
    The M. Groh’s Sons Co., Respondent, v. Charles Schneider et al., Appellants.
    (Supreme Court, Appellate Term,
    February, 1901.)
    Check — Holder “ in due course ”
    Where the evidence given upon the trial of an action upon a check tends to show that the holder, a corporation, had knowledge that the check was originally delivered upon a condition which had not been fulfilled and that Its payment had been stopped, and the holder accepts it in payment of a past indebtedness of the immediate assignor, the direction of a verdict for the holder is erroneous, as the question whether it was a holder “ in due course ” within the meaning of the Negotiable Instruments Law (L. 1897, ch. 612, §§ 91, 94, 95) must be submitted to the jury.
    Appeal from a judgment rendered in the Municipal Court of the city of New York, eighth district, borough of Manhattan, in favor of the plaintiff. - -
    Charles S. Bloomfield, for appellants.
    Gratz Nathan, for respondent.
   Blanchard, J.

The action was brought by the plaintiff, a brewing company, upon a check of the defendants made to the order of Louis Schneider, a brother of the defendants. The case was tried by a justice of the Municipal Court and a jury and resulted in a direction of a verdict for the plaintiff at the close of the trial. Considerable testimony was produced at the trial by both sides. The following facts, connected with the execution of the check and its present possession by the plaintiff, appear from the testimony.

One Eeldman was the owner of a saloon upon which the plaintiff held a chattel mortgage. Louis Schneider entered into an agreement with Feldman, whereby he, Schneider, was to become the purchaser of the saloon, if the consent of the plaintiff, the brewing company, in whose name the license of the place stood, could be obtained. For this purpose the defendants gave to their brother, Louis Schneider, the check in suit, and, according to the defendants’ evidence, for the purpose of binding the bargain, it being agreed that the check was not to be used in the event of the brewing company refusing their approval to the proposed change of ownership, but was to be returned to Louis Schneider. To obtain such consent, Louis Schneider, the day following the arrangement with Feldman for the sale, called upon the president of the plaintiff company and after some conversation the plaintiff refused its consent. The payment of the check was immediately stopped, and this knowledge was in the possession of the plaintiff prior to 'its receipt of the check. Subsequent to this conversation with Louis Schneider, Feldman called on the plaintiff and had a conversation with the plaintiff’s president, and he was at that time informed concerning the stopping of the check. In fact, without going into further details concerning the testimony adduced before the trial court, it is at least a fair inference from the evidence that the plaintiff, through its president, was cognizant of all the facts of the transaction. The plaintiff procured the transfer of the check from Feldman to itself, in part payment of Feldman’s indebtedness to it.

It was, therefore, a question of fact whether or not the plaintiff was the holder of the check in suit, in due course, within the meaning of that term as used in the Negotiable Instruments Law (Laws of 1897, eh. 612, § 91.)

By section 91 of this law the tests as to what constitutes a holder in due course are set forth, among which are that “ he took it in good faith ” and “ that at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it ” and, by section 94 of the act, it is provided that “ The title of a person who negotiates an instrument is defective within the meaning of this act when he obtained the instrument, or any signature thereto, by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith, or under such circumstances as amount to a fraud ” and, by section 95, it is provided that To constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith.” Having in view the plain wording of those sections of the act, how can it be said, as matter of law, that no question as to the plaintiffs being a holder in due course was presented by the evidence. The plaintiff, however, claims title by virtue of section 97 of the act, which provides that: A holder who derives his title through a holder in due course, and who is not himself a party to any fraud or illegality affecting the instrument, has all the rights of such former holder in respect of all parties prior to the latter.” Certainly, it cannot be said as matter of law that Feldman is a holder in due course, or that Louis Schneider, who secured the check without any consideration from his brothers who were present at the time the contract for the proposed sale was made, is such a holder.

It was clearly error on the part of the trial justice to take the case from the jury under the facts brought out at the trial.

The judgment must be reversed and a new trial ordered, with costs to the appellants to abide the event.

Andbews, P. J., and O’Goeman, J., concur.

Judgment reversed and new trial ordered, with costs to appellants to abide event.  