145 N.Y.S. 325 | N.Y. App. Div. | 1914
Lead Opinion
This is an action on a promissory note purporting to have been made by the defendant corporation to the order of the defendant Newman, which he indorsed and delivered to the plaintiff, who is his brother, for value before maturity.
The note is as follows:
“ $833.34/100 New York, December 30, 1911.
“ On June 20th, 1912, after date we promise to pay to the order of Herman A. Newman, Eight hundred thirty-three 34/100 Dollars at the Garfield National Bank, New York.
“Value received with interest at §%.
“ THE JNO. J. MITCHELL CO.,
“ M. V. Quinlan, Treas.
“ Herman A. Newman, Vice-Pres.”
The only defense interposed which it is necessary to consider on the appeal is that the note was given without consideration and that, therefore, it was not authorized. The by-laws of the defendant corporation were not proved, nor does it appear, otherwise than by the form in which the note in suit and two others executed at the same time were made, who, if any one, was authorized to make promissory notes for the corporation in the ordinary course of its business. Quinlan was the treasurer and the defendant Newman was the vice-president of
The defendant’s counterclaim for part of the moneys collected by the plaintiff on the first two notes was allowed to the extent of $166.66, which was the excess of the face value of those notes over the $1,500 advanced or loaned by the payee to the corporation.
These are. the only material facts shown with respect to the authority of the treasurer and vice-president to execute the note, or the consideration therefor, or the circumstances attending the delivery thereof to the plaintiff, or the knowledge or information received or acquired by him.
The theory on which the complaint was dismissed and the recovery on the counterclaim had, as appears by the findings of fact, was, that the face of the note put the plaintiff on
The learned counsel for the appellant contends that the corporation ratified the note in suit by paying the other two, and that the fact that it might have been but was not sued on the loan affords a sufficient consideration. It will be seen from the statement of facts that there is no evidence that there was any agreement or understanding when the $1,500 was loaned or advanced by the payee of the notes to the corporation that notes were to be issued therefor, nor is there any evidence that at the time the notes were issued the payee was demanding payment of the loan or that he attempted to exact the additional $1,000 as usury for a further forbearance, or that on issuing the notes there was any understanding or agreement with respect to forbearance. If the additional $1,000 was exacted as usury the entire amount of the note in suit would represent a usurious excess of interest. These facts, however, it is not necessary to consider further nor is it necessary to express an opinion on any question of usury in this case, for no point in that regard was made upon the trial or on the appeal. The reasonable inference from the facts is, that the additional $1,000 was a pure gratuity or bonus, without any consideration flowing to the corporation therefor, and that is the theory on which the case was tried and on which the appeal has been argued.
The plaintiff having made no inquiry, so far as the evidence shows, cannot be heard to say that an inquiry would not have revealed the truth. According to the evidence there was no fact which inquiry would have revealed, if it revealed the truth, that would have tended to show either actual or apparent authority or consideration for the making of the note in excess of the amount of the loan; and there is nothing to justify an inference that reasonable inquiry' would have resulted in information contrary to the true facts. The authorities, therefore, on which the appellant relies (Ward v. City Trust Co., 192 N. Y. 61; Wilson v. M. E. R. Co., 120 id. 145) are not in point. If the plaintiff was put upon inquiry by the form of the note, then he is chargeable with knowledge that the note was given without consideration, and, manifestly, he can
It is well settled under the authorities that in these circumstances the plaintiff would have been put on inquiry if he had taken the note in payment of or as security for an indebtedness or obligation owing by his brother. (Ward v. City Trust Co., supra; Wilson v. M. E. R. Co., supra; Rochester & C. T. R. Co. v. Paviour, supra. See, also, Havana C. R. R. Co. v. Knickerbocker T. Co., 198 N. Y. 422.) The only points of difference between the adjudicated cases cited and the case at bar are that here another officer of the corporation joined with the plaintiff’s brother in making the note and the plaintiff paid consideration for the note in the form of a check to the order of his brother individually, instead of applying it in extinguishment of or as security for an indebtedness from his brother to him. I am of opinion that the fact that another officer of the corporation joined with plaintiff’s brother in making the note did not relieve the plaintiff from inquiry when he found that his brother was negotiating the note for his personal benefit. (Squire v. Ordemann, 194 N. Y. 394; Cheever v. Pittsburgh, etc., R. R. Co., 150 id. 59. See, also, Wilson v. M. E. R. Co., supra.) It is not claimed that there
It follows that the determination should be affirmed, with costs.
Clarke and Scott, JJ., concurred; Ingraham, P. J., and McLaughlin, J., dissented.
