
    William A. Ferguson, Respondent, v. Charles S. Netter, Appellant.
    First Department,
    December 2, 1910.
    Bills and notes — acceptance- of draft for purchase price of unmerchantable goods—failure, of consideration --- defense available against person not holder imdue course — erroneous direction of verdict.
    Whore a buyer refuses, to accept goods oil the ground that they are unmerchantable and do not- conform to the order, the consideration for his acceptance of á draft for ,the purchase price fails, he having no opportunity to examine the goods'before acceptance, and lié may set out the failure of consideration as a defense when sued on the acceptance.
    Such defense is also available against one to whom the draft was assigned for a-nominal consideration subsequent to the acceptance, for under section- 54 of the-Negotiable Instruments Law. failure of consideration is a defense against any person not a holder in due course.
    Hence, in an. action against the acceptor it is error to direct a verdict for the plaintiff where, under the evidence, the question as to whether the acceptor was justified in refusing the goods is for the jury.
    McLaughlin and Dowling, JJ., dissented, with memorandum. ■
    Appeal by the defendant, Charles S. Retter,. from, a judgment of the Suprenie Court in favor of the plaintiff, entered1 in the office of the clerk of the county of New York on the 5th day of March, 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. 4th day of March, 1910, denying the defendant’s motion for a new trial made . upon the minutes. •
    
      I. Maurice Wormser, for the appellant.
    
      Maurice Léon, for the respondent.
   Ingraham, P. J.:

' The action was brought to recover upon an .acceptance of a draft drawn by the plaintiff’s assignor upon the defendant, a resident of the city of Rew York, dated the 30th day of December, 1907. This draft was drawn in France and requested the- defendant on March fifteenth to pay to the order of himself, the drawer, the sum of 6,807 francs, 35 -centimes, “ Value received in merchandise.” Upon this draft was written the words, “Accepted Jan’y 28th, 1908,” and it was signed by the defendant. The complaint alleges that on or about the 16th of March, 1908, the said bill so accepted was duly presented to the defendant, for payment, but was not paid and was thereupon duly protested. for non-payment; that on or about the 26th of August, 1908, the drawer of the draft, for a valuable consideration, duly assigned said bill to the plaintiff.

The defendant in substance admitted the acceptance of the draft and that it was assigned by the drawer to the plaintiff, and alleges that the plaintiff paid no value therefor arid took the assignment with knowledge of the equities existing between the defendant and' the plaintiff’s assignor. For a separate defense the answer alleges that the drawer of the draft (plaintiff’s assignor) undertook and did sell to this defendant, and said defendant undertook to and did purchase from the • plaintiff’s assignor, certain goods, wares and merchandise consisting of fifty cases of “ Preserved Dried Mushrooms,” to be shipped from France, such mushrooms to be of dried and choice quality; that the bill of exchange sued upon in' this action was drawn by the plaintiff’s assignor against the consignment of the aforesaid fifty cases of mushrooms; that the defendant could not get an examination of the aforesaid'mushrooms in order to determine whether the same were of dried and choice quality without the defendant’s previous acceptance of the bill of exchange sued upon in this action and against which the same was drawn; that the defendant, relying upon and believing the representations of the plaintiff’s assignor that the mushrooms were of the aforesaid quality, on the 28th day of January, 1908, accepted the aforesaid bill of exchange upon the express condition, however, that the mushrooms shipped by the plaintiff’s assignor were dried and of choice quality and not otherwise; that the plaintiff’s assignor pretending to comply with the aforesaid agreement, shipped the mushrooms to the defendant which were and are of inferior quality, mouldy and not choice quality; that the goods sold were not merchandise and were of no value to the defendant, and that this defendant failed and refused to accept the same as a compliance with the agreement aforesaid; that as soon as the defendant ascertained the quality of the mushrooms thus shipped to the defendant, the defendant stored the same for and on account of the plaintiff’s assignor and gave due notice .to the plaintiff’s assignor that the said mushrooms were so. stored in the city of New York for the plaintiff’s assignor’s account and subject to his order; that there was no consideration for the acceptance by the defendant of the aforesaid bill of exchange.

Upon the trial the plaintiff introduced the assignment of the bill of exchange which recited a consideration of one dollar, and the bill of exchange with the acceptance of the defendant, and it was. stipulated that the bill of exchange was presented by the plaintiff’s assignor for payment on the day it was due, and it was not paid. The plaintiff then rested. The defendant proved that he purchased fifty cases of mushrooms by a cable message, dated December 1, 1907, in French, the translation of which was “ January 33995 competition from Italy.” The figures 'f33995 ” were a code word, meaning fifty cases twelve tins each dried mushrooms, five-pound tins at 550 francs per 100 kilos net against documents, and upon the receipt of this cablegram on the 2d of December, 1907, the plain- . tiff’s assignor wrote to the defendant that he had received this cablegram and confirmed the sale’ of fifty cases, twelve tins each, “ Dried mushrooms, 5 lb. tins at 550 francs per 100. kilos net against documents.” This letter was answered by defendant on December 18, 1907, in which he said : I confirm your letters dated Dec. 2d ’ and 5th.” In speaking of former shipments the defendant stated that lie had had cases returned, and had to make considerable allowance for them. He suggested that this was because the mushrooms were not sufficiently dried, and being hermetically sealed they get heated and become mouldy, and asked the plaintiff’s assignor to be in no hurry with the shipment of fifty cases, to “ let the mushroom get dry and make a good selection of the goods that they are bright, sound and dry.” In reply to this letter the plaintiff’s assignor wrote that he was to ship the fifty cases of mushrooms on the defendant’s demand between the date of the letter, December eighteenth, and the end of January; that when he received the defendant’s cable he would put them on the railroad. In answer to this the defendant wrote, on December thirtieth, that he would cable the plaintiff’s assignor 'during the month of January for fifty cases, requesting the plaintiff’s assignor to open several tins and see if towards the middle of the tin the mushroom is not warm,”, repeating to the plaintiff’s assignor that the article “ must be of absolute conservation, well dried- and as light in color as possible.” It further appeared that these mushrooms arrived in Bew York on the twenty-seventh of January on the steamer Adriatic; that the bill of exchange arrived a few days before and was presented to the defendant and accepted by him on the twenty-eighth of January; that it took two or three days to clear the goods and obtain possession of them so as to be able to examine their quality; that the defendant examined the goods as soon as he received notice from the warehouse, and on February 7, 1908, he wrote to the plaintiff’s assignor that the defendant was compelled to reserve final acceptance of the last shipment of fifty cases. The defendant, on February twenty-ninth, wrote to the plaintiff’s assignor that the quality of the mushrooms was bad.

