App. Div.] First Department, June, 1920. The testimony herein is quite convincing that the ThompsonStarrett Company acted in breach of faith in negotiating the notes in question; that its title thereto was defective; that plaintiff had notice of this defect; that plaintiff acted in bad faith in discounting the notes and is not a holder in due course. The testimony sustains the findings of the trial court to the foregoing effect, and fully justifies the conclusion reached by it. The Thompson-Starrett Company obtained the notes in suit upon the distinct and explicit agreement that they were not to be taken as evidence of any fixed indebtedness owing by defendant, but that the amount thereof was to be subject to future and final adjustment, after an investigation of the honesty of the bills rendered. These notes were never intended to be certain and definite in amount. Undoubtedly there had been friction in the finance committee of the Thompson-Starrett Company because Horowitz had not been getting notes from defendant for several months, and so defendant sent him notes dated August 2, 1912, after withholding them because of the condition of the work upon Horowitz's statement, "It is not necessary to withhold the notes. My understanding with you is that the matter shall be investigated and adjusted and it will save me adverse criticism if you will give me the notes." So that the reservation of defendant's rights was not a new idea when the notes in suit were given. Running all through this record is a consistent, outspoken and unyielding insistence by defendant upon his right to question the statements and to impeach their honesty after his suspicions had been aroused by the delay and greatly increased cost of the work and confirmed by his reports from Whiting and the investigation made on the ground. What plaintiff's representatives in the management of the Thompson-Starrett Company were anxious to get was defendant's final note, and they evidently thought that if they could secure that and pass it over to plaintiff it would be safe from any defense, inasmuch as the two corporations were not identical in interest. Defendant believed the Thompson-Starrett Company meant to act in good faith and not only give him the fullest opportunity for investigation, but assist him to the fullest extent by any records in its possession, that the truth might be ascertained and the com First Department, June, 1920. [Vol. 192. pany would then do the right thing and give defendant credit on his account for any loss due to incompetency, carelessness, inexcusable delay, extravagance or dishonesty. An honest contractor could not do less than this. It is apparent from Horowitz's correspondence that he had more than a suspicion that all was not right with the work and he constantly impressed upon defendant his determination to adjust anything that was wrong, nor did he abandon this position and refuse to recognize any just cause for complaint, until after defendant's final note had been obtained. The Thompson-Starrett Company under the domination of plaintiff's representatives not only did not place at defendant's disposal its records and seek to assist him in ascertaining the truth, but steadily and vigorously resisted every effort that defendant made not only to ascertain the truth from their books, but anywhere else. When defendant's attorneys asked to be allowed to examine the books of account and vouchers of the Thompson-Starrett Company in so far as they referred to the Uva job, a motion was made at a meeting of the finance committee on September 3, 1914, when the letter was read, that such books of accounts and vouchers be made accessible to said attorneys. The motion was made by Mr. Boardman, an attorney of high standing and the largest stockholder of the company, who advised that the contract with defendant was one of agency, whereby under the rules of fidelity they should be disposed to show their principal the evidence; but the motion was defeated, Mr. Boardman alone voting "aye." Notice of this resolution was sent to defendant's attorneys. At the same meeting a resolution was offered by Mr. Bedford, one of plaintiff's representatives on the committee, that the matter be referred to Mr. Frank Platt with the statement that it was the sense of the committee: "That we are inclined to offer every facility to Mr. Pam and his attorneys to examine the correctness of our books, provided so doing in no way prejudices our interests in the pending litigation;" but of this resolution no notice was given to defendant or his attorneys and nothing was ever done thereunder. The conclusion is irresistible that the negotiations of these notes was in breach of faith and solely for the purpose of allowing a third person to recover upon them, if possible, and to prevent defendant App. Div.] First Department, June, 1920. from asserting as against them any claims or defenses he might honestly have as between the original parties. Good faith would have required the honest and open adjustment of the rights of the contracting parties upon a disclosure of the real state of the contractor's books and knowledge, instead of subjecting defendant to the intolerable burden of preparing and presenting his defense at such a distance from the field of the operations under the original contract. It would also have led them to retain those notes in their possession instead of passing them over so soon to the plaintiff, which sought to entirely destroy the effect of the agreement under which the notes were given. If the Thompson-Starrett Company for any reason was unable to retain possession of the notes, its duty was to apprise the person to whom they were transferred of the conditions under which they were given and of the uncertainty as to the amount due thereunder and to refrain from unjustly seeking to change the character of the notes or the extent of the obligation thereupon. Plaintiff sought to establish