Small v. Smith

1 Denio 583

Opinion

By the Court, Beardsley, J.

If the evidence given on the trial was true, and that was for the jury to determine, it is perfectly clear that the note was delivered to the plaintiffs in violation of the agreement upon which it had been endorsed by the defendant. The plaintiffs therefore were not entitled to recover, unless they received it bona fide and upon a valuable consideration. Both were necessary. It must have been received in good faith, without notice of the arrangement on which the endorsement had been made, and the transfer must have been upon what the law regards as a valuable consideration.

Footnotes

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(a) These principles admit of no dispute; and although upon some points of commercial law in close proximity to those I have stated, discordant opinions may be found, (Stalker v. McDonald, 6 Hill, 93, Swift v. Tyson, 16 Peters, 1,) there is entire harmony as to those I have mentioned.

The judge charged that if the plaintiffs received the note in payment and satisfaction of a debt due to them from Hulburt, the maker of the note, that was a sufficient consideration for its transfer, and they thereby became purchasers for value. This, as a legal proposition, is not questioned; but the bill of exceptions fails to show any evidence to which this principle could be applied. There was no proof which tended to show that the note had been transferred in extinguishment of the debt of Hul hurt. The judge, therefore, in my view of the case, erred in submitting that question to the jury.

But I shall not dwell on this point, for the case may be disposed of on the question of good faith.

It appears by the testimony of Hulburt, that he was indebted to the plaintiffs in a sum exceeding the amount of this note, and that Small, one of the plaintiffs, came to Vienna, where Hulburt resided, to secure payment of said debt. Small proposed to Hulbur.t to give a note at one year with security, and. the defendant, who lived in another county, was spoken of for that purpose. Small said he would take the defendant as surety, and it was arranged that while Small was absent, (as he was going west for a few days,) Hulburt should go to the defendant’s residence in order to obtain him as such surety. Pursuant to this arrangement Hulburt went to see the defendant, and told him what he wanted. At first the defendant refused to endorse, but it was finally agreed between them that he would endorse the note upon condition that one Austin, who then held a note given by the defendant, should deposit the same with a third person, there to remain until the defendant should be discharged from said endorsement. The note in question was accordingly signed by. Hulburt and endorsed by the defendant, but it was not to be transferred to Small, or used in any manner, until the one held by Austin had been deposited under said arrangement. Hulburt returned with the note to Vienna, where Austin lived, and told him of the arrangement under which the endorsement had been made. Austin declined to comply with that arrangement, but Hulburt, as he states, left the note in suit on Austin’s table, and did not see it again until Small had returned to Vienna. Hulburt first saw Small after his return at Austin’s office, where, on arriving at the office, according to the testimony of Hulburt, Small said to him—“We have fixed that •natter, and Mr. Austin has let me have the note.” The witness then inquired of Austin, in Small’s presence, in what manner the note had been turned out, and whether the arrangement of the defendant had been complied with—to which Austin made no answer—but Small said he had prevailed on Mr. Aus tin to endorse the note and he had got it. This, according to the witness Hulburt, was all which passed at that time. Another witness, (Paul,) who was present, said the remark of Hulburt to Austin was, that he supposed he had not turned out the note without complying with the request of Mr. Smith, the defendant—to which Austin made- no answer—but Small said he had prevailed on Mr. Austin to endorse the note and had released Mr. Smith.

It is not material which of these witnesses was correct as to the form of the remarks made at that time. Both come to the same result; for what was - said, according to the statement of either witness, was full notice to Small -that the endorsement had been procured upon some arrangement or cond ition which had not been complied with. Here, then, Small had actual notice that the endorsement was conditional; and if the note was subsequently transferred to him, he would necessarily take it subject to that cofidition. When this notice was given, the note was in Small’s hands. He had received it as he said of Mr. Austin. But it cannot be pretended he had received it of Austin upon any consideration moving between them. Indeed, the first remark of Small to Hulburt, and all that was said on that occasion, goes to show that whatever might have been dono by Austin had been done for Hulburt and not for himself, and in furtherance of the negotiation which had been commenced between Hulburt and Small. It is not shown that Austin had authority from Hulburt to transfer this note to Small on any terms, although it may be inferred that he was authorized to do so, on complying with the cpndition upon which the defendant’s endorsement had been made. Small did not set up that he had received the note as the property of Austin, and the whole transaction shows he did not. He could not, therefore, upon the facts as disclosed by the witnesses, pretend that he had acquired title to the note in any manner before he was apprised by Hulburt that the endorsement was made on a condition which had not been performed. It is more a matter of inference than of any thing like direct proof, that Hulburt ’’ at any time assented to the transfer of the note to Small; but if he did so, after notice to Small of the condition on which the endorsement had been made, it is plain that the plaintiffs ought not to recover, as the condition has never been performed. If the plaintiffs claim as purchasers of the note from Austin, they are niet by two objections: first, Small, one of the plaintiffs, was aware that the note belonged to Hulburt and not to Austin: and, secondly, it is not shown that the plaintiffs- paid or advanced any thing to Austin, or that any consideration passed between them for the transfer of the note. And as to Hulburt, if he assented to the transfer of the note to Small, it was after explicit notice that the endorsement was conditional, as is proved by the testimony of both Paul and Hulburt. Had the case been put to the jury upon the point of notice, with suitable explanations, there is no doubt what the verdict should and would have been, unless these witnesses were wholly discredited. I think the case was not so submitted to the jury, and that it should be sent back for a new trial.

New trial granted.

See Wardell v. Howell, (9 Wend. 179.)