
    Le Grand Benedict, Respondent, v. August Kress and John H. Carragan, Doing Business under the Name of August Kress & Company, Appellants.
    
      Pleading—a failure to deny that a checjc was given for value precludes proof of an affirmative defense or counterclaim inconsistent with such admission.
    
    The complaint in an action brought to recover the amount of a clitick alleged that the defendants, for value received, made and delivered the bank check to one Johnson; that Johnson indorsed the check and delivered it together with a written assignment thereof to the plaintiff, and that the defendants had stopped payment upon the check.
    The only denial contained in the answer related to the allegation of the complaint in reference to the assignment of the check to the plaintiff.
    The answer set up, as a separate and distinct defense and as a counterclaim, the transaction out of which the Check originated, and there were some allegations which might, if established, tend to show that fraud had been practiced upon the defendants by the plaintiff's assignor.
    
      
      Reid, that the defendants having admitted, by failing to deny it, the allegation of the complaint that the check was given to the plaintiffs assignor forwalue, were precluded from proving the matters set forth in the separate defense and counterclaim as such matters were inconsistent .with the admission-.
    Appeal by the defendants, August Kress and another, doing business under the name of August Kress & Company, from a .judgment of the Municipal Court of the city of New York, borough of Brooklyn, in favor of the plaintiff, entered . on the 30th day of December, 1903, and also from an order entered on the 18th day of January, 1904, denying the defendants’ motion for a new trial made upon the minutes and upon alleged newly-discovered evidence.
    
      Feltenstein dh Rosmstewi {Samuel ^Branch of counsel], for the appellants.
    
      G. Murray Hulbert, for the respondent.
   Woodward, J.:

The complaint in this action alleges the copartnership of August Kress c% Co., the defendants, and on information and belief avers that on or about the 4tli day of June, 1903, at Bayonne. City, in the State of New Jersey, the defendants, under their said firm name, for value received, made their check in writing, dated on that, day, and directed the same to the Bayonne Bank, and thereby required that said bank pay to one E. W. Johnson or order.$114.96, and delivered it to said Johnson ; that thereafter the said Johnson indorsed said check, and by an instrument in Writing duly assigned the said check and all moneys due or to grow due thereunder to this plaintiff, and delivered said instrument of assignment and said check to this plaintiff, who is the holder and owner thereof; that the defendants stopped payment on the said check; that payment had been demanded and refused, and that there was still owing to the plaintiff the sum represented by the check. The complaint demands judgment for the amount of the check, with interest and costs.

The answer alleges that the defendants “ have no knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraph or section marked ‘III’ ” This is the only denial contained in the answer, and relates wholly to the alie-. gation of the complaint in reference to the assignment of the check to the plaintiff, so that the defendants have not denied that they made and delivered the check in suit for value to the plaintiff’s assignor. Under the provisions of section 522 of the Code of Civil Procedure, each material allegation of the complaint, not controverted' by the answer, * * * must, for the purposes of the action, be taken as true.” So that the fact is conclusively established that the check in suit came to the plaintiff’s assignor for value. This check is a negotiable instrument. (Neg. Inst. Law [Laws of 1897, chap. 612], § 20.) Every such instrument is presumed to have been issued for value (Neg. Inst. Law, § 50), while in the present case this is admitted. Having come to plaintiff’s assignor for valué, and the latter having transferred the same to the plaintiff, the latter is a holder in due course. Every holder is deemed prima facie to be a holder in due course; but when it is shown that the title_ of any person who has negotiated the instrument was defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title as a holder in due course. (Neg. Inst. Law, § 98.) In the case now before us, by the admissions of the pleadings, the plaintiff’s assignor came into possession of this check for value; the instrument was complete and regular upon its face; she became the holder of it before it was overdue, and without notice that it had been previously dishonored; she took it in good faith and for value, so far as appears from the pleadings, for no fraud is alleged, and at the time it was negotiated to her she had no notice of any infirmity in the instrument or defect in the title of the person negotiating it which constituted her a holder in due course. (Neg. Inst. Law, § 91.) Under the admissions of the pleadings that plaintiff’s assignor became the holder of the cheek for value, there is no doubt of her right to assign the instrument to the plaintiff, and the latter having become the owner through one who was a holder in due course, and there being no suggestion that the plaintiff had any notice of any of the transactions out of which the instrument arose, or that lie had any notice of the dishonoring of the check by the defendants, he is a holder in due course, and as such he takes the instrument free from any defect of title of prior parties and free from defenses available to prior parties among themselves. (Neg. Inst. Law, § 96.)

It is true,, of course, that the defendants set up an alleged separate, and distinct defense and as a counterclaim.. .the transaction: out of which, the check originated, and there are some allegations which might;, if established, tend to show that fraud had been practiced; upon-the defendants- by- the plaintiff’s assignor. B.ut the defendants having admitted, by not denying, that the plaintiff’s assignor'became the holder- of the check in question for value, they cannot now be permitted, to show,, as against the plaintiff, a state, of facts inconsistent. with that, admission. The only issue left by the: pleadings was whether, .the plaintiff ¡had come into the ownership of this check by-'an assignment from E.. W. Johnson. That fact was established by the introduction of the. assignment in evidence., and the questions of-evidence which the defendants, urge upon this appeal relate,, not to: the.- issue, raised by the pleadings, but to matters relating to the - alleged! counterclaim, and this* as we have pointed out, was, not in-issue as between the, parties to this- action, because of; the failure- of the defendants to deny the material fact that the check was. given for value:

The motion for á new trial upon the exceptions! and upon the: ground of newly-discovered evidence was properly denied,, for the. reasons- which, we have already suggested, and' because, the alleged newly-discovered evidence has no- relation to the only issue which, was before the court.

The judgment and order appealed, from should be. affirmed, with costs.. !

All concurred. !

Judgment and order,of the Municipal Court affirmed, with costs.  