By the Court,
James C. Smith, J.
It appears from the evidence that the plaintiff received the draft in suit from Lowrey, the payee, knowing at the time that he was a member of the firm of Lowrey, Strang & Co., the drawees and acceptors. The defendants insist that these facts charge the plaintiff with notice that the draft was made for the accommodation of [391]*391Lowrey, Strang & Co., and 'that Bradner & Carroll, the drawers, were mere sureties for that firm, and impose upon the plaintiff the burden of proving the assent of Bradner to such use of the firm name. I think this position can not be maintained. The payee, being in possession of the draft, is presumed to hold it for his own use and benefit, and the draft, like other ordinary bills of exchange, imports a debt due from the drawees to the drawers, which is assigned to the payee. It is true that Lowrey, the payee, could not maintain an action at law against the acceptors, Lowrey, Strang & Co., .of which firm be was a member, but that is only by reason of the technical legal rule that a man can not sue himself. (2 Bos. & Pul. 120.) There can be no doubt that a partnership may be indebted to one of the firm, and may bind themselves to him by note or bill; and that though the payee can not enforce the obligation at law, yet he may have relief in equity, (1 Story’s Eq. Jur. §§ 679 to 682,) and his indorsee may recover at law. (Smith v. Lusher, 5 Cowen, 688. Temple v. Seaver, 11 Cush. 314.) The authorities cited by the defendants’ counsel upon this branch of the case do not sustain his position.
A question of more difficulty and importance is, whether the plaintiff is a holder for value. At the time when the bank received the draft in suit, which was between the 19th and 29 th days of March, it held nine other drafts, previously discounted by it, seven of which, amounting to #17,000 were drawn by Lowrey, on Lowrey, Strang & Co., and accepted by them, and the other two, amounting to #4000, were drawn by Bradner & Carroll, on Lowrey, Strang & Co., to the order of Lowrey, and accepted by the drawees. Of these nine drafts, one was to mature on the 29th of March, one on the 9 th of May, and the others on different days between those dates. The draft in suit was transferred to the plaintiff as collateral security for the payment of the nine drafts above mentioned, and the plaintiff, in consideration of such transfer, expressly agreed that it would not sue Lowrey, [392]*392or Lowrey, Strang & Co., upon either of said drafts, until the maturity of the draft thus transferred. The judge, at the circuit, held that this agreement for forbearance was a valuable consideration within the meaning of the rule protecting the holder of negotiable paper; and I am of opinion the decision is correct. It is insisted by the defendants, that as the plaintiff received the draft as collateral security to a pre-existing debt, it is not a holder for value according to the law as settled by the adjudications of the courts of this state. As I understand the numerous reported cases bearing upon this question, they establish the following propositions: (1.) The holder of commercial paper, who has received it for an antecedent debt, either as a security for payment, or as a nominal payment, without parting with any security, property or other thing of legal value, or giving any new consideration, is not a holder for a valuable consideration. (Coddington v. Bay, 20 John. 637. Stalker v. McDonald, 6 Hill, 93. Farrington v. Frankfort Bank, 24 Barb. 554.) (2.) If, however, he has paid value for the paper, or on the credit thereof has relinquished some available security or valuable right, or has expressly assumed some new legal obligation, he is a holder for value, although the paper is available to him as security for a pre-existing debt. (Bank of Salina v. Babcock, 21 Wend. 499. Bank of St. Albans v. Gilliland, 23 id. 311. Bank of Sandusky v. Scoville, 24 id. 115. Mohawk Bank v. Corey, 1 Hill, 513. Youngs v. Lee, 18 Barb. 187. S. C. affirmed, 2 Kern. 551. White v. Springfield Bank, 3 Sandf. S. C. R. 222. Meads v. The Merchants’ Bank, 25 N. Y. Rep. 143.) Tested by these rules, the agreement of the plaintiff to give time upon the drafts held by it was clearly a valuable consideration. Hot only was it a valid consideration to support the transfer, but it created a new equity between the original parties, and as it suspended the legal remedy of the plaintiff, the latter could not be restored to as good condition as it was in before the transfer. It operated like a new loan of the sums due upon [393]*393the drafts, until the maturity of the new security. The transaction was substantially the same as if the old drafts, to the amount of $17,000, had been paid and canceled, and the sunt paid had been loaned upon the new draft. Although the plaintiff did not give up the old drafts, it parted with its right of action upon them until the maturity of the new one," and assumed the risk of loss by the insolvency of Lowrey and his firm, in the meantime. And if the agreement to give time included the drafts drawn by Bradner & Carroll, they were thereby released from their obligation upon such drafts, as, on the face of the paper, they were sureties for the acceptors, and it does not appear that they consented to the extension.
