Mechanics' Banking Ass'n v. New York & Saugerties White Lead Co.

A corporation is bound, by its indorsement of commercial paper, for the accommodation of the maker, in respect to a bona fide holder, who discounts it before maturity on the faith of its being business paper.

Appeal from the Supreme Court. The action was on a promissory note for $1,250, made by one James B. Townsend, payable to the order of the New York & Saugerties White Lead Company, and indorsed by -that company, and by the Spring Yalley Shot and Lead Company, by James McCullogh, as president of each of said companies. The note was made by Townsend, and indorsed by the appellant, for the accommodation of the Spring Yalley Shot and Lead Company. McCullogh was not only the president, but also the financial officer of both these companies. He had previously made and indorsed notes in behalf of each of them, with the knowledge of the respective directors. At the time of the transaction in question, the following entry was made in the appellant’s bill book: “ This note was used by the Spring Yalley Shot and Lead Manufacturing Company, discounted at their bank, of which they received the proceeds, and is to be paid by them at maturity.” The Spring Valley Company had an account at the plaintiff’s hank. The White Lead Company had none. The note was discounted for the Spring Valley Company, and that company received the whole of the proceeds; the appellant being a mere accommodation indorser, and deriving no benefit from the transaction. The plaintiff, at the time of the discount, had no notice of these facts, and made the discount in good faith, the note being in the usual form of business paper. Upon this state of facts, judgment was rendered in favor of the plaintiff by'Mr. Justice E. Dahwht Smith, before whom the cause was tried, without a jury. The judgment was affirmed, on appeal, at the General Term in the first judicial district, the opinion of the court being delivered by Mr. Justice Hogebooh.