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right, or whether the theory on which that issue was decided was correct, for I deem it an immaterial issue herein.

The plaintiff was the principal, but not the sole, banker of the payee of the notes, and since March 9, 1903, it has been represented on the board of directors of the payee by Mr. Kelsey, its president, and Mr. Stanley, its second vice president, treasurer, and the manager of its banking department, and by three others, forming a majority of the board. Kelsey was also chairman of the payee's finance committee, which had general charge of the contracts to be taken by the payee and of its finances. Stanley was also a member of the finance committee, and was one of the two members of the auditing committee of the payee. It is unnecessary at this point further to consider the relations between the plaintiff and the payee of the notes, for the trial court properly found that they remained separate and distinct corporations and that the payee was not a subsidiary of the plaintiff.

The latter part of October, 1912, Pond, the treasurer of the payee, informed Kelsey, the chairman of its finance committee, that he had notes of the defendant about to fall due, and that Horowitz had agreed to take renewal notes for a year therefor. Kelsey informed him that, since Horowitz was absent, the only thing to do was to take the renewal notes. Thereupon the renewal notes, which had been made by the defendant and left with his secretary for delivery, were procured and delivered to the treasurer of the payee. A few days thereafter a demand note of the defendant for the interest on the notes due November 1st was likewise received from him by the payee. That note was paid by him on May 2, 1913, by check inclosed with a letter stating that it was without prejudice or waiver of any rights or claims the maker had against the notes then held by the payee, and that any such rights or claims “on any account in connection with the contract” for the construction work were expressly reserved. The defendant's notes due November 1, 1912, in so far as they had been discounted by the plaintiff, were taken up by the payee's check given that day to the plaintiff for $63,406.38. They were retained by the payee for a few days, and returned to the defendant on receiving from him, as already stated, the notes in suit.

The payee was not in need of funds at the time it received from the defendant the notes in suit, but early in December thereafter it became necessary for it to discount some paper. The treasurer of the payee spoke to Mr. Stanley of having these notes, and of the necessity for discounting some paper within a few days, and said he intended to speak to Horowitz about it, and Mr. Stanley approved. The treasurer then spoke to Horowitz, who directed that he have the notes discounted. A few days later, and on December 7, 1912, the treasurer of the payee took the notes to the plaintiff and there informed Stanley, its treasurer, that they were the notes he had spoken to him a few days before about having discounted, and Stanley answered, "All right," and directed him to the discount clerk, and he informed the discount clerk that Stanley authorized their discount, and they were thereupon accepted and discounted. The testimony of the treasurer of the payee tends to show that he informed Stanley (182 N.Y.S.) on the first occasion, either of the amount of the notes or about the amount that was needed, but that nothing was said as to whose notes they were, and that Stanley on neither occasion examined them. When they became due, no adjustment had been made between the defendant and the payee. The defendant refused to pay them, and the payee likewise refused to pay them, and suggested to the plaintiff that it bring an action thereon, which it did.

Accepting the testimony of the defendant, as did the trial court, I am of opinion that the fair inference to be drawn therefrom, and the effect thereof, is only that the amount payable on the notes was subject to deduction according to any adjustment arrived at between the parties with respect to the defendant's claim that the charges for the cost of the work, and for which he gave the notes originally, were excessive. It is perfectly clear, I think, that the notes were unconditionally delivered, and the evidence of the defendant with respect thereto only shows a condition subsequent, which, being inconsistent with and contradictory of the terms of the notes, could not be proved by parol evidence, and did not constitute a defense thereto. Jamestown Business College Association v. Allen, 172 N. Y. 291, 64 N. E. 952, 92 Am. St. Rep. 740; Smith v. Dotterwich, 200 N. Y. 299, 93 N. E. 985, 33 L. R. A. (N. S.) 892; Grannis v. Stevens, 157 App. Div. 561, 142 N. Y. Supp. 835, affirmed 216 N. Y. 583, 111 N. E. 263; Nash v. Weidenfeld, 41 App. Div. 511, 58 N. Y. Supp. 609, affirmed 166 N. Y. 612, 59 N. E. 1127; Copans v. Dougan et al., 217 N. Y. 695, 112 N. E. 1056, reversing 158 App. Div. 896, 142 N. Y. Supp. 1113, on the dissenting opinion of Burr, J.; Pratt & Whitney Co. v. Pneumatic Tool Co., 50 App. Div. 369, 63 N. Y. Supp. 1062, affirmed on opinion below 166 N. Y. 588, 59 N. E. 1129; Smith v. Hedges, 89 Misc. Rep. 183, 152 N. Y. Supp. 95, affirm.ed 170 App. Div. 349, 155 N. Y. Supp. 934, affirmed 222 N. Y. 701, 119 N. E. 1077; Rice v. Grange, 131 N. Y. 149, 30 N. E. 46; Tradesmen's Nat. Bank v. Curtis et al., 167 N. Y. 194, 60 N. E. 429, 52 L. R. A. 430.

