
    Banque Franco-Americaine, Respondent, v. Oscar B. Bergstrom and Henry A. Taylor, Copartners Doing Business under the Firm Name and Style of Bergstrom & Company, Appellants.
    First Department,
    March 3, 1916.
    Bills and notes — foreign bill of exchange — liability of acceptors — alleged conditional acceptance — evidence — oral evidence of condition varying terms of written agreement — when transferee holder in due course—notice of alleged condition to transferror — delivery of draft with blank date — right of holder to fill in date — when error not available as against holder in due course.
    Action on drafts made by a foreign bank to its own order and accepted by the defendants and alleged to have been delivered in part payment of the defendants’ subscription to the capital stock of the bank. The defense stated that the acceptances of the defendants were conditional and that the drafts were not to become a binding obligation until the foreign bank should sell a certain amount of mortgage bonds issued by a corporation in which the defendants were interested. The written correspondence of the parties relating to the acceptance of the drafts by the defendants stated that the latter had purchased a certain amount of the foreign bank stock and had accepted the drafts in payment thereof, the same to be renewable up to a specified date. The writings made no mention whatever of the alleged fact that the acceptances were conditioned upon the sale of the bonds aforesaid.
    
      Held, that it was error to allow the defendants to give oral evidence as to said alleged condition, as it varied not only the terms of the drafts themselves but also the written agreement contained in the letters of the parties which stated the circumstances under which the drafts were made and accepted.
    
      Held, further, that the evidence showed that the defendants bought the bank stock without condition, and that a verdict should have been directed for the plaintiff.
    The plaintiff was a holder in due course and entitled to enforce the drafts against the acceptors, although they stated to the plaintiff’s transferror the alleged condition as to the sale of bonds. This, because such information would at most require the transferror to inquire of the foreign bank as to the transaction, and had he done so he would have learned that they were free from the condition claimed by the defendants.
    Although the agreement entitled the acceptors to renewals of the drafts up to a certain date and the drafts were delivered with the date left blank, the bank was entitled to fill in the due date so as to make the drafts payable after the date of the rights to renewals ceased.
    In any event, the plaintiff as an innocent holder for value is protected against any irregularity in filling in the date by section 33 of the Negotiable Instruments Law.
    
      Appeal by the defendants, Oscar B. Bergstrom and another, from an order of the Supreme Court, made at the New York Trial Term and entered in the office of the clerk of the county of New York on the 19th day of June, 1915, setting aside the verdict of a jury in their favor and granting plaintiff’s motion for a new trial.
    
      Oscar B. Bergstrom, for the appellants.
    
      Martin A. SchencJc \ Julien T. Davies with him on the brief], for the respondent.
   Davis, J.:

In this case a verdict in favor of the defendants was set aside as against the evidence and the weight of the evidence.

The action was brought by plaintiff as the holder of two drafts for $10,000 each, made by the Banque Alsacienne of Paris to its own order and accepted by the defendants and alleged to have been delivered in part payment of defendants’ subscription to the capital stock of the. Banque Alsacienne. The defense was that the drafts had been accepted and delivered with a condition that the drafts were not to become complete and effective obligations until the performance of the condition; that the drafts had been negotiated in breach of the condition, and that the plaintiff received the drafts with knowledge of the fraud.

The defendants claimed that the drafts were not to become complete liabilities unless and until the Banque Alsacienne should sell $1,000,000 of first mortgage bonds of the San Antonio Brewing Association, which were to be placed in its hands for that purpose by the defendants. The defendants claimed that this condition was agreed to orally; that the Banque Alsacienne through its own fault failed to sell the bonds, and for that reason the condition on which the drafts were to become complete obligations was never performed; that the Banque Alsacienne had fraudulently negotiated the drafts, and that the plaintiff had knowledge of the alleged fraud and was not an innocent purchaser for value. Before the making of these drafts and their acceptance by defendants there were many conversations between the defendants and the Banque Alsacienne. After these conversations the parties came together and deliberately agreed upon the form of two letters which were to and did accompany the making of the drafts and their acceptance and delivery by the defendants.

