Opinion
June, 1913.
Parker, Davis, Wagner Walton (N. Raymond Heater, of counsel), for appellant.
Julius Siegelman, for respondent.
The action was to recover upon a promissory note made by the defendant and delivered to the Henry J. McCoy Company in payment for a steam hammer, and by the Henry J. McCoy Company endorsed and delivered before maturity to the plaintiff in payment of a pre-existing debt.
The trial justice admitted evidence over plaintiff's objection and exception, tending to prove that the steam hammer was not as represented and had been returned by Margaret McGrath to the Henry J. McCoy Company. Judgment was given for the defendant upon the theory of a failure of consideration. From the decision of Coddington v. Bay, 20 Johns. 637, until the enactment of the Negotiable Instruments Law (Laws of 1897, chap. 612, Consol. Laws, chap. 38) it was the law of this state that in order to constitute one a holder for value it was necessary that he part with some present consideration. Therefore where a holder received a note as collateral security for a pre-existing indebtedness, without discharging the debt or granting extension or forbearance on account thereof, such a holder was not a holder for value, and was subject to the equities existing between the original parties. The decisions in this state, in this regard, were not in harmony with the decisions in the federal and many state courts. The Negotiable Instruments Law was proposed by the commission for the promotion of uniformity of legislation in the United States.
That law provides, section 5: "What constitutes consideration. Value is any consideration sufficient to support a simple contract. An antecedent or pre-existing debt constitutes value; and is deemed such whether the instrument is payable on demand or at a future time."
Section 52. "What constitutes holder for value. Where value has at any time been given for the instrument, the holder is deemed a holder for value in respect to all parties who became such prior to that time."
Courts of this state at first refused to recognize in this enactment the legislative intent to change the rule that had been recognized and enforced in this state since 1822 and held that this provision of the Negotiable Instruments Law had not abrogated the rule announced in Coddington v. Bay, 20 Johns. 637. See Sutherland v. Mead, 80 A.D. 103, 107; Roseman v. Mahony, 86 id. 377, 378; Bank of America v. Waydell, 103 id. 28, 33; affd., 187 N.Y. 115. But the later cases, without expressly overruling these decisions, have held that the Negotiable Instruments Law has changed the rule in this state and brought our law in harmony with that of other jurisdictions and a pre-existing debt without extension or forbearance is a sufficient consideration to constitute a holder for value. King v. Bowling Green Trust Co., 145 A.D. 398, 402; Maurice v. Fowler, 78 Misc. 357; Martin L. Hall Co. v. Todd, 139 N.Y.S. 111. The desirability of uniformity in the laws of various states with reference to negotiable instruments is so obvious, the legislative intent to harmonize our theretofore conflicting decisions, with those of other jurisdictions, is, to my mind, so clearly expressed, that full effect should be given thereto.
In the case at bar the plaintiff was a holder of the note for value and the equities that might have existed between the maker and payee were not available to the maker as a defense against the endorsee. Neg. Inst. Law, § 96. Failure of consideration is not one of the defenses specified in section 94 of the Negotiable Instruments Law which throws upon the plaintiff the burden of establishing his bona fide position.
SEABURY and BIJUR, JJ., concur.
Judgment reversed and new trial ordered, with costs to appellant to abide event.