Powers v. French — 8 N.Y. Sup. Ct. 582

Majority

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DANIEL W. POWERS, Respondent, v. JOHN M. FRENCH, Jr., Impleaded with MARY FRENCH, Appellant.

Headnote

Promissory note—Accommodation indorsor—bona fide purchaser of note indorsed, by— Consideration of, presumed.—Pleadings—effect of admissions in.

A party having notice of the fact that a note has upon it an accommodation indorser, and who does not part with anything upon the faith of its transfer to him, stands in no better position than the maker, and cannot recover thereon against the indorser.

The distinction between a promissory note and other contracts, is, that in the former a consideration will be presumed, and in the latter it must be proved.

An admission in the answer, of the making, indorsement and transfer of a promissory note, does not preclude the defendant from showing that there was no consideration; that the indorsement was lent; and that the consideration paid by the plaintiff was in fact the money of the party to whom the indorsement was lent.

An appeal by the defendant from a judgment entered on a verdict at the Monroe Circuit.

This action was brought to recover the amount of a promissory note, alleged in the complaint to have been made by the defendant, Mary French, and delivered by her to the defendant John M. French, Jr., “ who thereupon indorsed the same and sold and delivered the same, for a valuable consideration, to the plaintiff.”

The defendant John M. French, alone answered. He set up in his answer, and offered to prove on the trial, that on the 27th day of May, 1865, the plaintiff had in his hands $2,600 belonging to John M. French, Sr., which was held by him in trust for the benefit of said French, Sr.; that upon that day said French, Sr., applied for the payment of said sum of $2,600 ; that the plaintiff stated that for certain reasons he desired the payment to be in the form of a loan to said French, Sr., and suggested that he procure the promissory note for that amount of his, said French senior’s, wife, and the indorsement of his son,- John M. French, Jr.; that accordingly, the said Mary French, wife of French, senior, made the note mentioned and described in the complaint, at his request, and the defendant, John M. French, Jr., indorsed it at his request, and that he then presented it to the plaintiff, who delivered to him the said sum of $2,600, which he had in his hands in trust, and that the note had no other or different consideration. The answer con

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tained no further matter, nor any denial of the allegations of the complaint. The court excluded the evidence offered, and decided that the answer did not set up a sufficient defense, and directed a verdict for the plaintiff.

W. F. Qogswell, for the appellant.

George F. Banforth, for the respondent.

Construing the defendant’s answer liberally, as we are required to do,^[1] it sets up the defense that the note in suit was made and indorsed without any consideration, but at the request, and solely for the accommodation, of the defendant’s father; that all this was done upon the suggestion of-the plaintiff, and that all the consideration which the plaintiff paid for the note, was the father’s own money. For the purposes of this appeal, the answer must be taken as true. Unless, then, he, who borrows a promissory note, can enforce payment of it against the lender, it is difficult to perceive why the facts stated would not defeat the action. The plaintiff is in no sense a bona fide holder. He had notice of the purpose for which the note was made and indorsed, and he parted with nothing upon the faith of the transfer thereof to him.

Under such circumstances, the plaintiff stands in no better position than the father would have occupied if he had retained the note, and given the plaintiff a voucher for the money which he received from the latter, in some other form. Want of consideration in a promissory note, will defeat a recovery, where the action is between the parties to it, or where it is brought by a transferree, affected with notice. The only distinction between promissory notes and other simple contracts, in this respect, is, that in the case of the former, unless the transaction be affected with fraud or the like, a consideration will be presumed until the contrary be shown; while in the case of the latter, it must in general affirmatively appear that there was a consideration therefor.^[2]

* Code, § 159.

† † 2nd Gr. Ev., § 172 ; Story, Prom. Notes, § 181; Story, Bills, § 178; Byles, Bills, § 76, 3d ed.

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The defendant could not deny, and therefore had to admit, the making, indorsement and transfer of the note, as alleged in the complaint. His omission to deny those allegations, had that effect —• no more. Stretching the admission to the utmost, its only effect was, that the note, by its terms, imported a consideration, and that the defendant, by his indorsement in blank, sold and delivered it to the plaintiff for a valuable consideration. The allegations of the complaint related to nothing aliunde the written instrument. The admission of them proved nothing more than that which the law would have presumed from the production of the note, or from pleading it according to the legal effect of the contracts of the maker and indorser respectively. The allegation, respecting the sale and delivery of the note to the plaintiff, does not necessarily imply that such transfer was made directly by the defendant, and consequently does not involve an averment (contrary to the fact) that the consideration was .received by the defendant. So understood, the defense does not contravene the admission, but is merely one, sub modo, and is qualified by the facts stated in the answer.

Those facts were offered to be proved on the trial, and we think they would have established a complete defense, by showing that there was no consideration whatever for the note; that it was in fact lent to the elder French; and that, although a valuable consideration was nominally paid for it by the plaintiff, such consideration in fact proceeded from the elder French, and that the transaction was contrived by the plaintiff.

Taking the case as thus represented, there can be no pretense of a right of recovery against the plaintiff by the elder French, for the money received by the former, belonging to the latter. Those moneys were in fact paid by the plaintiff to the elder French, and the effort to make the transaction assume the form of a purchase of a void note, was simply nugatory.

The judgment must be reversed, and a new trial granted, with costs to abide the event.

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