The defendant Bergstrom claims that he was solicited by the Banque Alsacienne to make an arrangement with that bank for the purpose of floating American securities upon the European market. After various conversations referred to above, Bergstrom agreed to purchase 2,000,000 francs worth of shares of the bank conditionally, as he claims; unconditionally, as claimed by plaintiff. These preliminary negotiations resulted in the writing of the following letters:

“April 18 th, 1912.
“ Mr. Oscar Bernard Bergstrom,
“ Hotel Meurice,
“ Paris:
“ Dear Sir.—■ We hereby beg to confirm your having purchased from us:
“Frs. 2,000,000 (two millions) shares of our Bank 25% paid.
“ It has been agreed upon that in settlement of this purchase " you hand us 10 drafts $10,000 each accepted by your firm Bergstrom & Oo. New York, these drafts to be renewed every three months, payable finally at latest term on January 10th, 1913.
“You will find enclosed the said drafts for your signature and return.
“ Please to let us know, in whose name the shares are to be registered on our books, whether in the name of the firm Bergstrom & Oo., or in that of Messrs. Bergstrom & Taylor, New York.
“Yours faithfully,
“BANQUE ALSACIENNE DE PARIS.
“ (Signed) ETIENNE MULLER.”
“April 19, ’12.
“ Banque Alsacienne De Paris,
“ Paris, France:
“Gentlemen.—Enclosed we hand you ten drafts for ten thousand dollars ($10,000) each, to cover the first payment of twenty-five per cent (25%) on our subscription to two million frs. of your capital stock. The drafts are duly accepted by us and the date of payment left blank to be filled in by you to suit your convenience. These drafts are to be subject to renewals, however, so that the drafts shall become finally payable Jan. 10th, 1913.
“Exchange to be settled on final payment of drafts on a basis of five hundred thousand frs. (500,000 frs.) The stock certificates to be held by you duly endorsed as security for these drafts.
“ Very truly,
“ BERGSTROM & GO.”

These letters were put in evidence by the plaintiff. The defendants were allowed to give oral evidence at the trial that there was a condition agreed to orally between the parties that the defendants’ subscription to the capital stock of the Banque Alsacienne and the drafts should not become complete obligations until the brewery bonds had been sold by defendants. This evidence was objected to by the plaintiff as tending to vary the terms of the written agreement between the parties, but the court overruled the objection.

We think the objection should have been sustained inasmuch as it not only varied the terms of the drafts, but it also varied the written agreements contained in the letters accompanying the delivery of those drafts showing the circumstances under which the drafts were made, accepted and delivered. While it is admissible to prove a conditional delivery of notes and drafts for the purpose of showing that they never became complete obligations because of the non-performance of conditions precedent, still, when the parties themselves reduce to writing in documents separate from the notes or drafts the conditions under which the notes or drafts are delivered, they will not be permitted to vary the terms of those writings by showing alleged oral ageements contradicting them. As stated above, before the delivery of the drafts in question, the parties co-operated in preparing the letters of April 18 and 19, 1912, as a part of the transaction. There is nothing in these letters to suggest that the drafts were to be delivered conditionally. Certainly, had the parties intended to make the subscription to the stock and the payment of the drafts depend upon the sale of the hrewery bonds, that important and vital fact would have been mentioned in these letters. At the trial the learned justice presiding allowed the defendants to prove this oral agreement, but after the verdict he was so impressed with the written proof negativing the claim of the defendants that he was constrained to set aside the verdict on the ground that it was against the evidence and against the weight of evidence, especially on the point of a diversion of the drafts before fulfillment of the alleged condition upon which they were accepted and delivered. We think this testimony under objection ought to have been excluded altogether and the verdict not only set aside but a verdict directed for the plaintiff. All the evidence shows that the defendants actually purchased the stock and delivered the drafts in payment thereof unconditionally. The letters of April eighteenth and nineteenth referred to the purchase of the stock of the Banque Alsacienne. Defendants’ Exhibit B, a letter written by the Banque Alsacienne to the defendants, states: “The stock we sell to you, consists of shares of our Bank, which we had taken over from Mr. MayerBacum.” In the letter of April 16,1912, written by Bergstrom to the Banque Alsacienne, he inquires about the shares and the total capital stock, and then inquires: “Is the stock we take treasury stock or the stock of some individual, and if individuals, who ? ” In the letter dated the 16th of April, 1912, written to Bergstrom by the bank, it is stated that Bergstrom is to have the right of nominating two members in the board of directors of the bank. In the letter of April 18, 1912, the bank inquires as to the name in which the shares are to be registered, whether in the name of Bergstrom & Company or the name of Bergstrom & Taylor. The evidence also shows that Bergstrom exercised acts of ownership over the bank stock by signing acceptances of transfer of the stock to his firm; by giving Muller, the president of the Banque Alsacienne, a power of attorney to vote the stock, and by executing a transfer in blank and leaving it with the bank to be held by it. We think the evidence shows that defendants bought the stock out and out — gave the acceptances in payment thereof, and that the acceptances were not given upon any condition other than those referred to in the deliberately prepared letters accompanying the subscription to the stock and the delivery of the acceptances.

