Coleman v. Lansing , 4 Lans. 70 ( 1871 )

Mullin, P. J.

W. V. K. Lansing was not a bona fide holder, for value of the note given by the plaintiff to Klink. He took it in part payment of a precedent debt; and it is well settled that one who receives a note upon such a consideration is not a bona fide holder. (20 J. R., 637; 6 Hill, 93; 24 Barb., 554; 37 id., 458; Lawrence v. Clark, 36 N. Y., 128.)

Erickson, Jennings & Mumford, having received the note from Lansing, before maturity, and without notice of the purposes for which it was made, or the manner in which Lansing acquired it, were bona fide holders, and against them the plaintiff had no defence.

But, when Lansing took an assignment of the judgment recovered upon the note by E., J. & M., he did not obtain the rights of his assignors. He held the judgment, as he did the note, subject to the lights of the plaintiff against the note while it was in his hands. (Devlin v. Brady, 36 N. Y., 531.)

After the recovery of the judgment, the plaintiff was forever foreclosed from assailing it upon any other ground than fraud in obtaining it.

As a general rule, this immunity from assault accompanies it into the hands of every person to whom it is assigned. Were it not so, the person recovering it might lose the whole benefit of it, as no one would purchase it, if, when purchased, it was liable to be defeated or rendered valueless by reason of some defect in the title of some of the persons through whose hands the claim may have passed on which the judgment was recovered.

It is on this ground that negotiable paper is held valid in the hands of one who had notice of facts rendering it invalid, when he acquires title to it from a bona fide holder.

The same considerations which would render it proper to make an exception to the general rule in case of negotiable paper, apply to a judgment.

In the case of Devlin v. Brady (supra), the note was made for an illegal purpose, which was known to the plaintiff. He indorsed it, and procured it to he discounted by the Bowery Bank, and after protest paid the amount to the bank and took up the note, and brought a suit upon it against the maker. The plaintiff sought to recover on the ground that the Bowery Bank was a bona fide holder, for value, without notice; and he, having acquired the title, of the bank to the note, was entitled to the rights of the bank, and, as a consequence, to exclude the defence of illegality in the consideration set up by the maker. The Court of Appeals, however, held, that, as the plaintiff was not a bona fide holder of the note when he transferred it to the bank, he acquired no greater rights to it, when he paid it and took it up, than he had when he transferred it, and the defence was available against him.

W. Y. K. Lansing indorsed the note in question in this suit, procured it to be discounted, paid the bank the amount of the judgment, and took an assignment. He is in precisely the same position Devlin was in, in the case cited, and his rights cannot be any other or different, except so far as the judgment operates to prevent the plaintiff and other parties to the note from disputing its validity.

In the case of Newell v. Gregg (51 Barb., 263), a sufficient reason is furnished for maintaining this action. In that case it was held, that an action may be maintained against the holder of a promissory note which is in his hands invalid against the maker, but who wrongfully transferred it before maturity to a bona fide holder for value, and without notice, and who enforces payment thereof, and the maker will be entitled to recover the amount of said note and interest.

The transfer in such a case is held, to be fraudulent, as against the maker; and, if so, a court of equity may grant the maker relief against a judgment on the note recovered by the bona fide holder who wrongfully transferred it.

The judgment should be reversed, and a new trial ordered; costs to abide the event.

Judgment reversed.