1900] Union Nut & Bolt Co. v. Doherty. ceded proposition of law that (page 417, 25 App. Div., page 544, 49 Supp.) "the indorsement of notes for the accommodation of third parties is not within the scope of partnership business," and that the indorsement of such a note in the co-partnership name by one partner is a fraud upon his co-partners, unless made with their consent. The case can in no wise be an authority for the appellant here unless it can be maintained as a matter of necessary inference that the purchase of merchandise is not within the ordinary scope of the business of a co-partnership engaged in the business of transportation. We are satisfied that this proposition cannot be maintained. Such purchases would be necessary for the purpose of providing and maintaining facili WHAT NOTICE DESTROYS BONA FIDES OF. TRANSFEREE OF NEGOTIABLE its notes in payment of or as security for a personal debt of the officer does so at his peril. Wilson v. Metropolitan Elevated Ry. Co., 120 N. Y. 145; 24 N. E. 384. But if the making and transfer of such notes was actually authorized, the rights of a bona fide holder exists, although such holder failed to make any inquiries. Id. And where the president of a corporation was authorized by the by-laws to execute all contracts in the name of the company, the possession by a director thereof of a note signed by the president, although presented several days after its date, does not, on its face, suggest that it was an accommodation note, nor that it was to be used for a dishonest purpose. Chemical National Bank v. Colwell, 16 Daly, 28; 29 St. Rep. 726; 9 Supp. 285. A person discounting a note presented by the maker and payable to his order, having thereon the indorsement of a business corporation, is charged with notice that such indorsement was not made in the regular course of the business of the corporation, and if it proves to have been made without authority, a recovery cannot be had against the corporation. National Park Bank v. German-American Mutual Warehousing and Security Co., 116 N. Y. 281; 22 N. E. 567. A question of fact as to whether a holder of notes is a bona fide holder arises where he knew that the notes had been issued by a corporation after its insolvency had become known, and that the stock of the corporation had not been fully issued and paid for, and such notes were payable to the cor ties for the proper conduct of the business, and would be quite properly resorted to for the purpose of promoting and extending the main object of the business. At all events, there is no such necessary inference as that which is contended for here by the appellants from the nature of the defendant's business as would have justified the court in holding that the plaintiff was not a bona fide holder of the note. The evidence shows that the plaintiff acquired the note for value, upon a present consideration, and before maturity, and that it acted in good faith in the transaction. The contention advanced by the appellants that, inasmuch as the burden rested upon the plaintiff of showing these facts, all the officers of the corporation should have been called as witnesses to show that WHAT NOTICE DESTROYS BONA FIDES OF TRANSFEREE OF NEGOTIABLE INSTRUMENT,-continued. poration and were transferred to him without other indorsement than that of the corporation. Close v. Potter, 155 N. Y. 145; 49 N. E. 686. If the president of a corporation, having authority to execute notes, makes a note regular in form, payable to the order of a third person having no actual interest therein, who in turn indorses it to a firm, of which such president is a member, and the note is then indorsed by the firm and the president thereafter wrongfully delivers it to a stranger having no knowledge of the facts stated, as collateral security for a cash advance for more than its amount, upon a note of the firm and for its benefit, such holder, upon becoming absolute owner of the note, can enforce it against the corporation Cheever v. Pittsburgh &c. R. R. Co., 150 N. Y. 59; 44 N. E. 701. i. When paper made or indorsed by partnership. The delivery of a partnership note by one partner, for the purpose of paying his individual debt, places the person so taking it upon inquiry and he is not a bona fide holder, if it is shown that such note was made without the consent or ratification of the other partners. Union National Bank v. Underhill, 102 N. Y. 336; 7 N. E. 293. 1 Fielden v. Lahens, 6 Abb. N. S. 341. But a person receiving such paper from the person to whom it was transferred in payment of the individual debt of a partner, for value and with 1900] Union Nut & Bolt Co. v. Doherty. they had not acquired any knowledge or information adverse to the claim of the plaintiff that it was a holder in good faith, is not tenable. The witness called on behalf of the plaintiff was its agent, who apparently had exclusive charge of the business in the course of which the note was taken, and was the sole participant in the transaction on the part of the plaintiff. We have considered the other exceptions in the case which were taken to the rulings of the trial justice in the course of the trial, but do not think that they call for any discussion. It is sufficient to say that they do not present error for which the