Lead Opinion
The defendant Hoadley appeals from a. judgment entered upon a verdict for the plaintiff directed by the court. The appellant is' sued as indorser upon promissory notes made by the defendant Maloney to his own order, and indorsed by the appellant. The plaintiffs are stockbrokers. Maloney who, although named as a defendant, has not been served with process, was the manager of their branch office at Boston, Mass. The appellant resided at Providence. Some time in July, 1906, Maloney opened a speculative account for account of appellant under the wholly fictitious title of “ Fred. Williams, Special.” It is not made clear whether appellant in the first instance authorized the opening of this account, but it is clear tliat he soon knew of it and received notices concerning it from time to time. He was not required to put up any margin. The account ran along until about August 25, 1906, when it showed a small loss of about one' hundred dollars. Appellant’s testimony is that on this date he notified Maloney by telephone to close the account out, and at the same time repudiated any responsibility for it or interest in it. Maloney’s story' is that he did receive a telephone message from appellant, but his understanding was that he was to continue to trade in the account according to such instructions as he might receive from plaintiffs’ Hew York house. Appellant went off on a journey and appears to have had nothing further to do with the account or knowledge as to what Maloney was doing with it. Maloney did not close it out. Some time during the month of September there was a sharp and sudden rise in the price of cotton (with which the account dealt),, and the account was closed out at a loss of several thousand dollars. Demand was made upon appellant for the amount of the deficit, which he refused to pay, disclaiming any responsibility. Plaintiffs then declared that unless appellant assumed responsibility the loss would fall upon Maloney and that he would be discharged from his position. Appellant, in order to relieve Maloney, and still disclaiming any responsibility on his own part,, proposed that he should intrust Maloney with the selling of a large amount of mining
This defense, if established, was available to appellant as against the plaintiffs. They were not bona ficie holders for value, for they had parted with nothing in consideration of the notes. They held a claim against either the appellant or Maloney; against appellant if lie was legally responsible for the account, which he always denied;, against Maloney if he had carried - on the account in the face of appellant’s instructions to close it out, and without plaintiffs’ consent. In either case, their claim was for an. antecedent debt, which they did not release upon receiving the notes. . The question of appellant’s liability'upon the account was not-litigated. The court submitted to the jury certain specific questions which, as the record shows, were carefully formulated by agreement between counsel for both parties. The questions and the answers given by the jury were as follows: Q. “Was-it agreed by Maloney with Hoadley, at the -time the notes in suit were given, that, he (Maloney) would keep the notes in his possession as evidence of Maloney’s authority to apply the money received ón the sale of the stock of the Cathedral Mining Co. in payment of said notes; that the notes would, be held and the proceeds of such- sales applied to their payment and Hoadley not be compelled' to pay anything on them otherwise than out of the proceeds of such sales?” A. “Yes.”
The special verdict thus found by the jury was not objected to in any way, and no motion was made to set it aside. There was evidence to sustain it, and the findings of fact thus found stand as the undisputed facts of the case. Notwithstanding the special verdict, the court directed a verdict in favor of plaintiffs.
The question which we have to consider is, therefore, whether the facts thus found constitute a defense to the action. The first question submitted to and answered by the jury is substantially identical with that which was submitted in Andrews & Co. v. Hess (20 App. Div. 195), the affirmative answer to which was held to establish a defense. In that case the rule was recognized, which has been stated in one form or another in many cases, that when the delivery of a note is limited by the conditions upon which the delivery was made, the performance of these conditions is essential to the validity of the notes. In Benton v. Martin (52 N. Y. 570, 574) the rule is thus stated: “ Instruments not under seal may be delivered to the one to whom upon their face they are made payable, or who by their terms is entitled to some interest or benefit under .them, upon conditions, the observance of which is essential to their validity. And the annexing of such conditions to the delivery is not an oral contradiction of the written obligation, though negotiable, as between the parties to it, or others having notice. It needs a delivery to make the obligation operative at all, and the effect of the delivery and the extent of the operation of the instrument may be limited by the conditions with which delivery is made. And so also, as between the original parties and others having notice, the want of consideration may be shown.” To the same effect are many other authorities, in one of which the words quoted above are adopted and reiterated. (Higgins v. Ridgway, 153 N. Y. 130.) In Jamestown Business College Assn. v. Allen (172 N. Y. 291) a very different question was presented. In that case the defense relied upon was.that the note was to become void upon the happening of a future event. The court pointed out very clearly the dis-
Our attention has beeti called to a written contract between Maloney and the' appellant, dated about two months after the notes had been delivered and after they had come into the possession of the plaintiffs, which states the condition upon which the notes had been delivered somewhat differently from the statement made by appellant in his testimony. ’ This paper does not purport to be the
It follows that the judgment appealed from must be reversed, and judgment directed upon- the'special verdict-in favor of the appellant, with costs to the appellant in this court and in the court below, including the special allowance which it was stipulated upon the trial should follow the judgment.