The defendants’ counsel cites Wardell v. Howell, (9 Wend. 170,) and Francia v. Joseph, (3 Edw. 182,) as authorities for the position that the agreement to give time does not constitute a valuable consideration. But I think they are not decisive of the question. In Wardell v. Howell, the plaintiffs had sued one Hughes on a note for $178. Hughes offered the plaintiffs that if they would stop the suit, he would pay the costs, and turn out a note in his possession indorsed by the defendants, for $150, as collateral security for the note they held against him. The plaintiffs acceded to his proposition; he paid the costs and delivered the note in question to them, and they gave him a receipt acknowledging that they had received the note, which, when paid, was to apply on their note against him. There was no express agreement to extend the time of payment; and none could be presumed, as the agreement was merely that the note should take effect as security. (11 Wend. 320. 1 Bosw. 411.) It would have -been otherwise, perhaps, if the parties had intended the note to operate as a conditional payment, at the time of the transfer; (5 Hill, 463 ; 3 Denio, 512; 2 Am. L. Cas. 420;) but, by the terms of the receipt, it was not to be applied until paid. This view of the case was undoubtedly taken by the court. Justice Sutherland, deliv[394]*394ering the opinion, said that the prior indebtedness of Hughes, and the discontinuing the suit against him, did not constitute a valuable consideration against the indorser, under the circumstances of the case.
Free access — add to your briefcase to read the full text and ask questions with AI
By the Court,
James C. Smith, J.
It appears from the evidence that the plaintiff received the draft in suit from Lowrey, the payee, knowing at the time that he was a member of the firm of Lowrey, Strang & Co., the drawees and acceptors. The defendants insist that these facts charge the plaintiff with notice that the draft was made for the accommodation of [391]*391Lowrey, Strang & Co., and 'that Bradner & Carroll, the drawers, were mere sureties for that firm, and impose upon the plaintiff the burden of proving the assent of Bradner to such use of the firm name. I think this position can not be maintained. The payee, being in possession of the draft, is presumed to hold it for his own use and benefit, and the draft, like other ordinary bills of exchange, imports a debt due from the drawees to the drawers, which is assigned to the payee. It is true that Lowrey, the payee, could not maintain an action at law against the acceptors, Lowrey, Strang & Co., .of which firm be was a member, but that is only by reason of the technical legal rule that a man can not sue himself. (2 Bos. & Pul. 120.) There can be no doubt that a partnership may be indebted to one of the firm, and may bind themselves to him by note or bill; and that though the payee can not enforce the obligation at law, yet he may have relief in equity, (1 Story’s Eq. Jur. §§ 679 to 682,) and his indorsee may recover at law. (Smith v. Lusher, 5 Cowen, 688. Temple v. Seaver, 11 Cush. 314.) The authorities cited by the defendants’ counsel upon this branch of the case do not sustain his position.
