Second Nat. Bank of City of Elmira v. Weston

• Decision Date: 23 January 1900
• Citation: 161 N.Y. 520,55 N.E. 1080
• Parties: SECOND NAT. BANK OF CITY OF ELMIRA v. WESTON et al.
• Court: New York Court of Appeals Court of Appeals

161 N.Y. 520

55 N.E. 1080

SECOND NAT. BANK OF CITY OF ELMIRA

v.WESTON et al.

Court of Appeals of New York.

Jan. 23, 1900.

Appeal from supreme court, appellate division, Fourth department.

Action by the Second National Bank of the City of Elmira, N. Y., against Charles Weston, as executor of the last will and testament of Abijah Weston, deceased, and others. A motion for a new trial on exceptions ordered to be heard in the appellate division in the first instance, after the direction of a verdict for defendant, was denied (52 N. Y. Supp. 315), and plaintiff appeals. Reversed.

This action was brought to recover the sum of $3,925.71, with interest from December 30, 1891, upon a promissory note for that amount dated that day, signed, ‘Weston Brothers,’ and payable 18 months after date to the order of George E. Ramsey, at the First National Bank of Olean, for value received, with interest. It was indorsed by the payee as first indorser, and by the firm of W. H. & D. C. Conklin as second indorser. The defendants Abijah and Orren Weston alone answered, alleging that the firm of Weston Bros., composed of themselves and William W. Weston, was dissolved on the 3d of January, 1892, and that their firm name was fraudulently signed to said note by William W. Weston, after the dissolution of the firm, for the accommodation of the payee. Upon the trial it appeared that said firm of Weston Bros. had been in existence for many years prior to the 3d of January, 1892, when it was dissolved, but no actual notice of the dissolution was given to the plaintiff, and no constructive notice was given through the publication of an advertisement in a newspaper. Evidence was given tending to show the same facts relating to the implied authority of William W. Weston which were considered in a case against these defendants reported in 159 N. Y. 201, 54 N. E. 40. The note in question was discounted by the plaintiff in March, 1893, the rate of discount having been 7 1/2 per cent. It was in fact made at about the time it was discounted, and was dated back, but of this the plaintiff had no notice. It was given to renew in part the last of a series of three notes, for $5,000 each, made and indorsed by the same parties, and discounted by the plaintiff. At the close of the evidence the court, on motion of the counsel for the defendants, directed a verdict in their favor, although the counsel for the plaintiff asked to go to the jury upon the whole case. After affirmance by the appellate division, the plaintiff came here. Further facts appear in the opinion.

C. S. Cary, for appellant.

J. H. Waring, for respondents.

VANN, J.

The main questions presented by this appeal have already been passed upon by us in another case against the same defendants, but recently decided. Bank of Monongahela Valley v. Weston, 159 N. Y. 201, 54 N. E. 40. Upon a similar state of facts we then held that there was a question of fact for the jury as to the good faith of Abijah and Orren Weston in simply remonstrating privately with their brother William against his constant use during many years of the firm name for the accommodation of his friends, and as to his implied authority to do so. Our reasons for holding that the same question of fact is presented in this case may be found in our opinion rendered on the former appeal. We further held that the co-partnership of Weston Bros., and the authority of William to bind his associates by his acts, continued as to third persons, acting in good faith, who knew of the existence of the firm, but had no knowledge, either actual or constructive, of the dissolution thereof. That disposes of the same question presented in this case, upon substantially the same facts.

There is one feature, however, which distinguishes this case from the others against these defendants that have been before us. Smith v. Weston, 159 N. Y. 194, 54 N. E. 38; Monongahela Bank Case, supra. The notes formerly under consideration were presented to the purchaser either by the maker, or by a party who would not in the ordinary course of business have them in his possession unless they were accommodation paper. This fact, after evidence was given tending to show that the notes had been signed by William in the name of the firm without the consent of the other members, was held to involve such notice to the purchaser as to cast upon him the burden of showing that he was a bona fide purchaser, or that the use of the firm name by the one partner was authorized by his co-partners. In the case now before us the note was presented to the plaintiff by the payee, to whom it had apparently been delivered by the Weston brothers, as makers, in the usual course of business, and hence upon the face of the transaction there was nothing to put the purchaser upon inquiry. The plaintiff had a right to assume, in the absence of actual notice of any defect, that the relation to the paper of every party whose name had been written upon it was precisely what it appeared to be. Cheever v. Railroad Co., 150 N. Y. 59, 44 N. E. 701,34 L. R. A. 69. While the plaintiff may have had notice that the subsequent indorsers, who do not defend, had indorsed for the acommodation of some other party to the note, the presentation of the note by the payee cast no suspicion upon the capacity in which the Weston brothers had signed it. As to them, it was apparently business paper, and there was nothing for the plaintiff to inquire about in that regard. The defendants, however, gave evidence tending to show that the note was in fact made outside of the business of the firm, by William W. Weston, without the authority of his co-partners; and thereupon it became necessary for the plaintiff to show either that it was a bona fide purchaser, or that the making of the note was authorized. Smith v. Weston, supra. In order to meet th burden of proof thus shifted upon it, the plaintiff proved that it purchased the note before maturity, for value, and then called its president, who testified that he was the manager of its bank, and had known of the existence of the firm of Weston Bros., and of their ‘good credit,’ for a great many years; that, when the note in suit was presented by the payee, the president asked him what ‘this long-time paper’ meant, and was informed ‘that a deal had been made between the Westons and himself by which this paper was secured to them, and it was given to him to use in his matters, and he had it for that purpose. He did not say in express terms that it was business paper. He did not go into the details of it. He said to me the transaction was one by which property had been transferred to the Westons, and this paper was given back to him on account of it. That was the situation. There was nothing further said about it on that occasion.’ This evidence did not conclusively establish notice to the plaintiff that the note was accommodation paper. While it may have permitted, it did not, as matter of law, require, that inference. The statement of Mr. Ramsey that the note was given to him ‘to use in his matters' should be read in connection with his further statement, made at the same time, that ‘property had been transferred to the Westons, and this paper was given back to him on account of it.’ This permitted the inference that the note was business paper, given in the course of a business transaction. Where conflicting inferences may be drawn from undisputed testimony, a question of fact is presented for the jury. The purchaser of negotiable paper, for value and before maturity, is not bound at his peril to be on the watch for facts which might put a very cautious man on his guard. As we said in late...