The defendant also claims that the plaintiff Franco-American Bank of Paris was not an innocent holder and did not receive the drafts for value and in good faith. It appears that the drafts were indorsed by the Banque Alsacienne and by its president, Muller, and that they were then delivered to Brunner who indorsed and parted with them to the plaintiff for value. The particular fact upon which defendants claim that the plaintiff is not a holder in good faith is that before the delivery of the drafts to the Banque Alsacienne Bergstrom met Brunner, who was the manager of the plaintiff bank, and told him in effect that he was making a purchase of stock of the Banque Alsacienne and was going to give acceptances in payment, but that the aeceptances were not to be complete obligations until the bonds of the Texas Brewery Company had been sold by the Banque Alsacienne. Brunner denies this conversation.

We think even if this information was conveyed to Brunner it would not necessarily affect the good faith of the plaintiff bank or of Brunner. As the respondent well contends, the most that it would require Brunner to do would be an inquiry of the Banque Alsacienne as to the details of the transaction in which the drafts were delivered. Had Brunner sought this information, he would have ascertained the nature of the transaction as set forth in the drafts and the letters accompanying their delivery, and he would have learned, not that the drafts were unavailable for negotiation because of the nonperformance of a condition precedent, but that they were free from any such condition as claimed by defendants. Under these circumstances we think the plaintiff is a holder in good faith and for value.

The defendants also claim that the Banque Alsacienne failed to observe the agreements upon which the acceptances were made and delivered by failing to comply strictly with the provision in the letters as to the filling in of the space left blank for the due date of the drafts. Bergstrom was to deliver ten drafts for $10,000 each accepted by his firm.' The drafts were to be renewed every three months, but payable finally at latest term on January 10, 1913. Such was the statement contained in the bank’s letter to Bergstrom under date of April 18, 1912. In answer to this letter Bergstrom wrote the letter of April nineteenth inclosing drafts and stating as follows:

“ The drafts are duly accepted by us and the date of payment left blank to be filled in by you to suit your convenience. These drafts are to be subject to renewals, however, so that the drafts shall become finally payable Jan. 10th, 1913.”

The bank filled in the 12th of January, 1913, as the due date —two days later than the date mentioned in Bergstrom’s letter of April nineteenth. Defendants complain that the terms of the agreement required that a date should be filled in prior to the due date of the note so as to allow renewals. We do not interpret these letters that way. The purpose of both parties was to have these drafts paid not before January 10, 1913. It was optional with the Banque Alsacienne to fill in a date prior to the due date, but if it did so Bergstrom was to have the right of renewal so that the drafts need not be paid before January 10, 1913. The adding of two days, making the due date the twelfth of January instead of the tenth, certainly did not work to the detriment of Bergstrom. Under the circumstances I think there was no violation of the agreement by the Banque Alsacienne as to the filling in of the blank, and that there was a substantial compliance with section 33 of the Negotiable Instruments Law (Consol. Laws, chap. 38; Laws of 1909, chap. 43). But even if the blanks were not filled in strictly, the plaintiff as an innocent holder for value would be protected against that omission under the last sentence of section 33 of the Negotiable Instruments Law, which provides that such a holder may enforce the draft as if it had been filled up strictly.

The two drafts in question are signed by the president of the Banque Alsacienne and another person whose signature is illegible, and they are properly indorsed by the bank, but through an obvious error in printing the case on appeal the illegible signatures are omitted from the face and indorsement of the draft, and the signature of Muller as president is omitted from the indorsement. The court’s attention was drawn to this omission on the argument, and the original drafts submitted to the court for its consideration.

The order appealed from is modified by striking out the provision for a new trial, and judgment may he entered for the plaintiff, with costs, and as so modified the order is affirmed, with costs of this appeal to the respondent.

Clarke, P. J., Scott, Smith and Page, JJ., concurred.

Order modified as directed in opinion and as modified affirmed, with costs to respondent. Order to be settled on notice.  