McElwee Manufacturing Co. v. Trowbridge — 43 N.Y. St. Rep. 238

Majority

p. 238

The McElwee Manufacturing Co., Resp’t, v. Benjamin Trowbridge, App’lt.

(Supreme Court, General Term, First Department,

Filed December 31, 1891.)

Headnote

Bills and notes—Bona fide holder—Counterclaim.

PlaintiS was the successor of a firm to which defendant had given notes. Its officers, with the exception of the president, were members of

p. 239

the former firm. In an action on said notes it was not shown that it paid, the firm any -consideration therefor; but it appeared that it had sold them before maturity, and upon their protest purchased them back. Held, that, plaintiff was not a holder for value before maturity of the paper, but the mere successor to the rights of the firm, and that if there was any defense, or offset as against the firm defendant h'ad a right to establish it.

Appeal from judgment entered upon the verdict of a jury-directed by the court.

B. G. GTielwood, for app’lt; J. M Bustis, for resp’t.

This action was the a foreign corporation, to recover upon two promissory notes made by the defendant, whereby he promised to pay to the order of Don A. Gaylord & Co. the sums in said notes mentioned. The complaint alleged that before maturity, Gaylord & Co. assigned the notes for value to the plaintiff.

The answer admitted the making of the notes, but denied their endorsement to the plaintiff, and alleged want of knowledge or information sufficient to form a belief as to the incorporation of the plaintiff, and set up by way of a separate and distinct defence, an offset against the amount of said notes because of a breach of contract by Gaylord & Co. out of which these notes arose.

It appears from" the evidence that the plaintiff in this action succeeded to the business of Gaylord & Go., and that Mr. Mc-Blwee, of said firm, was the treasurer of the plaintiff, and Mr. Gaylord, also of said firm, was the secretary. It further appeared, that one B. D. Cotter had paid for these notes to the plaintiff, and upon their being protested at maturity they were taken up by the-plaintiff, payment being made to Cotter therefor.

It would thus appear that the plaintiff was not the holder for value before maturity of this paper, but the mere successor to the rights of Gaylord & Co., whatever they were.

Upon the trial the defendant offered to prove the defence set up in the answer. This defence was ruled out, and an exception, taken, and a verdict directed for the plaintiff.

We think this was error. Whether the defendant could or could not establish the defence which he set up as an offset to the note-it is not now necessary to consider. But it is clear that the plaintiff was not the holder of this paper for value, before maturity,, without notice. It was the mere successor of Gaylord & Co. The •whole of the officers, as far as the record shows, with the exception of the president, were members of the firm of Gaylord & Co., and there is no proof that the plaintiff paid any special consideration upon the transfer of the notes to it.

The jury under these circumstances would have had the right to find that plaintiff merely represented Gaylord & Co., and if there was any defense or offset to the notes, had they been sued upon by Gaylord & Co., the defendant had a right to establish it

The claim that there was no evidence to show that the plaintiff had any knowledge of any agreement between the defendant and Gaylord & Co. is not well founded. As already stated, the evidence showed that the plaintiff had full knowledge because it was

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the mere successor of Gaylord & Co., and the members of that firm were the officers of the plaintiff.

The objection that the incorporation of the plaintiff was not established, would have been well taken had not improper evidence proving the incorporation been admitted without objection.

The judgment should be reversed and a new trial ordered, costs to appellant to abide the event

Barrett and Andrews, JJ., concur.