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Ryan v. Sullivan

Supreme Court of New York, Appellate Division

March 24, 1911

PATRICK RYAN, Respondent,
v.
CORNELIUS J. SULLIVAN, Appellant.

APPEAL by the defendant, Cornelius J. Sullivan, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 5th day of October, 1910, upon the verdict of a jury rendered by direction of the court, and also from an order entered in said clerk's office on the 7th day

Page 472

of December 1910, denying the defendant's motion for a new trial made upon the minutes.

COUNSEL

Ambrose G. Todd [Eli J. Blair with him on the brief], for the appellant.

William L. Bowman, for the respondent.

LAUGHLIN, J.:

The plaintiff has recovered on three promissory notes made by the defendant to the order of the plaintiff, payable at the Oriental Bank, New York city. The first note bears date June 13, 1907, and was for four months; the second bears date October 28, 1907, and was for a like period, and the third is dated January 13, 1908, and was payable in thirty days. The plaintiff does not set out the notes in his complaint, nor does he allege that they were given for value. The notes all recite that they were given for value, but the allegations of the complaint are confined to the making and delivery of three promissory notes for the amounts and on the dates and for the periods specified, and an allegation that thereby defendant promised to pay to the plaintiff the respective amounts. The answer contains no denial of any of the allegations of the complaint, but it is therein alleged as a defense, first, that each of the notes was made for the benefit and accommodation of the plaintiff, and that at the time of making the same it was agreed between plaintiff and defendant that the plaintiff and not the defendant should pay the same. The defendant pleads as a further defense an agreement, in writing, between him and the Ryan-Parker Construction Company, a New Jersey corporation, of which the plaintiff was president, executed on the 3d day of May, 1906, wherein and whereby, in consideration of services rendered and to be rendered by the defendant, the company agreed, among other things, to pay an advance to the defendant, on account of his interest in another contract therein referred to, the sum of $1,000 per month, and he alleges that for a short time the monthly payments were made, and then the company was unable to continue to make the payments, and the plaintiff, on account of his interest in the company, agreed that if defendant would make his promissory notes to the order of the plaintiff he would have the same discounted and have the proceeds delivered to the defendant for his use, and would pay the notes as they fell due out of the

Page 473

moneys of the company, and charge the same against the amounts owing by the company to the defendant; and further alleges that in the event that the company should not have sufficient funds to meet the notes at maturity he would take up the notes at the bank where they were discounted and hold them until he could obtain reimbursement from the funds of the company, when they would be taken up by the company and charged to the defendant's account; that the notes upon which the action was based were made pursuant to that agreement; that the indebtedness of the company to defendant largely exceeded the amount of the notes, and that the company had ample funds with which to pay the notes at all times since plaintiff took them up from the bank where they were discounted.

On the trial the court received, under objection and exception taken by counsel for plaintiff, the testimony of the defendant tending to establish the facts set forth in the answer as defenses, subject, however, to a motion to strike it out, and after receiving it struck it out, and an exception was duly taken by the defendant. We are of opinion that this ruling requires a new trial.

Of course, parol evidence to the effect that the defendant was not to pay his own note, and that it was to be paid from the funds of the Ryan-Parker Construction Company, in and of itself tended to vary the terms of the notes and would have been inadmissible for that reason. ( Jamestown Business College Assn. v. Allen, 172 N.Y. 291.) Manifestly this evidence did not tend to show that the notes were delivered conditionally, or were not intended to have effect as notes, and, therefore, the evidence was not admissible on that theory. (Smith v. Dotterweich, 200 N.Y. 299; Niblock v. Sprague, Id. 390; Higgins v. Ridgway, 153 id. 130.) I am of opinion, however, that the evidence was admissible to establish the first defense pleaded, namely, that the notes were given for the benefit and accommodation of the plaintiff. The fact that the defendant did not deny any of the allegations of the complaint is not an admission that there was a good consideration for the notes. As already observed, the complaint neither sets forth the notes in haec verba nor contains an allegation that they were given for value or that there was any consideration therefor, and while it is true that a presumption arises, and doubtless without a recital to that effect in the notes (Neg. Inst. Law [[Consol. Laws, chap. 38; Laws of 1909, chap.

Page 474

43], § § 20, 320), that they were given for value and that there was, therefore, a good consideration (Neg. Inst. Law, § 50; Carnwright v. Gray,127 N.Y. 92), yet the defendant could not deny the making of the notes, and he was not called upon to deny nor could he deny the allegation that he therein promised to pay the plaintiff the amount specified if that allegation is to be deemed an allegation of fact with respect to the contents of the notes, and if it is to be deemed an allegation of a legal conclusion with respect to the effect of the notes then it is not admitted by a failure to deny it. It is well settled, however, that proof of want of consideration may not be given under a general denial but must be specially pleaded (Dubois v. Hermance,56 N.Y. 673; Carnwright v. Gray, 127 id. 92; Sprague v. Sprague, 80 Hun, 285; Eldridge v. Mather,2 N.Y. 157), and it follows, I think, that if a general denial does not put in issue the consideration, a failure to deny the making of a note does not constitute an admission that the note was given for value or debar the defendant from setting up failure of consideration as a defense, for that question only becomes an issue by being thus presented by the answer. (Sprague v. Sprague, supra.) Hence I think that the giving of a promissory note may be admitted and that the defense of want of consideration or that it was made for the benefit and accommodation of the plaintiff may be interposed. (See Daniel Neg. Inst. [5th ed.] § § 174, 189.) It is well settled that parol evidence is admissible to show that a promissory note was given by the maker for the accommodation of the payee, the effect of which is to show that there was no real consideration therefor. (Sprague v. Sprague, supra; Higgins v. Ridgway, supra; Carnwright v. Gray, supra; Beacon Trust Co. v. Robbins,173 Mass. 261; Stapylton v. Teague,85 F. 407; Evansville Nat. Bank v. Kaufmann,93 N.Y. 273, 290; Daniel Neg. Inst. [5th ed.] § § 174, 189.) It seems to me that ...


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