Steinhart v. Boker

34 Barb. 436, 1861 N.Y. App. Div. LEXIS 113

• Court: New York Supreme Court
• Decided: May 6, 1861
• Status: Published

Opinion

By the Court, Ingraham, J.

The question in this case is whether a party who takes a note in the usual course of business, and gives value for it, is bound also to make inquiry as to the title to the note, if there are circumstances of suspicion attending the receipt of it, or if the person taking it is guilty of negligence by which he is led to take it, when due diligence would have informed him of the defect of title.

In Raphael v. The Bank of England, (33 Eng. Law and Eg. 276,) it was held that the title of a person to a note received in good faith and for value could not be impeached for negligence. In that case notice of the note having been stolen had been left at the plaintiff’s office, but had not been seen by him. (Goodman v. Harvey, 4 Ad. & El. 870.)

Mr. Justice Allen, in Hall v. Wilson, (16 Barb. 550,) says, quoting from Lord Denman, “ Gross negligence may be evidence of mala fides, but is not the same thing.” And he adds, “ where the bill has passed to the plaintiff without and proof of bad faith in him, there is no objection to his title. In the absence of bad faith in the holder, if he is in other respects within the rule established for the benefit of commercial paper, his title will be upheld.”

In Davis and others v. McCready and others, (17 N. Y. Rep. 230,) the note was taken with knowledge of the purpose for which it was made, but without knowledge of a failure of that consideration. Denio, J. held that though the plaintiffs had such notice, they were not required to see whether the payees had performed their agreement; and he adds, “ a party receiving a bill is not put upon inquiry, unless circumstances of suspicion have come to his knowledge.”

The old established rule of law that the holder of bills, &c. can give a title which he does not possess, to a person taking them bona fide for value, is not to be qualified by treating it as essential that the person should take them with due care and caution; but-the person taking them bona fide for value has a good title, though he take them without care or caution ; except so far as the want of such care and caution may affect the bona fides and honesty of the transaction. (Porter v. Pearson, 1 C., M. & R. 849. 5 Tyrw. 870. Goodman v. Harvey, 6 N. & M. 372. 4 Ad. & El. 870. Goodman v. Simonds, 20 How. U. S. Rep. 363.) The judge erred in his charge on this point.

[New York General Term, May 6, 1861.

Judgment reversed and new trial ordered; costs to abide the event. • *

Clerke, Gould and Ingraham, Justices.]