Merritt v. Cole

BoaedmaN, J.:

The note in suit was under seal, and was not,-therefore, negotiable. (Clark v. Farmers' Woolen Man. Co., 15 Wend., 256; 1 Pars. on Notes, 26; 2 id., 35; Dinsmore v. Duncan, 51 N. Y., 577.) It was not, therefore, commercial paper to which tona fide purchasers could acquire title as against the rights of the original parties to the contract. Plaintiff’s father conveyed the property to defendant’s testator, in consideration of which this note was given. The father was therefore owner of the note when given. This would be true, even though the title to the real estate sold was in his wife, of which I think there is no proof. For the conversion of the real estate of the wife into money, at that time — 1828 — would vest the money or personal property taken therefor in the husband, he having taken possession of it at that time. Until Charles Dewitt, Jr., plaintiff’s father, made a valid gift of the note to plaintiff, the title to the same would remain in him. I find no evidence that defendant’s testator had any knowledge of plaintiff’s claim or ownership of the note before 1853, when the last payment of $200 was paid. Prior to that two payments had been made by defendant’s testator to Charles Dewitt, Jr., and indorsed upon the note then in his possession, viz., $250 March 5, 1845, and seventy-four dollars September 10, 1850. If it be true that John R. Cole had no knowledge of any transfer or gift of tbe note to the plaintiff when those payments were made, they should be allowed to the defendant because the secret equities of the plaintiff ought not to prevail over the legal presumption which Cole was entitled to entertain — that the note still belonged to Charles Dewitt, to whom it was given and who still held possession of it.

I will not, however, rest on that conclusion, but consider the ease upon the question arising upon the trial — were the payments made by John R. Cole to Charles Dewitt on this note good and binding upon the plaintiff, even if she was its owner?

It must be remembered that Dewitt was plaintiff’s father, and. had possession of the note which was payable to plaintiff or bearer; that the consideration for the note moved from him and the contract, was made with him; that the note was given to plaintiff when she was a minor and immediately returned to her father, who, for nearly thirty years, and until his death, had retained its custody; that during a large part of that time plaintiff had lived with her father, and,' to a greater or less extent, had been supported and maintained by him. "Under such circumstances was a payment to Charles Dewitt good ?

If this note had been overdue when the payments were made, no doubt can exist such payments would be valid under the facts proved. The fact that the payments were made before maturity is not, in my judgment, important. The doctrine contained in the text books, that a payment made before the note is due is at the peril of the maker, has no application to this case. That principle relates only to commercial paper. The peril is that such paper may, after such payment, get into the hands of a bona fide holder, who can enforce it notwithstanding such-payment. In this case the status of the note is not changed after payments made. If they were good when made, they are still so ; no new purchaser or party has intervened.

The validity of the payments will depend upon circumstances surrounding the case. The possession of.the note by Charles Dewitt, Jr., if not evidence of title, is still presumptive evidence of authority to receive payment thereof. Certainly he could have sold the note to a bona fide purchaser and given a good title.

Some of the earlier English eases are collected in 1 Equity Cases Abridged, 145. It is there held that where a scrivener is intrusted with a bond he may receive both principal and interest. The same principle is applied to the case of an agent or attorney who loans money for and in the name of his principal, and retains possession of the bond and mortgage. Payments made to.the attorney will bind the principal though never received by the latter. (Hatfield v. Reynolds, 34 Barb., 612.) Mr. Justice EMott says: “ If such agent is intrusted with the continued possession of the bond or evidence of debt, authority for him to receive payment may be implied,” citing Paley on Agency, 274; Story on Agency, sections 98,104. To the same effect is Williams v. Walker (2 Sandf. Ch. [m. p.], 325), where many of the English cases are reviewed. It is there said : “ While Bancker had the possession of the. bond, although he had neither the mortgage nor the assignment, Mr. Walker, the defendant, was, in my judgment, entitled to presume that he was authorized to receive the principal as well as the interest on the bond and mortgage.” I see no essential distinction between the case of a bond and a sealed note. •

But the same principle, by implication, has been decided by the Court of Appeals in Doubleday v. Kress (50 N. Y., 410), as to an ordinary negotiable promissory note. The learned judge says: “ That the agent took the security or negotiated and made the loan for which the security was taken, and was thereafter intrusted by the owner with its possession, is sufficient to render the payment valid.” Again : “ The reason of the rule, that one who has made the loan as agent and taken the security is authorized to receive payment when he retains possession of the security, is founded upon human experience, that the payer knows that the agent has been trusted by the payee about the same business, and he is. thus given a credit with the payer.” So, also, it is held that “ one who has the possession of a negotiable promissory note with all the evidence of ownership by the act and consent of the owner, may deal with the maker in respect to it, and the owner will be bound by the acts and agreements of the possessor and apparent owner.” (Scoville v. Landon, 50 N. Y., 686.)

These authorities, I think, are sufficient to justify the conclusion that Charles Dewitt, Jr., was, upon the facts proved, authorized to receive tbe payments made by Cole upon the note in suit, and they should have been allowed thereon. '

If this conclusion be correct, the learned judge erred in holding that the defendant was bound to show these payments were made with the consent of the plaintiff. The burden of the charge was that the defendant must show knowledge and consent by the plaintiff to these payments, or authority in Charles Dewitt, from plaintiff, to receive them, and that the possession of the note by Charles Dewitt, under the conceded facts proved, was not prima faoie evidence of his authority.

I do not see that the marriage of the plaintiff about 1830 can influence the result of this action. The husband never had possession or control of this note.

It is not apparent how the defendant can urge any real or imaginary indebtedness of the plaintiff to her father’s estate in bar of this action. The defendant is bound to pay the amount due to this estate. Any claim in favor of Charles Dewitt’s estate is to be enforced in a far different mode.

The amount due and unpaid upon the note at the time of the trial, after deducting the three indorsements, was $170.62.

The judgment and order must, therefore, be reversed and a new trial granted, costs to abide the event, unless the plaintiff, within twenty days after notice of this decision, shall stipulate to reduce the damages included in the judgment to $170.62, in which case the judgment, as so modified, is affirmed, with costs of this appeal to the defendant.

Present — Leaeeed, P. J., BoaedmAN and Bocees, JJ.

Judgment reversed and new trial granted, costs to abide event, unless plaintiff, within twenty days after notice of this decision, shall stipulate to reduce the damages in the judgment to $170.62, in which cáse the judgment, as so modified, is affirmed. ■ Costs of this appeal to the defendant. ■