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(182 N.Y.S.) only such as bore upon any credit which the payee might apply to it for.

I agree with the learned trial court that the, representatives of the plaintiff had notice and knowledge that this contract had been made by the payee, and that the work was being performed by it, and that notes were being given by the defendant to the payee under the contract, long prior to the time when, according to the testimony of some of them given on the trial, they first acquired knowledge thereof; but that has no material bearing on the points upon which the decision of the issues depends. The plaintiff is not chargeable with knowledge of the interview between the president of the payee and Horowitz. Knowledge of any agreement made by Horowitz in procuring the renewal notes would, of course, be chargeable to the payee, which was his principal; but there is no evidence that he communicated the facts to the finance committee of the payee, on which the plaintiff had representation, or to any of its representatives. There is merely his statement to defendant that he did; but he did not represent the plaintiff, and his admissions or declarations are not binding upon it, and all the testimony in the case shows that he did not so cominunicate it to the finance committee, and there is no evidence, competent as against the plaintiff, that he did. If the plaintiff, in the circumstances, were chargeable with knowledge of all the records of the payee, notice of this verbal agreement between Horowitz and its president could not be imputed to it, for that agreement was in no manner made a matter of record

The plaintiff's representatives on the finance committee and on the auditing committee of the payee had knowledge of this contract, and doubtless, through them, notice that the notes were given with respect to the contract work was imputable to the plaintiff; but upon no theory of the evidence was notice or knowledge that the defendant claimed or had or reserved any defense to these notes, in whole or in part, brought home to any of the plaintiff's representatives in the management of the affairs of the payee, and therefore there is no basis for imputing such notice or knowledge to Stanley, who, as treasurer of the plaintiff, authorized the discount of these notes by it, or for charging the plaintiff with notice or knowledge of the conversations between the defendant and Horowitz with respect to the giving of the renewal notes, or any of the notes of which they were renewals. There is no evidence of notice or knowledge to the plaintiff's representatives, in the management of the affairs of the payee, of any of the correspondence or interviews showing or tending to show that the defendant claimed to have a defense in whole or in part to any of the notes given to the payee, or a claim for a deduction of any amount from the vouchers purporting to represent the cost of the work plus the payee's commissions. The record evidence with respect thereto was kept by Horowitz, personally, and was not seen by, or known to, or available to the plaintiff's representatives; but if they would have been entitled to see it, had they insisted on seeing it, I think that it is quite clear that the plaintiff is only chargeable with such notice and knowledge as its representatives actually had.

The plaintiff's representatives may have been negligent with respect to the performance of their duty toward it in supervising the affairs of the payee; but the plaintiff owed no duty to the defendant, and its representatives in the management of the payee were under no obligation to the defendant, to investigate or inquire with respect to his interviews or negotiations or correspondence with Horowitz. The defendant acquired no right under the agreement between the plaintiff and the payee with respect to supervision or financial control. That agreement the plaintiff made solely for its own protection. It had the same right as any one else to discount these notes, and owed the defendant no duty of inquiry with respect thereto. The uncontroverted evidence shows that it had no notice or knowledge that these renewal notes were not what they purported to be, or that they were subject to any adjustment or deduction between the defendant and the payee, or that there was any implied agreement between them that they were not to be negotiated. The plaintiff, through its representatives, is chargeable with knowledge or notice that the notes were renewal notes in connection with the contract work, but not with any verbal arrangement between the defendant and Horowitz with respect thereto.

A bank need not be suspicious of its customers, and may assume, when they present papers for discount, that they are acting in good faith and within their lawful rights. Am. Ex. Nat. Bank v. N. Y. Belting & P. Co., 148 N. Y. 698, 43 N. E. 168. Therefore the title of the plaintiff is to be tested, not by its diligence or negligence in making inquiries, but by its honesty and good faith, and if it had no actual notice of any infirmity in the notes or defect in the title of the payee, and acted in good faith, even though it acted negligently and omitted to make inquiries which a prudent man would have made, its title is unimpeachable. Cheever v. Pittsburg S. & L. R. Co., 150 N. Y. 59, 44 N. E. 701, 34 L. R. A. 69, 55 Am. St. Rep. 646; Carlisle v. Norris, 215 N. Y. 401-415, 109 N. E. 564, Ann. Cas. 1917A, 429. If the defense pleaded be a partial failure of consideration, the burden was on the defendant, not only of showing the partial failurue of consideration, but that plaintiff was not a holder in due course (Broderick & Bascom Rope Co. v. McGrath, 81 Misc. Rep. 199, 142 N. Y. Supp. 497; Abramson v. Steele, 176 App. Div. 865, 163 N. Y. Supp. 827; Greenhall v. Davis, 190 App. Div. 632, 180 N. Y. Supp. 525 [1st Dept., decided Feb. 4, 1920]; sections 54, 91, 94, 95, 96 and 97 [Vegotiable Instruments Law (Consol. Laws, c. 38)]), and that he failed to do.

