for safe keeping. That is the fair construction of her testimony, although in some places she uses language inaccurately, and so the fact is stated in the brief of defendant’s counsel.

On that day Justin Kellogg pledged the bond to defendant as security for a note of Giles B. Kellogg, endorsed by him. This note was twice renewed, and the last renewal was paid August 9, 1878. On applying for the surrender of the bond at that time, or shortly after, Justin Kellogg was informed that the bank claimed to hold it for other notes.

The evidence on that subject is, in substance, that in May, 1878, Justin Kellogg had a conversation at the bank with some of its officers in regard to the liability then existing of himself, and also of Giles B. Kellogg, on notes endorsed by Justin Kellogg; that Justin Kellogg then said that the bank then held securities amounting at par to ■something like $600 or $800 less than the liability; that he was willing that the bank should hold as they had done, securities deposited by him as collateral security to his own paper, and to that of Giles B., endorsed by him.

The bond in question was not specially mentioned, except that one of the bank officials testifies that Justin Kellogg mentioned the securities, and among them a Troy and Boston Railroad $1,000 bond. He further says that after the conversation was over, and Justin had agreed to pay the $400 note (renewal of the $450), they agreed to renew them.”

Afterwards the bank did renew notes of Giles B., on which Justin was endorser, to the amount of several thousand dollars. Upon these facts the bank claims that it has ,a lien on this bond superior to plaintiff’s title.

The learned justice directed a verdict for plaintiff, and -defendant appeals.

Charles E. Patterson, for app’lt; Esek Cowen, for resp’t.

—It is suggested that this is not a case where the party to a negotiable instrument claims to assert

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some defense which would be valid against the original holder, and where the question is whether such defense is-valid against the present holder; but that the present case-presents a question of title to the bond, and not one of' defense thereto. In the cases decided on this subject," we do-not find that any distinction is made. Most, of the cases have been of the former kind; a few of the latter. Still, so-far as we can see, both in the text books and in the cases,, the same course of argument has been applied in each.

The point on which most discussion has been had, and some _ disagreement has existed, is as to what constitutes a. sufficient consideration, to protect the bona fide purchaser. And that is the question in this case.

We must assume all which the jury could have found in defendant’s favor, as a verdict was directed against it. The-jury then might have found that in consideration of the pledge of this bond, the defendant agreed to renew the notes of Justin Kellogg, and of Giles B. Kellogg, and that in pursuance of that agreement, they did make such renewals. The bank shows in its possession notes of a date later-than day of the alleged agreement, and these are stated to-be renewals.

In Phœnix Insurance Co. v. Church ( 81 N. Y, 218 , at page 225), after a review of numerous cases, it is said that the surrender by a creditor of the past due notes of a. debtor constitutes the creditor a holder for value, and that-it is immaterial whether or not by renewing the note the creditor parted with his entire right of action.

In Oates v. National Bank ( 100 U. S., 239 ), it was decided that an extension of time in consideration of the indorsement to the creditor of a negotiable note, made the creditor a holder for value, so that his rights were not affected by equities between antecedent parties.

This point has been so thoroughly considered in those and other cases, that we do not think it profitable to cite-the many cases in which the subject has been treated. There may not be perfect consistency in them. When a. note is renewed, the old note is surrendered. True, the-debt exists under another form. But the creditor cannot bring suit upon it until the new note has become payable.

If the creditor surrenders an old note and takes a new note in its place, in consideration of a negotiable security put into his hands, he parts with value. If the negotiable-security is put into his hands to induce him to promise to-renew the old note, and subsequently he does so renew before notice of the defect of title to the security, the situation is the same.

The creditor deprives himself of the valuable right of suing the debt at once, accepts a new liability instead of the-

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old, and does this in consideration of a negotiable security delivered to him for the purpose of inducing this delay.

We think, therefore, that a verdict should not have been directed for the plaintiff, but that the case should have gone to the jury.

Judgment reversed, new trial granted, costs to abide ■event.

Landon, J., concurs.