Opinion
February Term. Filed March, 1922.
Nathan D. Leiman, for appellants.
Shaine Weinrib ( C. Weinrib, of counsel), for respondent.
The note in suit was given to one Shiller, a creditor of the defendants, on condition that he would withdraw the objections filed by his attorneys in the bankruptcy court to the composition which all the other creditors of the defendants were willing to execute. Under the composition the creditors were to receive thirty-five per cent. The objections were withdrawn and the composition executed and confirmed by the court. The note was obtained secretly and without the knowledge of the other creditors of the defendants, and was a fraud on them. Shiller thus obtained a preference and rendered the note unenforcible as between the parties. Hanover Nat. Bank v. Blake, 142 N.Y. 404; Union Exchange Nat. Bank v. Joseph, 194 A.D. 295, 297; affd., 231 N.Y. 250. When this fact was established, the plaintiff, claiming to be the holder of the note in due course and for value, was under a duty to come forward with his proof to meet that offered against Shiller. The presumption upon which he could rest no longer existed. Neg. Inst. Law, § 98.
Judgment reversed and new trial ordered, with thirty dollars costs to appellant to abide the event.
All concur.
Judgment reversed.