The defendant, being a capable, experienced lawyer, and knowing that the payee had negotiated his former notes, must have known that it would likely, or, at least, that it might, negotiate the notes in question. He could have protected himself by not giving negotiable notes, or by exacting an agreement that the notes were not to become obligations until the matters in difference were adjusted, and then only to the extent of the balance found to be due and owing by him. The payee was financially responsible, and it is perfectly evident that he gave all the notes, intending that they should be negotiable instruments, and, if negotiated, that he would look to the payee to take them up

(182 N.Y.S.) if the matters of difference between them were not adjusted in the irterim. The fair and reasonable construction of his testimony is, I think, that in giving the notes he reserved his claims against the payee. If he had not so reserved them, it might have been claimed that he bad waived them. That, in my opinion, is all that he intended to guard against. He could have taken up the notes at maturity, when he found that they had been negotiated, and could then have brought action against the payee for the difference between what he had paid for the work and the amount with which he should have been charged therefor. He knew that the payee insisted upon having the notes to reimburse it for its disbursements under the contract, and he knew that the only manner in which it could obtain reimbursement by the notes was by discounting them pending the adjustment of his claims for reductions in the charges for the work.

This construction of the defendant's testimony brings the case within the authority of Pratt & Whitney Co. v. Pneumatic Tool Co., supra, and also within the authority of Tradesmen's National Bank v. Curtis et al., 167 N. Y. 194, 60 N. E. 429, 52 L. R. A. 430, where a time draft for coal to be delivered was accepted on the agreement of the drawer to deliver the coal before the draft became payable, and to take up the draft if the coal should not be so delivered. The plaintiff, with full knowledge of the agreement, discounted the draft without knowledge that the drawer had failed to deliver the coal. It was held that the plaintiff could recover, and that the drawer's promise to deliver the coal was a sufficient consideration for the draft, even though he failed to perform the agreement, and that the prior discount by the drawer of like drafts, which was known to the acceptor, was sufficient to show that he knew that it might be negotiated.' To the same effect is Davis v. McCready, 17 N. Y. 230, 72 Am. Dec. 461, where an accepted time draft for work to be performed, discounted by plaintiff before maturity with knowledge that it was given under an executory contract for work to be performed, but without knowledge of a breach of the contract, was held enforceable; and it was also held that the plaintiff was under no obligation to inquire with respect to the performance of the work, even though such inquiry would have disclosed that the contract had been breached before the draft was discounted, and that the acceptor must be deemed to have relied on the agreement for performance for his indemnity.

I deem it very doubtful whether the judgment could be sustained on the findings as made; but I think several findings are based on an erroneous construction of the testimony of the defendant. I am of opinion, therefore, that the judgment should be reversed, with costs to the appellant, and the findings of fact and conclusions of law inconsistent with these views should be reversed, and that the findings with respect to the cost of the performance of the contract work should be reversed as immaterial, and findings and conclusions in accordance herewith made, and awarding judgment in favor of the plaintiff for the entire amount of the notes, together with interest thereon, and costs.

L. R. LUNCH & RESTAURANT CO., Inc., v. ZUSMAN et al. (Supreme Court, Appellate Term, First Department. June 24, 1920.) Corporations from 458–Offer to transfer stock of seller corporation held a breach of contract to deliver bill of sale to its property.

Seller of restaurant, with fixtures, etc., under contract requiring delivery of bill of sale on certain date, could not recover for buyer's refusal to consummate the sale, on the seller's offer of the stock of its corporation as a performance of the contract; the offer to transfer the stock being a breach of the seller's contract to deliver the bill of sale.

Appeal from Municipal Court, Borough of Manhattan, Second District.

