
    JOHN A. MOODY, Plaintiff, v. ROBERT T. ANDREWS et al., Defendants.
    PLEADINGS, ISSUES THEREIN—JUDGMENT ON THE SAME.
    Rights of a party, who lawfully hold's a promissory rote as a 0 PLEDGE.
    The admission in the answer, “ that at the time mentioned in the complaint, they (the defendants) made and endorsed a note like that set forth therein, ” unaccompanied with anything tending to show that it was a distinct note from that described in the complaint, and on which the action is brought, must be held to refer to the note sued upon.
    This answer does not put in issue plaintiff’s allegation in the complaint, that he is the lawful holder of the note, but states facts that do show that the plaintiff is the lawful holder of the note, for value.
    
    Where a party holds a note as a pledge, the law confers upon him the power to receive the whole money from the makers of the note, and sue and collect the same. The money, when received by him, is held as a substitute for the note, and subject to all the terms and conditions affecting it (Garlick v. James, 12 John. 146). When commercial paper is received as security, for an advance of money made upon it at the time, without notice of any defects of title, the law merchant, protects thé transferee against all latent equities, whether of the parties to the paper or third persons (Weaver v. Barden, 49 N. Y. 294; Muller v. Pondir, 55 N. Y. 332). The pledgee of commercial paper, in the absence of any special power, is bound to hold it, and to collect it, and apply the money to pay the loan, and to account for, and to return the balance, if any remained (Wheeler v. Newbould, 16 N. Y. 392). The allegation in this answer to the effect that there are other parties claiming title to the note, or to the proceeds, are of no force. The proceeds of the note are to be reached through the plaintiff.
    Before Monell, Ch. J., and Curtis and Speir, JJ.
    
      Decided May 3, 1875.
    
      This action is against the makers of a promissory note.
    The pleadings are as follows :
    COMPLAINT.
    “The complaint of the above named plaintiff respecfully shows to this court that at the several times hereinafter mentioned, the defendants were partners doing business under the firm name of Andrews & Sandford. That the said defendants heretofore at the city of .ISTew York made their promissory note in writing, bearing date on the 24th day of January, 1874, whereby he promised to pay six months after the date thereof to the order of themselves, for value received, the sum of sixteen hundred and sixty-six dollars and sixty-six cents, and the said defendants thereupon, and before the maturity thereof, endorsed the said note, and so endorsed, the same was passed and delivered to the plaintiff, and although the said note became due and payable before the commencement of this action, yet the defendants have not paid the same. And the plaintiff further says that he is now the lawful owner and holder of the said note, and that the defendants are justly indebted to him thereupon in the sum of sixteen hundred and sixty-six dollars and sixty-six cents principal, together with interest thereon from the 27th day of July, 1874.”
    “ Wherefore the plaintiff demands judgment against the defendants for the said principal sum and interest.”
    ANSWER.
    “These defendants, for answer to the said complaint, admit their partnership, and also that at the time mentioned in the complaint, they made and endorsed a note like that set forth therein, and that said note is not paid.”
    ‘‘ They deny each and every allegation in the said complaint not hereinbefore admitted.”
    “These defendants further answering:, aver that the said note so endorsed by them was delivered, by them to one Mrs. Jennie Reynolds, who is now the lawful owner thereof.”
    “These defendants further aver that the said note was by the said Jennie Reynolds delivered to one James H. Dobbs for the purpose of having the same-discounted for her and the proceeds thereof paid to her, but that the said James H. Dobbs did not have the same discounted, but without authority and out of the-usual course of business, delivered the said note to the plaintiff as security for a small sum, to wit: the sum of one hundred dollars, loaned to him by the plaintiff.”
    “ These defendants further aver that they have been notified by the said Jennie Reynolds not to pay the same, and that she claims the money due thereon.” “These defendants further aver that Alfred P. Reynolds, the husband of the said Jennie Reynolds, was duly adjudicated a bankrupt by the U. S. District Court, for the -Southern District of New York in Bankruptcy, on or about the 1st day of March, 1874, as of the 20th of February, 1874, and that by an order made in said proceeding one Napoleon Godone claims to have been appointed assignee in bankruptcy of the effects of the said Alfred P. Reynolds.”
    “That the said Napoleon Godone has notified defendants that said note was the property of said Alfred P. Reynolds, and as such became and is now the property .of the said Napoleon Godone, and has forbidden the payment thereof to anybody other than himself.” “These defendants aver that the said Jennie Reynolds and the said Napoleon Godone are necessary parties to this action and to a complete determination thereof, and pray that the plaintiff may be compelled to bring them into this action, arid that an adjudication may be made herein which shall protect these defendants from the claims of the said several parties.”
    
      On motion of plaintiff’s counsel at the trial the court directed judgment on the pleadings for the plaintiff, for the amount of the note and interest, the exceptions to be heard in the first instance at the general term.
    
      James W. Monk, attorney for plaintiff; Daniel T. Walden, of counsel.
    
      Thomas Darlington, attorney for defendant; Samuel Jones, of counsel.
   By the Court.—Curtis, J.

The admission in the answer of the making and endorsing by defendants of a note, like that set forth ” in the complaint, unaccompanied with anything tending to show that it was a distinct note from that described in the complaint, and on which the action is bought, must be held to refer to the note sued upon.

The answer does not put in issue plaintiff’s claim to be the lawful holder of the note, but states facts showing that the plaintiff is the holder of the note, as collateral security for a loan.

The plaintiff is the holder of a negotiable promissory note endorsed by the payees. It is not alleged in the answer that he received it, with notice that it was delivered to Dobbs for any specific purpose, or of any equities between the parties, or as security for an antecedent debt. On the contrary, the answer states that the note was delivered to the plaintiff as security for money loaned by the plaintiff to Dobbs, the then holder of the note. The answer discloses facts showing that the plaintiff is a holder of the note for value, and does not question his good faith in becoming such holder. Ho burden is cast on the plaintiff to show that he is a tona fide holder.

In the Bank of New York v. Vanderhorst (32 N, Y. 553), affirming 1 Robt. 211, it is held. that, taking a note as collateral security under such circumstances constitutes a holder for value. The principle, that when commercial paper is received as security for an advance made upon it at the time, without notice of any defects of title, the law merchant protects the transferee against all latent equities, whether of third persons or parties to the instrument, is recognized in Weaver v. Barden (49 N. Y. 294, 295), and in Muller v. Pondir (55 N. Y. 332).

The plaintiff thus holding the note as a pledge, the law confers on him the power to receive the whole money from the makers of the note, and to sue for its collection. The money when so received is simply held by him as a substitute for the note, and subject to all the terms and conditions affecting it (Garlick v. James, 12 John. 146).

In Wheeler v. Newbould (16 N. Y. 392), the decision of this court, that the pledgee of commercial paper; in the absence of any special powers, was bound to hold and collect it, and apply the money to the payment of the loan, and return the balance, if any, was affirmed.

The allegation of the answer, to the effect that there are other parties claiming title to the note, or to the proceeds, are of no force. The law affords the defendants a proper remedy for their protection in such a contingency, which they have not thought fit to resort to, and the proceeds of the note are to be reached through the plaintiff.

The exceptions should be overruled, and judgment ordered for the plaintiff upon the verdict, with costs.

Monell, Ch. J., and Speir, J., concurred.  