Clarke and Dowling, JJ., concurred; Ingraham, P. J., and McLaughlin, J., dissented.
Dissenting Opinion
(dissenting):
As the result of an agreement between the defendant and one Maloney, the terms of which will be hereafter referred to, the defendant prepared three promissory notes, each of which were dated October 1, 1906, which Maloney promised to pay to the order of. himself, $2,268.33, value received, with interest at six per cent from date, one of which was payable four months after date and one payable eight months after date. Maloney indorsed the notes, the defendant Hoadley indorsed them, and they were delivered to Maloney. Two of these notes were subsequently transferred to the plaintiffs, and to recover on those two notes this action was brought. The defendant interposed an answer admitting the indorsement of the notes sued on, alleging that at the time of the indorsement the plaintiffs were brokers dealing in cotton at the New York Cotton Exchange and maintained an office in the city of Boston, which was in charge of Maloney, setting up certain transactions in cotton in the name of “ Fred. Williams, Special,” in which Maloney made trades in cotton by making purchases and sales from time to time in accordance with the dictates of his own judgment for the account of the defendant and for his benefit; that prior to the indorsement of the notes Maloney had told the defendant that he had opened an account in a fictitious name for the benefit of the defendant who was to receive the proceeds but was not and should not be called
This answer, therefore, admits the indorsement and delivery of
The answer itself does not allege that there had been a conditional delivery of the notes. The defendant admitted that he indorsed the notes, and then, as a special defense, alleges that for the accommodation of the defendant Maloney and the plaintiffs, and to indicate his assent to the payment thereof from the proceeds of sale of the mining stock, he indorsed the notes upon condition that the payment thereof should only be made'out of the proceeds of sale of said mining stock, and that in no other way should payment of the notes be demanded or sought to be enforced against this defendant. Upon the trial the defendant testified that he was informed of the fact that a special account had been opened to trade in cotton, and that he understood that this account was opened for his benefit; that, as he understood the proposition, he thought that he was to get all the profits and somebody else was to stand all the loss; that he was not to be liable for any losses; that after this loss had been incurred upon this account, and in the latter part of September, 1906, he had .an interview in New York with two of the plaintiffs and Maloney ; that defendant then told the plaintiffs that he would make no settlement of the account, and that he had never author
Whatever agreement was entered into at the time the notes were
I do not think that evidence as to this alleged conditional delivery of the notes was available to the defendant upon this trial. As before stated, the answer did not specially allege a conditional delivery. When it was first attempted to prove such a conditional delivery it was objected to as not within the defense set up in the answer, but the court received the evidence and allowed the defendant to move to amend the answer. To this the plaintiffs excepted. At the end of the defendant’s case counsel for the defendant moved to amend the answer By alleging that at the time of the delivery of the notes Maloney agreed with defendant Hoadley that he would retain such notes in his possession and under his control; that under no circumstances were these notes to be delivered out of his possession; and that said notes .should be paid entirely and solely out of the proceeds of the sale of stock of the mining and smelting company and in no other way. This amendment was objected' to upon the ground that it set up a new defense and the court had no power to make it upon the trial. The objection was overruled and the amendment granted, to which the plaintiffs excepted. The defense as originally pleaded was that although the note was given absolutely on its face it was agreed that it should not be paid as the writing expressed but in a different way. Undoubtedly upon the defense as it stood the evidence as to any conditional delivery was inadmissible. The amendment sought to interject into the case upon the trial the defense of a conditional delivery and that I do not think the court had power to allow. It is now settled in this State that evidence allowing a maker or indorser of a promissory note to avoid his contract because of a contemporaneous oral agreement that the note should not be paid according to its terms is
I think, therefore, the court below was quite right in directing a verdict for the plaintiffs upon the testimony, and that the judgment ' appealed from should .be affirmed.
McLaughlin, J., concurred.
Judgment reversed and judgment directed upon special verdict in favor of appellant, with costs to appellant in this court and in the court below, including special allowance.