Dissenting Opinion
The action was brought on a promissory note, dated December 30, 1911, of the John J. Mitchell Company, by M. V. Quinlan, treasurer, Herman A. Newman, vice-president, whereby the defendant the John J. Mitchell Company, on
The case came on for trial before the court, a jury being waived. The court found that the defendant the John J. Mitchell Company made, executed and delivered the said note to Herman A. Newman on December 30, 1911; that prior to maturity of said note the payee, Herman A. Newman, indorsed the note in blank, and for value received duly delivered said note to the plaintiff; that said note was pre
The defendant Herman A. Newman was called as a witness and produced the check of plaintiff, dated April 20, 1912, and made to his order, for $861.65 in payment of this note, and he testified that he received the money on the check from plaintiff. On cross-examination he testified that he had also delivered to plaintiff the other two notes before he delivered to him the note in suit, and when he delivered these notes to plaintiff he received check from the plaintiff for $1,500. The plaintiff having rested, the defendant called the president of the John J. Mitchell Company, and he said the plaintiff never made any inquiry from him in regard to the manner in which the note was issued; that Herman A. Newman was both an employee and officer of the company in the month of December, 1911; that he was vice-president and employed under a contract for five years to expire on the last day of June, 1912, at a salary of $5,200 a year; that on or about September 30, 1911, he had a conversation with the payee regarding the making of the note in suit and the two other notes dated December 30, 1911; that the three notes were all made at the same time and they were all part of one transaction; that Herman A. Newman prior to the making of the notes had advanced to the company the sum of $1,500. Michael Y. Quinlan, who also signed these notes as treasurer of the John J. Mitchell Company, was also called by the defendant and
We have here a promissory note made by a corporation, executed by its officers — its treasurer and vice-president — payable to the order of its vice-president, duly transferred to the plaintiff before maturity and for value, without notice of any infirmity or defense. The sole ground upon which the right of the plaintiff to enforce this note has been denied is, that because one of the officers of the corporation executing the note was the payee, the plaintiff was put upon inquiry as to the consideration for which the note was given, it being assumed that such inquiry would have developed the fact that the payee had only advanced to the company $1,500 for which he had received notes aggregating the sum of $2,500, and that, if the plaintiff had been aware of that fact, he could not have enforced the note as against the corporation. The defendant offered in evidence the articles of incorporation of the John J. Mitchell Company, but they contained no restrictions upon the officers of the company issuing the promissory notes in the ordinary course of business, and the defendant also offered in evidence section 6 of the by-laws, but that was excluded and as it is not part of the record we are without knowledge of its contents. There is, however, absolutely no proof in the case that the officers executing these promissory notes were not authorized to execute promissory notes on its behalf, no evidence that the note was not executed in pursuance of an existing contract or obligation of the company, no evidence that this note was executed without the consent of the president of the company, and nothing to show that the note was ultra vires or void. The only testimony as to the circumstances under which this note was executed was of the president, who says that on or about September 30, 1911, he had conversation with Herman A. Newman regarding the making of these three notes; that these three notes were all executed at .the same time and were all part of the same transaction; that Herman A. Newman had given $1,500 to the company some short time prior to the making of the notes; that he gave nothing
Nor do I think that the form of this note threw upon the plaintiff any duty of inquiry. The note was executed by the treasurer and vice-president of the company. There is nothing to show that the treasurer was not a proper person to sign promissory notes on the part of the corporation; nothing to show that a promissory note signed by him without the signature of the vice-president would not be a binding obligation on the corporation, and nothing to show he was not authorized to execute promissory notes binding on the corporation. It did appear that the payee was an officer of the corporation, or, in other wolds, the corporation had agreed to pay to the payee in three installments of $833.34 the sum of $2,500 in six months. Certainly the officers of a corporation are not prevented from loaning money to it and taking therefor obligations from the corporation for money so loaned to it. The fact that an officer of a corporation has in his possession a note of the corporation
My brother Latjghlin concedes that the authorities on which the defendant relied (Ward v. City Trust Co., 192 N. Y. 61, and Wilson v. M. E. R. Co., 120 id. 145) do not apply. But I think the whole trouble with the defendant’s case is that, to hold this note void, we must assume a fact that was not proven, i. e., that there was no consideration for the note in suit. The form of the note itself imports consideration. As between the plaintiff and the defendant, the burden would have been upon the defendant to show there was no consideration. What the defendant has shown is that there was a loan to the corporation of $1,500, and for a sum in excess of that amount the notes were given, there being no evidence of the terms of the agreement. I can see nothing in these facts to overcome the presumption of consideration, and nothing to prevent a bona fide holder for value and before maturity from enforcing the note because he made no inquiry as to consideration from the payee to the maker at the time the note was given. Consideration of a negotiable instrument is presumed. No fraud is alleged, no misappropriation of funds is charged, no lack of power to sign the notes is pleaded. The simple fact is, that when the three notes were given aggregating the sum of $2,500, the payee had paid to the company for these notes $1,500. It may be that the payee would be responsible to the company for the excess between the amount the notes called for and the amount that the payee paid actually to the corporation for them. But that is not a defense to the note when held by a bona fide holder before maturity and for value. For, if he had known that the sum of $1,500 was all the payee had paid to the corporation at that time, he was justified in assuming that the corporation’s vice-president would account to the corporation for any additional amount he had received for the notes.
I think, therefore, the judgment appealed from should be reversed and judgment directed for plaintiff for the full amount of the note, with interest and with costs in all courts.
McLaughlin, J., concurred.
Determination affirmed, with costs.