
    Edward Milius, Appellant, v. E. John Kauffmann, Respondent.
    
      Promissory note — the fact that it is given in exchange for' the note of the payee affords a good, consideration the failure of the payee to pay his own note is not a defense as against a/n indorsee — an agreement by the indorsee to extend' a preexisting indebtedness is a good consideration.
    
    E. John Kauffmann and Julius Manheim entered into an agreement for the exchange of their promissory notes; which provided that Kauffmann should discount Manheim’s notes and pay to Manheim forty per cent of the notes and also gave him his (Kauffmann’s) notes for the balance of such proceeds. The agreement further provided: ‘ ‘ Each party will then have to take, promptly, care of his own notes at maturity.”
    In an action brought by an indorsee from Manheim of one of Kauffmann’s notes, given pursuant to the agreement, to recover the amount of such note from Kauffmann, it appeared that the plaintiff took the. note as collateral security for an antecedent debt, under an agreement that he should forbear action on the existing indebtedness for two or three days.
    
      Held, that there was a good consideration for the note sued upon as between Kauffmann and Manheim, and that, moreover, the note being unrestricted as to its use, it was not subject in the plaintiff’s hands to the defense of want or failure of consideration;
    That the fact that Manheim had made default in the payment of the notes given by him to Kauffmann did not constitute a defense to Kauffmann in the present action;
    That the agreement of the plaintiff to forbear action on the existing indebtedness constituted the plaintiff a bona fide holder for value of the note.
    Appeal by the plaintiff, Edward Milius, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of New York on the 15th day of October, 1904, upon the verdict of a jury rendered by direction of the court, and also from an order bearing date the 31st day of October, 1904, and entered in said clerk’s office, denying the plaintiff’s motion for a new trial made upon the minutes.
    
    This is an action by an indorsee against the maker of a promissory note. The note was for $1,500. It was dated on the; 20th day pf November, 1903, payable to the order of Julius Manheim four months after date. It was delivered to Manheim who indorsed it in blank and delivered it to the plaintiff before maturity, as collateral security for other notes made by Manheim and held by tké. plaintiff, given for a merchandise account aggregating about $2,000.
    Manheim thereafter filed a voluntary petition in bankruptcy and was adjudged a bankrupt. The plaintiff filed and proved his claim to the amount of $2,061.12, and stated that he held this note as security therefor. It appears that sufficient of Manheim’s creditors in number and in amount have signed a composition agreement to accept twenty-five cents on the dollar, and that the bankrupt has deposited with the clerk of the court the necessary funds to carry out the agreement. It appears that at the time the note was delivered to the plaintiff some of the notes for which it was given as security were due and .the plaintiff had threatened suit thereon ; that upon condition of his receiving the security he agreed to extend the time of payment two or three days, and thereafter agreed to afford Manheim an opportunity of paying off the indebtedness at the rate of three dollars every ten days, or until he could discount the $1,500 note. The note was given pursuant to an agreement between the defendant and Manheim for the exchange of notes as follows: . .
    “Hew York, November 20th, 1903.
    
      “ Agreement.
    “ Received this .day from Mr. Julius Manheim as an accommodation for both parties undersigned, the following notes under the conditions hereafter named, viz.: Mr. Julius Manheim-transfers herewith to Dr. E. John Kauffmann, President of the Commonwealth Hygienique Ice Co., in Boston, Mass., five notes at $2,500 each, total $12,500.00 dated this day at four months from date and to the order of E. John Kauffmann, under the condition that Dr. E. John Kauffmann discounts said notes, total $12,500.00, and pay to Mr. Julius Manheim, out of the proceeds of said notes, the- sum of forty per cent of the proceeds of said notes, and the balance of sixty per cent of this total amount may .be retained by Dr. E. John Kauffmann, for which amount he gives his own notes to Mr. Julius Manheim. Each party will then have to take, promptly, care of his own notes at maturity. This agreement is herewith made under the following further understanding that the aforesaid forty per cent will have to be paid in cash by Dr. E. John Kauffmann to Julius Manheim, the latest within ten days.
    
      “ Both parties have herewith agreed to and signed to the above conditions. (Signed) E. JOHN KAUFFMANN.
    “ julius manheim:.”
    
      Francis D. Pollak, for the appellant.
    
      David C. Myers, for the respondent.
   Laughlin, J.:

The respondent contends that Manheim could not have enforced' the payment of the note because he defaulted in the payment of his note given'at the same time pursuant to the agreement for the mutual exchange of notes, and that the plaintiff, having taken the note as security for an antecedent debt, is not a bona fide holder, and the note in his hands is subject to any defense that exists against its collection by Manheim. We are of opinion that there was a good consideration for the note as between the original parties ; that the execution of the notes constituted it an executed contract ; that it was the duty of each to the other to pay his note at maturity, and that the defendant, while he might have a counterclaim for the non-payment1 of Manheim’s note, could not defend against the non-payment of his own on the theory of failure of consideration on account of Manheim’s default. (Rice v. Grange, 131 N. Y. 149.) Moreover, the note not having been diverted, but being unrestricted as to its use, would not be subject in plaintiff’s hands to the defense of want or failure of consideration, or that Manheim had subsequently failed to perform his obligation of paying his own note, and the plaintiff having taken it as security for an antecedent debt is regarded as a holder for value. (Neg. Ins. Law [Laws of 1897, chap. 612], § 51; First National Bank v. Wood, 128 N. Y. 35 ; McSpedon v. Troy City Bank, 2 Keyes, 35 ; Grandin v. Le Roy, 2 Paige, 509; Tinsdale v. Murray, 9 Daly, 446; Furniss v. Gilchrist, 1 Sandf. 53; Grocers' Bank v. Penfield, 69 N. Y. 502; Continental National Bank v. Townsend, 87 id. 8.) Furthermore, there was an agreement to forbear action on the existing indebtedness, for a few days at least, founded upon a good consideration, to wit, the delivery of the security, and this clearly made the plaintiff a bona fide holder for value. It follows, therefore, that -the court erred in directing a verdict in favor of the defendant and should have .direóted a verdict in favor of the plaintiff.

The judgment and order should be reversed and a new trial granted, with costs to the appellant to abide the event.

Van Brunt, P. J., Patterson, Ingraham and McLaughlin, JJ., concurred.

Judgment and order reversed, new trial ordered, costs to appellant to abide event.  