
    Regina Goldberg, Respondent, v. Michael Berg and Philip Marks, Appellants.
    (Supreme Court, Appellate Term, First Department,
    February, 1916.)
    Negotiable instruments — who is holder in due course — bills, notes and checks — evidence — fraud.
    In an action against the maker of a note given on the purchase of the stock of a saloon the defense was the fraudulent' removal of stock before delivery of possession of the saloon, and that plaintiff was not a holder in due course, within the meaning of section 91 of the Negotiable Instruments Law. On, the trial it appeared that the note was indorsed by the payee and also by a firm of which plaintiff’s husband was a member and plaintiff testified that- she paid full value in cash to her brother for the note. Though plaintiff’s husband ostensibly managed the saloon for her brother the evidence tended to show that he was one of the real owners if not the sole owner of the place.
    Held, that plaintiff having taken the title directly from one of the payees in the circumstances disclosed it was not sufficient for her to show that she had paid her brother full value; for if in fact; as the uneontradieted evidence tended to show, her husband had fraudulently disposed of a large part of the stock - before delivery to the defendants she was called upon to show, , at least to the extent of the value of the missing stock, that she had taken the note "without notice of the alleged fraud; accordingly a judgment in favor of plaintiff granted upon the theory that the burden was on defendants to show that plaintiff had knowledge of the alleged fraudulent moving of the stock will be reversed and a new trial ordered.
    Appeal by defendants from judgment of the Municipal Court of the city of New York, borough of Manhattan, fourth district, in favor of plaintiff.
    Harry M. Peyser, for appellants.
    Cohen, Haas & Schimmel (Isidpre Cohen, of counsel), for respondent.
   Guy, J.

Action upon note given on purchase of saloon; defense, fraudulent removal of stock before .delivery of possession and that plaintiff is not a holder in due course. Neg. Inst. Law, § 91.

Defendants claimed that two notes were given on the transfer, one for the business and the other for the stock, and it appears that plaintiff was present during the negotiations for the sale. The note in suit, given for the stock, was made payable to Jacob Newman and Abraham Terkeltaub, was endorsed by the payees and also by Podrushnick & Goldberg, and plaintiff testified that she paid full value in cash for the paper to Terkeltaub, her brother (erroneously referred to in the testimony as Tieteldorf), who was in the raincoat business. Goldberg, plaintiff’s husband, ostensibly managed the saloon for Terkeltaub, but according to the evidence was one of the real owners if not the sole owner of the place.

One of the defendants testified that before the deal was closed he took a list of the stock; that they took possession on Tuesday night, and Wednesday morning went down in the cellar and a substantial part of the stock was then missing.

The trial justice granted judgment to plaintiff apparently on the erroneous theory that the burden was on defendants to show that planitiff had knowledge of the alleged fraudulent removal of the stock.

The plaintiff having taken title directly from one of the payees under the circumstances disclosed by the record, it was not sufficient for her to show that she had paid her brother-payee full value; for if in fact, as the uncontradicted evidence tended to prove, Goldberg, her husband, the real seller of the stock, had fraudulently disposed of a large part of the stock before delivery to the defendants, she was called upon to show, at least to the extent of the value of the missing stock, that she had taken the paper without notice of the alleged fraud. Neg. Inst. Law, §§ 91, 94, 95; German-Americcm Bank v. Cunningham, 97 App. Div. 244; American Exch. Nat. Bank v. New York Belting & P. Co., 148 N. Y. 698.

Bujur and Gavegan, JJ., concur.

Judgment reversed, new trial ordered, with thirty dollars costs to appellant to abide event.  