On April eighth the defendant wrote the plaintiff’s assignor that he held the fifty cases of dried mushrooms at the disposal of the plaintiff’s assignor. The defendant then testified that he examined the goods as soon as he received them in a warehouse in the city of Bew York; that they remained there until March twenty-sixth of the same year, when they were put in cold storage, where they now are! He produced tins of mushrooms taken from .one of the cases, and testified that on the 5tli or 6th of February, 1908, he opened seven or eight tins, one from each case; that he found some of the tins utterly worthless, black, "mouldy and wet; that some of the tins had nice mushrooms on top,” but when it came towards the middle of the cans they were black and mouldy and wormy; and there was further evidence for the defendant that the mushrooms, properly dried, would keep for years; that the goods in question, samples of which were produced in court, were black, mouldy and wet, and unfit for eating purposes ; that the mushrooms were not of a merchantable quality, and if they were accepted they would not be allowed to be sold by the board of health. The defendant then rested and the plaintiff made a motion to direct a verdict for the plaintiff. The defendant requested the court to submit the question as to whether the defendant had a reasonable opportunity to inspect the mushrooms before acceptance of the draft on the 28th of January, 1908, to the jury, which was refused, and the court directed a verdict for the plaintiff, to which the defendant excepted. The defendant then asked the court to send the case to the jury upon all the facts, which was also refused* and the defendant excepted.

It is clear, I think, that the mushrooms were not of a merchantable quality and did not conform to the order sent to the plaintiff’s assignor, and were not of the quality that the defendant was bound to accept. The acceptance of the bill was based upon what was assumed to be the shipment of mushrooms "that complied with the order, and on a refusal of the defendant to accept the mushrooms, based upon the fact that the mushrooms were not merchantable, the consideration for the acceptance fell, and, as between the original parties to the bill, the defendant could- allege a-failure of consideration, which would be a defense to the action on "the acceptance.

It was conceded upon the trial that the plaintiff’s assignor caused the bill to be presented for payment when due, and subsequently assigned the bill to the present plaintiff fór a nominal consideration. All the equities as between the defendant and the plaintiff’s assignor were open to. the defendant, and if there was absolutely no. consideration for the acceptance it is clear that the plaintiff could not enforce the bill. . '

. - By section 50 of the Negotiable Instruments Law (Laws of 1897, chap. 612; re-enacted in Consol. Laws, chap. 38 ; Lawsof 1909, chap. 43) it is provided that every negotiable instrument is presumed prima facie to have been issued for a valuable consideration. Section 54 provides that the absence or failure of consideration is matter of defense as against any person not a holder in due course. (See, also, Cowee v. Cornell, 75 N. Y. 91; Batterman v. Butcher, 95 App. Div. 213.) In National Park Bank v. Saitta (127 App. Div. 624; affd., 196 N. Y. 548) it was held that as between any parties to a bill, except the drawer and the drawee, who had purchased the bill for a valuable consideration, the defense of want of consideration was not available; but it is 'assumed in the opinion" that, as between the original parties to the bill, the question of consideration is always open. Now, the only consideration for the acceptance of this bill was the sale and delivery by the plaintiff’s assignor to the defendant of the mushrooms in question. The plaintiff’s assignor ■ shipped the mushrooms to the defendant, who examined them as' soon as possible, but that was after the acceptance, and they were found not to be merchantable dr a compliance with the contract. Consequently, the defendant had the .right to reject the mushrooms, and, having rejected them, there was no consideration for the acceptanee and the plaintiff’s assignor could not recover upon it.

It may be that upon the facts there was a question for the jury as to whether or not the defendant accepted the mushrooms, and whether the mushrooms were of such a quality as justified a refusal to accept, but it was certainly error to' direct a verdict for the plaintiff, and for that reason the judgment must be reversed and a new trial ordered, with costs to the appellant to abide the event.

Clarke and Scott, JJ., concurred ; McLaughlin and Dowling, JJ., dissented.

McLaughlin, J.

(dissenting):

The draft was accejffed on the twenty-eighth of January. It was absolute upon its face, and I think there was a good consideration for it. The defendant did not promptly reject the mushrooms after he had had an opportunity to examine them. He testified that he did'examine, them on, the fifth of February, but it was. not until the thirteenth of March that he notified the plaintiff’s assignor he would not accept them , except on consignment. He could, not receive the mushrooms and deal with them as he did and then refuse to pay the draft on the ground that there was no consideration for it, ■ Upon the undisputed facts ! think he accepted the .mushrooms, and if. they did not correspond to what the plaintiff’s assignor had agreed to furnish, then his claim, was for damages for breach of contract, which he could have pleaded, had he seen fit to do so, by \vay of counterclaim.

For these reasons I. dissent from the prevailing opinion.

..Dowling, J., concurred.

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