127 N.Y.S. 595 | N.Y. App. Div. | 1911
Lead Opinion
Tlie plaintiffs in this action sue to recover upon a promissory-note made by tbe defendant Lefkowitz, payable to the order of the defendant Lazarus and indorsed by Lazarus to tbe order bf tbe plaintiffs. This note was dated tbe 14th of September, 1909, and was payable on March 14, 1910, at tbe Corn Exchange Bank. Tbe defendant Lefkowitz admitted tbe making of tbe note and d'enied that the payee Lazarus indorsed tbe note and for value transferred the same so indorsed to tbe plaintiffs ; and as a separate defense alleged that on the 14th of September, 1909, the defendant'Lazaras wrongfully and unlawfully, and with the intent and purpose to cheat and defraud the defendant Lefkowitz, made certain false aud fraudulent
Upon the trial the plaintiffs produced the note which was admitted in evidence and one of the plaintiffs was called as a witness and testified that on or about March 5,1910, he received this promissory note from Harry E. Lazarus and paid him $2,000 for it. Upon cross-examination he stated that in the latter part of February, 1910, Lazarus came to the witness and told the witness that he was just embarking in the raincoat business and was short of funds and asked the witness to help him out and buy a note from him, which the witness agreed to do; that the witness then-investigated the credit of the maker of the note and being satisfied with the report received he purchased the note, giving Lazarus a check for it, which ' check was produced and offered in evidence. He also' produced his check book to show that the check was paid. He further testified that he gave Lazarus the check on March 5, 1910; that the witness bought the' note for the plaintiffs in the action and it was indorsed to them by Lazarus, the payee.
Upon this testimony the plaintiffs rested, when the defendant Lefkowitz was called as a witness. He testified that he had a conversation with Lazarus in August, 1909, and was shown in his place of business a certain patented advertising device which was the' invention in question; that Lazarus demonstrated it in his place of business, and the witness decided to go into the matter; that Lazarus had demonstrations outside to test the article, and that the witness and Lazarus drew up an agreement on September 14-, 1909, and before the agreement was drawn up Lazarus showed him various orders that he was receiving from people for this article; that they had sold many of the lamps at a good .substantial profit; that the lamp was a great advertising article, and there was considerable money to be made in it, but Lazarus had a very large venture to go into, and that he could not agree with his officers in the corporation ; that the other matter was so large that it required his concentrated time, and he was compelled to give up his patent for the interest in the thing he was going into; that he showed said defendant the merits of the article, and said that the lamp would stand for an indefinite period; that it would give satisfaction to the purchasers, which he tried to show by checks that he was getting
I think it doubtful whether the evidence was sufficient to support a verdict that there was fraud in the transaction which resulted in the sale of this patent to the defendant which was a valid defense
Section 95 of the Negotiable Instruments Law (Consol. Laws, chap. 38; Laws of 1909, chap. 43). provides- that “To constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledgé of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith.” Section 96 of the Negotiable Instruments Law provides that “A holder in due course holds the instrument free from any defect of title of prior parties and free from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof against all parties liable thereon.” Cheever v. Pittsburgh, etc., R. R. Co. (150 N. Y. 59) seems to be a case very much like the case at bar. It Was there said: “ The holder’s rights cannot be defeated without proof of .actual notice of the defect in title or bad faith on his part evidenced by circumstances. Though he may have been negligent in taking the paper, and omitted precautions which a prudent man would -have taken, nevertheless, unless he acted mala fide, his title, according to settled doctrine, will prevail; ” and further speaking of the purchaser of a note before maturity and for value, it is said : “ He had the right to assume that the relations to the paper of every party whose name appeared on it were precisely what they appeared to be. * * * He had the right
. It follows that the judgment ’ appealed from must be affirmed) with costs.
Clarke and Miller, JJ., concurred; Laughlin and Dowling, JJ., dissented. .
Dissenting Opinion
This is an action on a promissory note made by the appellant on the 14tli day of • September, 1909, for $2,500, payable on the fourteenth day of March thereafter, without interest, to the order of one Lazarus! The defense interposed by the answer was that the note was given in part payment of the purchase price, of certainadvertiscope lamps and the patent therefor, and that the purchase thereof was induced by false and fraudulent representations made by Lazarus to" the appellant and that plaintiffs were not" bona fide holders. The plaintiffs showed on their affirmative case by the testimony of the plaintiff Settel that, representing his firm, lie purchased the note from Lazarus on the 5th day of March, 1910, nine days before it- became due, and paid therefor by a check tire sum of $2,000; that he had been acquainted with Lazarus for about ten years and knew that he was in the advertiscope lamp business, and as he understood it, was - connected with the Advertiscope Lamp Company; that Lazarus came to him the latter part of February, 1910, and stated that he “ was just embarking in the raincoat business or he is embarking in the raincoat business and he is short of funds,” and that lie wanted to sell a note, and asked if the witness could not help.him out by buying it, which, the witness says, “I agreed to do; ” and thereafter and on the 5th day of March, 1910, Lazarus presented the note and Settel purchased it as stated, but before doing so, he obtained a financial report on appellant, whom he did not know ; that the firm owed one Aaron Eisenberg on a “ savings account,” and the note was credited to the firm on that account and
I am of opinion that the learned trial justice erred in thus ruling and in striking out the evidence. Section 95 of the Negotiable Instruments Law provides that to constitute notice of an infirmity in a negotiable instrument or a defect in the title of the person negotiating the same “ the person to whom it is negotiated must liav'e had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith.” This statutory declaration of the law, however, as I understand it, affects the numerous decisions of the courts holding that when the •defendant shows that a negotiable instrument on which he is sued has been diverted or that he was induced to execute it by fraud the burden is shifted to the plaintiff to show that he received the same without notice of the facts constituting the infirmity in the instrument. (Vosburgh v. Diefendorf, 119 N. Y. 357; Canajoharie Nat. Bank v. Diefendorf., 123 id. 191; Joy v. Diefendorf, 130 id. 6; Smith v. Weston, 159 id. 194; Citizen's Nat. Bank v. Weston, 162 id. 113; German-American Bank v. Cunningham, 97 App. Div. 244 ; Second Nat. Bank v. Weston, 172 N. Y. 250.) Here the court having struck out the evidence showing that the defendant had a good defense as against the payee of the note, of course there was no evidence in the case which the plaintiffs were
Dowling, J., concurred. '
Judgment affirmed, with costs.