Continental National Bank v. Townsend

An indorsee of a promissory note, taking it as collateral security for an antecedent debt without other consideration, but in good faith and before maturity, occupies the position of a holder for value and is protected as such. Where the transfer of a note is upon the last day of grace it is before maturity ; the maker has the whole of that day within which to pay.

Appeal from judgment of the General Term of the Supreme Court, in the first judicial department, entered upon an order made July 1, 1881, which affirmed a judgment in favor of plaintiff, entered upon a decision of the court on trial without a jury. This action was upon two promissory, notes executed by defendant Thompson, payable to the order of James Reid & Co., and indorsed by that firm to plaintiff on the last day of grace, as collateral security for an indebtedness of that firm. Thompson offered to show by way of set-off an indebtedness of said firm to him existing at the time of the transfer. This was excluded and said defendant’s counsel excepted. The mere acceptance of the notes in suit as collateral security to an existing debt did not give plaintiff a title as against Reid & Company. To produce such result, there must be some new consideration, something parted with .on the strength of. the transfer. (Stalker v. McDonald, 6 Hill, 93; Coddington v. Bay, 20 Johns. 636; Driggs v. Rockwell, 11 Wend. 504; O'Callahan v. Sawyer, 5 Johns. 118; McBride v. Farmers’ Bk., 26 N. Y. 450; West v. Am. Ex. Bk., 44 Barb. 175; Central Nat. Bk. v. Valentine, 18 Hun, 417; Phœnix Ins. Co. v. Church, 81 N. Y. 218.) Where a promissory note is made for the accommodation of the payee, but without restriction as to its use, an indorsee taking it in good faith as collateral security for an antecedent debt of the payee and indorser, without other consideration, occupies the position of a holder for value, and can recover thereon against the maker. The precedent debt is a sufficient consideration for the transfer, and no new consideration need be shown. (Grocers’ Bk. of N. Y. v. Penfield, 69 N. Y. 502.) A note may be negotiated on the last day of grace, within business hours, and the purchaser acquire a good title, unless he has notice of a defect in the consideration. Gross negligence in not making inquiry is insufficient per se to defeat his title, though it may constitute evidence of fraud. (Farrell v. Lovett, Sup. Ct. of Me. decided June 29, 1878; 18 Alb. L. J. 373.) The alleged set-off against plaintiff^ assignor is a defense, not a counter-claim. A counter-claim is limited to the parties to the record. ( Wolf v. Charles, E. H—, 13 How. Pr. 84.) One who for fall value obtains from the apparent owner a transfer of negotiable paper before it matures, and who has no notice of any equities between the original parties, or of any defect in the title of the presumptive owner, is to be deemed a bona fide holder. (Belmont Branch Bk. v. Hoge, 35 N. Y. 65; Magee v. Badger, 34 id. 247.) The holder is presumed, in the first instance, to have paid value for the bill. (Case v. Merch. Banking Association, 4 Comst. 166.) And this presumption is not overcome by showing that the plaintiffs acquired the paper after it was due. (James v. Chalmers, 2 Seld. 209.) No action can be brought upon the note until the third day of grace has expired. (Osborne v. Moncure, 3 Wend. 170; Hopping v. Quinn, 12 id. 517.) For the purpose of presenting a note for payment the proper hoars of business range through the whole day, down to bedtime in the evening. (The Cayuga Co. Bk. v. Hunt, 2 Hill, 635.) The statute only authorizes a set-off, where the note was assigned after it became due. (3 R. S. 635, 5th ed.; Code of Civil.Proc., § 502.)