Action by the L. R. Lunch & Restaurant Company, Incorporated, against George M. Zusman and another. From a judgment for plaintiff, and from an order denying a motion to set aside the verdict and for a new trial, defendants appeal. Reversed, complaint dismissed, and fiew trial of defendants' counterclaim granted.

Argued June term, 1920, before BIJUR, DELEHANTY, and WAGNER, JJ.

Reuben Dorfman, of New York City, for appellants.

Kunstler & Cohen (George Cohen, of New York City, on the brief), for respondent.

PER CURIAM. The plaintiff agreed in writing to sell to the defendants“the restaurant, fixtures, and all other things contained in the restaurant and business aforementioned, together with the lease to said premises, for the sum of ($27,000) twenty-seven thousand dollars, to be paid in the following manner: Six hundred ($600) dollars at the time of execution of these presents," etc. "It is further agreed by and between the parties hereto that the bill of saie shall be delivered by the parties of the second part on or about Saturday, the 21st day of February, 1920,” etc.

The defendants made the initial payment of $600 as required by the contract of sale. When the parties met to close the sale, the plaintiff offered the stock of its corporation to defendants as a performance of the contract. The defendants asked permission to examine the minutes and other records of the plaintiff corporation, and on the following day rejected the offer. At the end of the case, upon motion, the court directed a verdict in favor of plaintiff for the full amount claimed, and also dismissed defendants' counterclaim. This was error. The offer of plaintiff to transfer its certificate of stock was a breach of its agreement. That being the sole evidence of its attempted performance, the complaint should have been dismissed. It follows, of course, that defendants should have been permitted to prove by way of counterclaim any damages they suffered by reason of plaintiff's breach.

The judgment is reversed, with costs to appellant, and complaint disinissed, with costs, and new trial granted of the counterclaim.

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

(182 N.Y.S.)

UNITED STEEL & METAL CORPORATION v. CATEVENIS. (Supreme Court, Appellate Term, First Department. June 16, 1920.) 1. Customs and usages Com 17—Custom inadmissible to vary terms of sale con

tract.

In seller's action for buyer's breach in refusing to accept 200 cases coke tin plate, where defendant's evidence tended to show that the goods tendered contained a large proportion of defective plates, evidence offered by plaintiff to the effect that there was a custom in the trade that "a box of primes” might contain 10 per cent. of “wasters," namely, sheets of second and defective quality, was incompetent to vary the express terms of the contract, which provided that each case should consist of “112 sheets,

primes." 2. Appeal and error 231 (3)—General objection to evidence sufficient, where

evidence in any event incompetent.

A general objection to evidence, which was admitted over such objection, was sufficient to warrant a reversal, where the testimony was in any

event incompetent. Appeal from City Court of New York, Trial Term.

Action by the United Steel & Metal Corporation against Crist E. Catevenis, sued as Charles E. Catevenis. From a judgment for plaintiff, entered upon the verdict of a jury, defendant appeals. Reversed, and new trial granted.

Argued June term, 1920, before BIJUR, DELEHANTY, and WAGNER, JJ.

Prince & Nathan, of New York City (Sidney J. Loeb, of New York City, of counsel), for appellant.

Goldman & Unger, of New York City (William F. Unger, of New York City, and Samuel Rubin, of Brooklyn, of counsel), for respondent.

BIJUR, J. This is an action for damages for breach of contract on the part of defendant in refusing to accept and pay for certain: goods alleged by plaintiff to have been sold by it. On December 4, 1918, defendant wrote plaintiff a letter, requesting plaintiff to enter defendant's order for 200 cases coke tin plate as below:

"100 cases 14x20–112 sheets primes, 107 lbs. each case, at $10.15 per case. 100 cases 20x28-56 sheets primes, 107 lbs. each case, at $10.15 per case" -and specifying some additional details. On December 6th plaintiff wrote to defendant, thanking him for the order, and informing him that the same had been entered "on conditions as stipulated below and printed on the back of this sheet.” The conditions referred to covered some five printed pages of the record on appeal and were entirely apart from and beyond anything that had even been suggested by the defendant.

Had the record stopped there, it would be quite clear on familiar principles that the minds of the parties had not met, and that therefore no contract was established. On December 10th, however, the defendant wrote to the plaintiff : “We have your acknowledgment of December 6th

for the order which we placed with you on December 4th for 200 cases," etc.

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

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