judgment should be reversed. The judgment must be affirmed. Judgment affirmed, with costs. All concur. WHAT NOTICE DESTROYS BONA FIDES OF TRANSFEREE OF NEGOTIABLE INSTRUMENT,-continued. out notice of the circumstances attending the indorsement, is deemed a bona fide holder. Atlantic State Bank v. Savery, 82 N. Y. 291. Elliott v. Dudley, 19 Barb. 326. A bank discounting partnership notes made by one partner to his own order, and crediting the proceeds to the individual account of such partner and paying out the same upon his personal check, is not a bona fide holder, as against the firm, where the making of such note was without the consent or ratification of the other partner. Spaulding v. Kelly, 43 Hun, 301; 4 St. Rep. 389; 26 Week. Dig. 199. This rule also applies to a firm indorsement made by the partner benefited, without the consent or ratification of the remaining members of the firm. First National Bank v. Weston, 25 App. Div. 414; 83 St. Rep. 542; 49 Supp. 542. Elliott v. Dudley, 19 Barb. 326. Furthermore, it has been held that this principle is applicable to a case where paper bearing an unauthorized firm indorsement is transferred to and taken from a person not connected with the firm. Bank of Vergennes v. Cameron, 7 Barb. 143. Smith v. Weston, 88 Hun, 25; 68 St. Rep. 513; 34 Supp. 557; aff'd 159 N. Y. 194; 54 N. E. 38. And no estoppel arises against the other partners from the fact that they were aware that such partner was so indorsing notes, where they remonstrated at every occasion, and finally dissolved the partnership on that account. WHAT NOTICE DESTROYS BONA FIDES OF TRANSFEREE OF NEGOTIABLE INSTRUMENT,-continued Smith v. Weston, 88 Hun, 25; 68 St. Rep. 513; 34 Supp. 557; aff'd 159 N. Y. 194; 54 N. E. 38. This is likewise the case where the unauthorized indorsement was made for the accommodation of the makers and after the dissolution of the partnership, of which facts the person taking the note had full knowledge. Smith v. Weston, 81 Hun, 87; 62 St. Rep. 623; 30 Supp. 649; 24 Civ. Pro. 141. So, a transferee of a note having knowledge that the name of one of the makers, a partnership, was signed by one of the partners without the consent or ratification of the other member of the firm, is not a bona fide holder as against the partnership. Bank of Rochester v. Bowen, 7 Wend. 158. A person to whom is transferred a note, drawn in the name of partners, but not in the partnership name, as fixed by the partnership agreement, is thereby put on inquiry, and where the note was drawn by one partner for his individual debt, without knowledge of the other partner, such holder cannot recover as against the latter. Lucker v. Iba, 54 App. Div. 566; 100 St. Rep. 1019; 66 Supp. 1019. The fact that the president of a bank, at the time a note was presented to it for discount, having observed that it had run a long time, was informed, in answer to his inquiry what that meant, that a deal had taken place between the firm making the note and the payee "by which this paper was secured to them and it was given to him to use in his matters, and he had it for that purpose," constitutes notice that the note was not given in the usual course of business for the benefit of the firm, and that it is accommodation paper. Second National Bank v. Weston, 31 App. Div. 403; 86 St. Rep. 315; 52 Supp. 315. Where a loan was made by a party to one partner of a Boston firm personally, and a draft therefor drawn on the debtor and deposited to the drawer's credit in a Boston bank, which latter indorsed and sent the draft on to a New York bank for collection, which in turn presented the draft for payment and receiving a firm check for its amount surrendered the draft and later received payment of the check, such first named party is not chargeable with notice that firm property was used to pay the individual debt of the partner, and cannot be compelled to refund the proceeds of the firm check. Wheatland v. Pryor, 133 N. Y. 97; 30 N. E. 652. National Exhibition Co. v. Crane. NATIONAL EXHIBITION CO. v. CRANE. [54 App. Div. 175; 100 St. Rep. 361; 66 Supp. 361.] (Supreme Court, Appellate Division, First Department. October 19, 1900.) DISCONTINUANCE COSTS-CONDITION-DEFENDANT'S ATTORNEY'S RIGHTS. Defendant, who had become irresponsible, made a collusive agreement with plaintiff to consent to a discontinuance of the action, without costs, to which discontinuance the defendant's attorney objected. Held, that the court had power to protect the attorney, as an officer of the court, in his inchoate right to costs, by requiring payment thereof as a condition of discontinuance.* Van Brunt, P. J., and Ingraham, J., dissenting. Appeal from special term, New York county. Action by the National Exhibition Company against Samuel Crane, as president of the Atlantic League of Professional Baseball Clubs. From an order discontinuing the action without costs, defendant's attorney appeals. Reversed. Argued before VAN BRUNT, P. J., and HATCH, MCLAUGHLIN, O'BRIEN, and INGRAHAM, JJ. John M. Ward, for appellant. David Rumsey, for respondent. *For note on "Enforcement of Attorney's Lien,” see 8 Ann. Cas. 74–100. For note on "Attorney's Lien on Alimony," see 7 Ann. Cas. 257-258. For note on "Attorney's Lien in Surrogate's Court," see 7 Ann. Cas. 165 |