App. Div.] First Department, June, 1920. indebtedness, or, in view of the evidence most favorable to defendant, for such amount thereof as might be found on the adjustment to be due and owing from him, and on Horowitz's agreement to make such an adjustment. There can be no doubt but that, as between the original parties, the payee of those notes became a holder for value, for they were given in payment of former notes which were then surrendered to the maker. (Kelso & Co. v. Ellis, 224 N. Y. 528; Neg. Inst. Law, § 51; McKinney's notes and citations to the section in his Ann. Consol. Laws of N. Y.; Editors' notes and citations in Birdseye, Cumming & Gilbert's Consol. Laws of N. Y. vol. 5 [2d ed.], p. 5448 et seq.) If the action were by the payee on the original notes, I think the defendant could not defend on the theory of partial failure of consideration, which is the only possible defense pleaded here, predicated on the fact that the payee had breached its contract to furnish true and honest vouchers or had overcharged for the work, for the defendant agreed to give the notes on the presentation of the vouchers, and its agreement to perform and its performance of the work constituted the consideration for his agreement to give the notes; but, of course, in that case the defendant could have interposed a counterclaim based on the excessive or unauthorized charges. (Gillespie v. Torrance, 25 N. Y. 306; Pratt & Whitney Co. v. Pneumatic Tool Co., 50 App. Div. 369; affd., 166 N. Y. 588; Manufacturers' Nat. Bank v. Russell, 6 Hun, 375; Rice v. Grange, 131 N. Y. 149.) Surely the renewal notes were not open to defenses which could not have been interposed to the original notes, for the agreement between the defendant and Horowitz with respect to the renewal notes did not enlarge the rights of the defendant; and, moreover, here there were additional considerations for the renewal notes, consisting of Horowitz's agreement to make a proper adjustment with the defendant, which he has not breached, for so far as appears there was an honest effort to reach an agreement but without success, and there was also the extension of the time of payment. (O'Brien v. Fleckenstein, 180 N. Y. 350; Emerson v. Sheffer, 113 App. Div. 19; Milius v. Kauffmann, 104 id. 442; McCormick Harvesting Machine Co. v. Yoeman, 26 Ind. App. 415; Rice v. Grange, supra.) Ordinarily, a renewal note, where First Department, June, 1920. [Vol. 192. the note of which it is a renewal is retained, is merely a continuation of the original note, but where, as here, the original notes are given up on the execution and delivery of the renewal notes, the renewal notes are taken for value, for they are taken in payment of the old notes. (Twelfth Ward Bank v. Samuels, 71 App. Div. 168; affd., sub nom. Twelfth Ward Bank v. Schauffler, 176 N. Y. 593; Hayward v. Empire State Sugar Co., 105 App. Div. 21; affd., 191 N. Y. 536; Jagger Iron Co. v. Walker, 76 id. 521; First Nat. Bank v. Weston, 25 App. Div. 414.) But if the defense pleaded, in so far as it has been proved, would have constituted a good defense as between the original parties, without being pleaded as a counterclaim, on the theory that it shows a partial failure of consideration, it is not available as a defense in this action brought by the bank which discounted the notes for full value before maturity, and, I think, became a holder in due course without notice of any infirmity in the notes or of the facts upon which the defense is predicated. (See Neg. Inst. Law, §§ 91-98.) There is no evidence of express notice to the plaintiff that the defendant claimed to have any defense to the original notes or to the renewal notes, including those on which the action is brought. The only theory on which it is claimed that the plaintiff is chargeable with notice of any such defense is on account of the relationship between the plaintiff and the payee. All of the testimony and evidence in the case that was competent as against the plaintiff is to the effect that its representatives, who were taking part in the management of the affairs of the payee, had no notice or knowledge of any of the material facts on which the defendant predicates his defense. The only claim is that the plaintiff's representatives were in a position to acquire knowledge of these facts and that it was their duty to inquire, or that it may be inferred that Horowitz communicated to the finance committee of the payee his interview and understanding with the defendant. But such an inference would be unwarranted in view of the fact that the testimony of Horowitz and of all the plaintiff's representatives who were connected with the payee is to the contrary, and it is the only evidence in the case on the subject. The notice or knowledge acquired by an agent which is imputable to his First Department, June, 1920. App. Div.] principal is limited to notice to or knowledge acquired by him while acting for his principal, or which, if acquired while representing another principal, is in his mind when so acting and when the agent has no private purpose of his own to influence him in refraining from making disclosure to his principal or from acting for the protection of his principal with respect thereto. (Constant v. University of Rochester, 111 N. Y. 604; McCutcheon v. Dittman, 164 id. 355; Comey v. Harris, No. 1, 133 App. Div. 686; affd., 200 N. Y. 534; Cragie v. Hadley, 99 id. 131; Holden v. New York & Erie Bank, 72 id. 286; Crooks v. People's Nat. Bank, 72 App. Div. 331; New York Assets Realization Co. v. Pforzheimer, 158 id. 700; Republic Life Ins. Co. v. Hudson Trust Co., 130 id. 618; affd., 198 N. Y. 590; Casco Nat. Bank v. Clark, 139 id. 307; Logan v. Fidelity-Phenix Fire Ins. Co., 161 App. Div. 404; affd., 220 N. Y. 688.) It does not appear that the plaintiff was under any obligation to discount any or all the notes the payee might desire to have discounted, or to discount the notes of the defendant. It was, through representatives, exercising a financial supervision over the business of the payee to protect it with respect to credit it had extended or might extend to the payee. In other words, it was exercising this supervision for its own protection only, and not for the benefit of the defendant or others dealing with the payee, and it appears that discounts were obtained by the payee from other banking institutions from time to time. The payee, in making and performing contracts, was acting for itself, and not as agent of the plaintiff, which through its representatives exercised such restraint and control over the business of the payee as was deemed necessary for its own protection. Therefore, I think the plaintiff was not even chargeable with all notice and knowledge of the payee's business as the same was from time to time transacted, but 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 First Department, June, 1920. [Vol. 192. 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 communicate 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. App. Div.] First Department, June, 1920. 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. (American Ex. Nat. Bank v. N. Y. Belting, etc., Co., 148 N. Y. 698.) 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. Pittsburgh, etc., R. R. Co., 150 N. Y. 59; Carlisle v. Norris, 215 id. 400, 415.) If the defense pleaded be a partial failure |