In Copans v. Dougan et al., supra, the action was on a note against the indorser, and the answer admitted the making and the indorsement of the note, and alleged that it was made to secure the defendant Cronk for $200, on account of the purchase price of a house and lot which he had sold to the maker, who had purchased goods for him and guaranteed the account, and it was verbally agreed by all parties to the instrument that Cronk should hold the note, and that when it fell due, if he was still liable on his guaranty, the amount of such liability should be deducted from the note. The plaintiff was present when the agreement was made, and was fully informed with respect thereto, and therefore was not a bona fide holder in due course. When the note became due, Cronk owed on account of the purchases guaranteed by the maker more than the amount of the note. Justice Burr, on whose dissenting opinion the decision of the Appellate Division was reversed, wrote, and Justice Thomas concurred with him, holding that by the pleadings, which were in precisely the same condition, so far as this point is concerned, as those in the case at har, the absolute

making and delivery of the note was admitted, and that, if that were doubtful, the defendant pleaded and attempted to prove that, if at the maturity of the note the payee was indebted to the maker, such indebtedness should be offset against the note, which could not be done even between the original parties.

In Pratt & Whitney Co. v. Pneumatic Tool Co., supra, it was pointedly held that only conditions attaching to the delivery of a note which go to its existence as a contract may be shown by parol, and that no conditions which concede the existence of the contract and tend to vary its terms may be shown in defense, unless properly pleaded as a counterclaim, where a counterclaim is available. There, as here, the making and the delivery of the note were admitted, and the defendant pleaded, as a defense only, that it was given for work and material, and that it was agreed that the giving of the note should be without prejudice to the right of the defendant to have the proper deductions made in the amount of the bills theretofore rendered, and that the defendant should not be compelled to pay until such adjustment was made, and then only so much of the note as represented the actual amount of the cost to the plaintiff for work and material. Evidence of these facts was given in the defense of the action, but it was held that neither the defense pleaded nor the evidence given thereunder showed that the note was delivered conditionally and was not to become a contract, or a failure of consideration, but at most showed an offset which could only be availed of by counterclaim.

In Smith v. Hedges, supra, on the facts as stated in the Court of Appeals memorandum of affirmance, it was held that in an action on a note, brought by an assignee after maturity, an answer to the action on the note given in part payment for construction work pleading a failure of consideration, in that the work for which the note was given was not performed, was properly stricken out as pleading no defense, as was also a defense that the maker stated when he gave the note that it was for the accommodation of the payee only, and that he did not admit that any amount was due or owing to the payee, and that if the work was not completed at the maturity of the note he would not pay it, as was also a defense that he made the note relying on the false and fraudulent representations of the payee that it could and would complete the work within 10 days.

In the case at bar there was ample consideration for the giving of the original notes, in that the giving thereof was required by the contract, and the renewal notes rested on the same consideration, for they were given in payment of the former notes, which were surrendered, and on the further consideration of the extension of the time of the payment of the indebtedness, or, in view 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 v. Ellis, 224 N. Y. 528, 121 N. E. 364; section 51, Negotiable

(182 N.Y.S.) Instruments Law; McKinney's notes and citations to the section in his Ann. Consol. Laws of N. Y.; and Birdseye's notes and citations in Cummings & Gilbert's Consol. Laws of N. Y. vol. 5 (2d Ed.) P. 5450. 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, 82 Am. Dec. 355; Pratt & Whitney Co. v. Pneumatic Tool Co., 50 App. Div. 369, 63 N. Y. Supp. 1062, affirmed 166 N. Y. 588, 59 N. E. 1129; Manufacturers' Nat. Bank v. Russell, 6 Hun, 375; Rice v. Grange, 131 N. Y. 149, 30 N. E. 46.

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, 73 N. E. 30, 105 Am. St. Rep. 768; Emerson v. Sheffer, 113 App. Div. 19, 98 N. Y. Supp. 1057; Milius v. Kauffmann, 104 App. Div. 442, 93 N. Y. Supp. 669; McCormick Harvester Mach. Co. v Yoeman, 26 Ind. App. 415, 59 N. E. 1069; Rice v. Grange, supra. Ordinarily, a renewal note, where 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, 75 N. Y. Supp. 561, affirmed Same v. Schauffler, 176 N. Y. 593, 68 N. E. 1125; Hayward v. Empire State Sugar Co., 105 App. Div. 21, 93 N. Y. Supp. 449, affirmed 191 N. Y. 536, 84 N. E. 1114; Jagger Iron Co. v. Walker, 76 N. Y. 521; First Nat. Bank v. Weston, 25 App. Div. 414, 49 N. Y. Supp. 542.

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.

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 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 et al. v. Univ. of Rochester, 111 N. Y. 604, 19 N. E. 631, 2 L. R. A. 734, 7 Am. St. Rep. 769; McCutcheon v. Dittman, 164 N. Y. 355, 58 N. E. 97; Comey v. Harris, 133 App. Div. 686, 118 N. Y. Supp. 244, affirmed 200 N. Y. 534, 93 N. E. 1118; Cragie v. Hadley, 99 N. Y. 131, 1 N. E. 537, 52 Am: Rep. 9; Holden v. New York & Erie Bank et al., 72 N. Y. 286; Crooks v. People's Nat. Bank, 72 App. Div. 331, 76 N. Y. Supp. 92, 495; N. Y. Assets Realization Co. v. Pforzheimer, 158 App. Div. 700, 143 N. Y. Supp. 898; Republic Life Ins. Co. v. Hudson Trust Co., 130 App. Div. 618, 115 N. Y. Supp. 503, affirmed 198 N. Y. 590, 92 N. E. 1100; C. N. Bank v. Clark et al., 139 N. Y. 307, 34 N. E. 908, 36 Am. St. Rep. 705; Logan v. Fidelity Phenix Fire Ins. Co., 161 App. Div. 404, 146 N. Y. Supp. 678, affirmed 220 N. Y. 688, 116 N. E. 1058.

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

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