A question of more difficulty and importance is, whether the plaintiff is a holder for value. At the time when the bank received the draft in suit, which was between the 19th and 29 th days of March, it held nine other drafts, previously discounted by it, seven of which, amounting to #17,000 were drawn by Lowrey, on Lowrey, Strang & Co., and accepted by them, and the other two, amounting to #4000, were drawn by Bradner & Carroll, on Lowrey, Strang & Co., to the order of Lowrey, and accepted by the drawees. Of these nine drafts, one was to mature on the 29th of March, one on the 9 th of May, and the others on different days between those dates. The draft in suit was transferred to the plaintiff as collateral security for the payment of the nine drafts above mentioned, and the plaintiff, in consideration of such transfer, expressly agreed that it would not sue Lowrey, [392]*392or Lowrey, Strang & Co., upon either of said drafts, until the maturity of the draft thus transferred. The judge, at the circuit, held that this agreement for forbearance was a valuable consideration within the meaning of the rule protecting the holder of negotiable paper; and I am of opinion the decision is correct. It is insisted by the defendants, that as the plaintiff received the draft as collateral security to a pre-existing debt, it is not a holder for value according to the law as settled by the adjudications of the courts of this state. As I understand the numerous reported cases bearing upon this question, they establish the following propositions: (1.) The holder of commercial paper, who has received it for an antecedent debt, either as a security for payment, or as a nominal payment, without parting with any security, property or other thing of legal value, or giving any new consideration, is not a holder for a valuable consideration. (Coddington v. Bay, 20 John. 637. Stalker v. McDonald, 6 Hill, 93. Farrington v. Frankfort Bank, 24 Barb. 554.) (2.) If, however, he has paid value for the paper, or on the credit thereof has relinquished some available security or valuable right, or has expressly assumed some new legal obligation, he is a holder for value, although the paper is available to him as security for a pre-existing debt. (Bank of Salina v. Babcock, 21 Wend. 499. Bank of St. Albans v. Gilliland, 23 id. 311. Bank of Sandusky v. Scoville, 24 id. 115. Mohawk Bank v. Corey, 1 Hill, 513. Youngs v. Lee, 18 Barb. 187. S. C. affirmed, 2 Kern. 551. White v. Springfield Bank, 3 Sandf. S. C. R. 222. Meads v. The Merchants’ Bank, 25 N. Y. Rep. 143.) Tested by these rules, the agreement of the plaintiff to give time upon the drafts held by it was clearly a valuable consideration. Hot only was it a valid consideration to support the transfer, but it created a new equity between the original parties, and as it suspended the legal remedy of the plaintiff, the latter could not be restored to as good condition as it was in before the transfer. It operated like a new loan of the sums due upon [393]*393the drafts, until the maturity of the new security. The transaction was substantially the same as if the old drafts, to the amount of $17,000, had been paid and canceled, and the sunt paid had been loaned upon the new draft. Although the plaintiff did not give up the old drafts, it parted with its right of action upon them until the maturity of the new one," and assumed the risk of loss by the insolvency of Lowrey and his firm, in the meantime. And if the agreement to give time included the drafts drawn by Bradner & Carroll, they were thereby released from their obligation upon such drafts, as, on the face of the paper, they were sureties for the acceptors, and it does not appear that they consented to the extension.
The defendants’ counsel cites Wardell v. Howell, (9 Wend. 170,) and Francia v. Joseph, (3 Edw. 182,) as authorities for the position that the agreement to give time does not constitute a valuable consideration. But I think they are not decisive of the question. In Wardell v. Howell, the plaintiffs had sued one Hughes on a note for $178. Hughes offered the plaintiffs that if they would stop the suit, he would pay the costs, and turn out a note in his possession indorsed by the defendants, for $150, as collateral security for the note they held against him. The plaintiffs acceded to his proposition; he paid the costs and delivered the note in question to them, and they gave him a receipt acknowledging that they had received the note, which, when paid, was to apply on their note against him. There was no express agreement to extend the time of payment; and none could be presumed, as the agreement was merely that the note should take effect as security. (11 Wend. 320. 1 Bosw. 411.) It would have -been otherwise, perhaps, if the parties had intended the note to operate as a conditional payment, at the time of the transfer; (5 Hill, 463 ; 3 Denio, 512; 2 Am. L. Cas. 420;) but, by the terms of the receipt, it was not to be applied until paid. This view of the case was undoubtedly taken by the court. Justice Sutherland, deliv[394]*394ering the opinion, said that the prior indebtedness of Hughes, and the discontinuing the suit against him, did not constitute a valuable consideration against the indorser, under the circumstances of the case. But he did not suggest that there was an agreement to extend the time, express or implied; nor is there an allusion in the case to the effect of such an agreement by way of constituting a valuable consideration in the sense of the commercial rule. The case of Francia v. Joseph was decided by Vice Chancellor McCoun, so far as this point is concerned, mainly upon a misapprehension, as I conceive, of the ruling in Wardell v. Howell. The decision is entitled to great respect, but as it stands alone, and is not binding upon this court at general term, we may properly consider the question as an open one.
[Monroe General Term,
December 5, 1864.
The plaintiff is to be regarded as a holder for value to the full amount of the draft in suit. As has already been observed, it assumed by its agreement the risk of loss by reason of all the parties to the drafts becoming insolvent during the period for which the credit was extended. If such insolvency had occurred, the bank would be regarded as having paid the full amount of the draft. The result is the same if the transaction is treated as a payment of $17,000 upon the original drafts, and a loan of that amount upon the draft in suit.
I am of opinion the motion for a new trial should be denied.
Ordered accordingly.
J. C. Smith, Welles and E. D. Smith, Justices.