that it was the holder of these notes for value in due course and that the same were taken without knowledge or notice of any claims, defenses or equities of the respondent. But the contrary of these propositions has been affirmatively proven by the defendant. Concededly the equities, defenses and claims of the defendant were discussed at a meeting of the finance committee of the Thompson-Starrett Company. But plaintiff sought to fix the date as December nineteenth, after the notes in question were discounted by plaintiff. There are peculiar circumstances, not necessary to advert to here, which destroy the force of the evidence and records tending to fix this as the date when the discussion as to defendant's claims took place. The record establishes satisfactorily that Horowitz did in fact communicate as early as September or October to the finance committee of the Thompson-Starrett Company, including plaintiff's representatives therein, his belief that he would have a difficult time getting renewal notes from defendant, and had discussed with them defendant's claims and complaints, and had advised them that defendant should have ample opportunity for investigation, and an adjustment of any claim for overcharge or otherwise. For the reasons First Department, June, 1920. [Vol. 192. heretofore given, including the relationship between the parties, it seems to me clear that plaintiff is chargeable with knowledge and notice of the conditions, terms and agreement under which the notes were delivered. The learned trial court in his opinion held that upon the facts shown Mr. Kelsey and Mr. Stanley would have been presumed to have constructive knowledge of the facts regarding defendant's rights and claims, citing Ward v. City Trust Co. (117 App. Div. 130; 192 N. Y. 61) and Republic Life Ins. Co. v. Hudson Trust Co. (130 App. Div. 618; affd., 198 N. Y. 590). But he also found that it was not necessary to resort to constructive notice as the evidence satisfactorily established actual notice to both the officials named. In other jurisdictions, under circumstances not always so persuasive as those proven in the present action, knowledge has been charged to one corporation because of its connection through common agents or officers in another corporation. In Matter of Cotton Manufacturers' Sales Co. (209 Fed. Rep. 629) the corporation pledged at different times its accounts receivable to a bank and the bank appointed the president of the corporation its agent for receiving payments on these accounts and turning the money over to the bank. Within five months the corporation went into bankruptcy. Held, that the knowledge which the president of the corporation had or should have had, of the insolvency of the corporation, was imputable to the bank. In Vandagrift v. Bates County Investment Co. (144 Mo. App. 77; 128 S. W. Rep. 1007) a bank and an investment company had the same officers, adjoining places of business and used the same vaults. The investment company sold to the bank after maturity two notes secured originally by a deed of trust, which had, however, been foreclosed. This would be a fraud on the bank, unless it had notice. Held, that the bank's information as to the fact was as complete as could be imparted, and because of the confidential relation between the two corporations, the bank must have been acquainted with all the facts pertaining to the transaction. In First Nat. Bank v. Chowning Electric Co. (142 Ky. 624; 134 S. W. Rep. 1156) the case turned on whether knowledge of the directors of the Jefferson County Electric Com First Department, June, 1920. * App. Div.] pany of the priority of certain liens over a mortgage taken by the bank was imputable to the bank because it had the same directors. In the course of its opinion the court said (at p. 1158): "But it is insisted that, inasmuch as McClarty, Bickel, and Doherty were directors both of the Jefferson County Electric Company and of the bank, notice to them was not notice to the bank because of the conflict of interests developed by the facts of this case. The solution of this question depends upon the condition of affairs at the time it is alleged notice was given. * So far as the electric company was concerned, it was immaterial whether the bank or the lien claimants were paid first. There was, then, absolutely no conflict of interests between the bank and the electric company. Nor is there now any contest in this action between the bank and the Jefferson County Electric Company. It is perfectly plain, therefore, that, so far as the relationship which they sustain to the two corporations is concerned, there is nothing to show that it was the duty of McClarty, Bickel, and Doherty to withhold from the bank information which they obtained as directors of the electric company. On the contrary, it was their duty to impart such information to the bank, for in so doing they were not in any wise acting against the interests of the electric company." In First National Bank v. Burns (88 Ohio St. 434; 103 N. E. Rep. 93; 49 L. R. A. [N. S.] 764) the president of the bank, as an individual, sold to the bank certain promissory notes obtained by fraud. The defense set up was that the bank had knowledge of the fraud. The court said: "In a case of contract, as in the case at bar, there is no need of communicating knowledge, because the principal in law is already conclusively presumed to have that knowledge. The principal's liability does not depend upon the agent's duty to communicate, or the likelihood that he will communicate, his knowledge to the principal, but upon the fact that the agent is the alter ego of the principal, acting for the principal, and knows that his acts and knowledge ipso facto become the knowledge and acts of the principal." In Union Investment Co. v. Epley (164 Wis. 438; 160 N. W. Rep. 175) the cashier of a bank was also president of a land company. The land company took a note of the defendant in |