Mersick v. Alderman

60 A. 109 | Conn. | 1905

The plaintiff is the indorsee and holder of the note in suit, of which the defendants are the makers. He is also the owner of the indebtedness which it was indorsed to secure. As such holder of the note, whether in due course or not, and such owner of the indebtedness, he has all the rights of the Beckley Company, through whom he holds. General Statutes, § 4228. The Beckley Company held the note as collateral security for such indebtedness to it as the payee thereof might incur upon a continuing credit extended to him. It was therefore a lien holder, and as such was both originally and at the maturity of the note a holder for value to the extent of the lien, and to that extent a holder in due course. General Statutes, §§ 4197, 4222. This is conceded.

It is contended, however, that as to any indebtedness incurred by the payee subsequent to the maturity of the note, the Beckley Company was not in the position of a holder in due course, and that therefore as to such indebtedness the note in its hands was subject to the defense on the part of the makers that it was given for the accommodation of the payee and was without consideration.

This contention rests upon two assumptions of fact which are not supported by the finding, to wit: (1) that the note was made for the accommodation of the payee, and (2) that some part of his indebtedness to the Beckley Company arose subsequent to the maturity of the note. It rests also upon the assumption of law that the want of consideration, which is the peculiar characteristic of accommodation paper, is one of the equities or defenses to which such paper, in the hands of one who is a holder for value after maturity, is under all circumstances subject, save as otherwise controlled by § 4228 of the General Statutes. The courts of England and of many of our States have adopted, and the text writers with general unanimity have approved of, a contrary doctrine, which declares that unless the paper is shown to have been appropriated by the accommodated party to some purpose other than that for which it was given, the accommodation makers may not set up the want of consideration in an action by one who has acquired it in good faith, in the ordinary course of business, and for value, although after maturity. Sturtevant v. Ford, 4 Man. G. 101; Stein v.Yglesias, 1 Cromp. M. R. 565; Charles v. Marsden, 1 Taunt. 224; Carruthers v. West, 11 Q. B. 143; Atwood v.Crowdie, 1 Starkie 483; Dunn v. Weston, 71 Me. 270; Seyfert v. Edison, 45 N.J.L. 393; Miller v. Larned, 103 Ill. 562 570; Davis v. Miller, 55 Va. 1; East River Bank v.Butterworth, 45 Barb. (N. Y.) 476; Harrington v. Dorr, 3 Robertson (N. Y.) 275; Maitland v. Citizens' Nat. Bank,40 Md. 540; 1 Daniels on Neg. Inst., §§ 726, 786, 790; Story on Prom. Notes, § 194; Chitty on Bills, 218; 2 Parsons on N. B. 28; Byles on Bills, 285; Eaton Gil. on Com. Paper, 312, 313; Redfield Big. Leading Cases, 216. The cases holding otherwise — in so far at least as the rule laid down by them is made to embrace situations where, as here, the holder for value parted with the consideration without notice of the accommodation character of the paper — do not have the support of sound reason or safe policy. We are not prepared to introduce into the law commercial a principle so repugnant to its spirit and so fraught with danger. The defendants have shown no misappropriation by the accommodated party. Their defense must therefore fail, and it would not change the result if the finding should be so corrected as to establish the two facts assumed by them as hereinbefore stated.

The defendants claim that the complaint was inappropriate in that it was in the ordinary form of one on behalf of an indorsee of a negotiable note against the maker, and that the judgment did not conform to the complaint in that it was rendered for the amount of the indebtedness which it was given to secure. It is well settled that the payee or indorsee of a note held as collateral may sue upon it, and such is the plain implication of our statutes. General Statutes, §§ 4222, 4227; 1 Daniels on Neg. Inst., § 833;Hodges v. Nash, 141 Ill. 391; Whitteker v. Charleston GasCo., 16 W. Va. 717; Reed v. First National Bank, 23 Colo. 380. The fact that judgment is not in such cases rendered for the full amount of the note, but for the amount of the indebtedness secured thereby, does not establish that the recovery is not upon the note. True it is that, generally speaking, a holder in due course of negotiable instruments is entitled to recover the full amount thereof. General Statutes, § 4227. But it has long been an accepted principle limiting the operation of the general rule, but not repugnant to it, that one who takes such paper as collateral security for a debt will be limited in his recovery to the amount of that debt. Cromwell v. County of Sac, 96 U.S. 51, 60;Duncan v. Gilbert, 5 Dutcher (N. J. L.) 521; Fisher v.Fisher, 98 Mass. 303; Youngs v. Lee, 12 N.Y. 551. The recovery, however, is none the less upon the paper.

The plaintiff was justified in confining his allegations to such as disclosed his right prima facie to recover the amount of the note, and in leaving to the defendants to set up in their answer, as they did, the facts which served to limit that right. Vanliew v. Second Nat. Bank, 21 Ill. App. 126;Curtis v. Mohr, 18 Wis. 645; Duncan v. Gilbert, 5 Dutcher (N. J. L.) 521.

The exceptions to the finding need not be considered.

There is no error.

In this opinion the other judges concurred.