Hay v. Jaeckle

This action was brought upon a promissory note dated June 5, 1891, made by the defendant Jaeckle to the order of A.

The defendant Jaeclde contends that at the time the note was given Gr. D. Briggs agreed to have it discounted at the Farmers and ileehanics’ Bank, in Buffalo, where he had, or claimed to have, securities, and that he also agreed to take care of it when it became due. It appears that the note was not discounted at the bank, but was sent to the defendant Buck, who sent it to the plaintiffs with a request that they discount it and send him $400 in money and apply the balance on his account. The .plaintiffs discounted the note as requested and sent over $300 to Buck in cash and credited him with the balance. The note was not paid at maturity, but was duly protested for non-payment.

On the 8th day of December, T891, a new note was given by the defendant A. C. Briggs, payable to the order of J. II. Buck, for $550, which was delivered to the plaintiffs.

The defendant Jaeckle claimed upon the trial that the new note of December eighth was given in payment of the first note. This was denied by the plaintiffs, who contend that it was taken as additional security for the unsecured-accounts.

The learned judge at the trial held, as matter of law, that the plaintiffs were bona fide holders of the first note, and were entitled ,o recover thereon unless the second note was given in payment, and not as collateral security, for the first note.

It is now urged by the appellant that the court erred in holding, as a matter of law, that the plaintiffs w'ere bona fide holders of the first note. It appears from the evidence that the plaintiffs took che note before maturity and paid full value therefor. These facts' are not disputed, and there is no evidence in the -case ¿hat would raise even a suspicion that they purchased the note in bad faith.

The defendant Buck, about the fourteenth of J une, mailed a letter, with the note inclosed, to the plaintiffs, requesting, them to discount it and send him their check for $400, and to apply the

' In the case of Canajoharie Nat. Bank v. Diefendorf ( 123 N. Y. 201 ) the court held that “ The payment of value for negotiable paper is a circumstance to be taken into account with other facts in determining the question of the bonafides of the transaction, and when full value is paid is entitled to great weight. But that fact is never conclusive, except in the absence of evidence tending to show notice or bad faith.”

The defendant Jaeckle offered no evidence showing actual notice or bad faith on the part of the plaintiffs, and there were no suspicious circumstances as to the bonafides of the plaintiffs in purchasing the note; therefore, the learned judge committed no error in not submitting that question to the jury.

The learned counsel for the appellant also contends that while the defendant Jaeclde gave the note and intended that it should be a negotiable promissory note, yet, on account of the agreement with Briggs that it was to be discounted at the Farmers and Mechanics’ Bank in Buffalo, it lost its negotiability, and the failure to get it discounted at that bank was a fraudulent diversion of the note, and, therefore, the plaintiffs cannot recover.

I think it is very doubtful whether the defendant Jaeclde ever gave his note relying upon Briggs’ representations. The note was made payable at the American Exchange Bank, and not- at the Farmers and Mechanics’ Bank. There can be no question but what the defendant Jaeckle gave his note to Mrs. Briggs to enable her to raise money on it, and to use it as she saw fit. What difference, then, did it make to him who discounted the note ? How was he injured in any respect because the note was not discounted at the Farmers and Mechanics’ Bank ? His injury arose from the fact that

The elementary writers, in discussing the subject in reference to the diversion of commercial paper, all agree that where such paper is given to enable a payee to get the money at a particular bank, and he procures it to be discounted at another bank, it does not constitute a diversion of the paper, from the purpose for which it was given.

Daniel, in his work on Negotiable Instruments (§ 792), lays down the rule in reference to what amounts to a diversion of accommoda-' tion paper. He says: “In order to constitute a misappropriation there must be a fraudulent diversion from the original object and design ; and it is now well settled that where a note is indorsed for the accommodation of the maker, to be discounted at a particular -bank, it is no fraudulent misappropriation of the note, if it is discounted at another bank or used in the payment of a debt or otherwise for the credit of the maker. If the note 1ms effected the substantial purpose for which it was designed by the parties, an accommodation maker or indorser cannot object that the accommodation was not effected in the precise manner contemplated.” (Schepp v. Carpenter, 51 N. Y. 602 ; Bigelow on Bills & Notes, 456.)

It was held in Brooks v. Hey (23 Ilun, 372) that “ when a note is made for the general accommodation of the payee and no restrictions are placed upon him as to its use,- he may use it in any way which seems beneficial to him, provided it is not negotiated usuriously, and his failure to apply the proceeds according to a prior agreement with the maker constitutes no defense to the latter in an action brought against him thereon.” The learned j udge says : “ The failure on the part of a payee of an accommodation note to appropriate the proceeds according to a ju’ior agreement, is no defense for the accommodation maker, otherwise there could be no recovery on an accommodation note.” (Merchants’ Nat. Bank v. Comstock, 55 N. Y. 24 .)

We must, therefore, hold that the note in question -was not diverted from the purpose for which it was given. The plaintiffs having taken it in good faith before maturity in the usual course of

It follows, therefore, that the judgment appealed from should be affirmed, with costs against the defendant Jaeckle.

Lewis, Bradley and Ward, JJ., concurred.

Judgment affirmed.