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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 accommo

dation 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 drait 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, 193 N. Y. 97; 30 N. E. 652.

National Exhibition Co. v. Crane.

NATIONAL EXHIBITION CO. v. CRANE.

[54 App. Div. 175; 100 St. Rep. 861; 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 condi

tion 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–

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Hatch, J. This action was brought against the defendant in a representative capacity to recover for money had and received to the plaintiff's use. After issue was joined by the service of an answer, and the cause had been many

times upon

the calendar for trial, at which times the defendant had been ready for trial, and present in court with his witnesses, the same was postponed, at the request of the plaintiff, until February 20, 1900, when it was peremptorily set for trial. Prior to this time the plaintiff had presented the stipulation of the defendant consenting to a discontinuance of the action without costs, to which the defendant's attorney objected, refusing to consent thereto unless his costs were paid. The reason assigned by the defendant's attorney for refusing to consent to the discontinuance unless his costs were paid was that the defendant the Atlantic League had disbanded, that its members were financially irresponsible, and the attorney's only reliance for compensation for his services was the costs of the action; that said attorney, in order to make his defense to the action, and to procure the attendance of the nominal defendant, Crane, had been obliged to regularly subpæna Crane, he having no present interest in the matter. Upon the refusal of the attorney to consent to the discontinuance without costs, the plaintiff procured an order to show cause why the action should not be discontinued without costs, and, this coming on to be heard, the order sought for was granted, and the action was discontinued without costs.

It is quite apparent that the stipulation given by the nominal defendant, Crane, was collusive, and intended to be used by the plaintiff to force the discontinuance of the action without payment of costs to the defendant's attorney; and the question pre sented upon this appeal is whether the court has the power to compel, as a condition to the discontinuance of the action, the payment of the costs of the defendant's attorney. Appellant does not claim, nor could he successfully, that he is possessed of any lien, either by virtue of the provision of the code or otherwise. It is quite clear that he has no such lien, and as no counterclaim is set up in his answer, and no judgment has been ob

1900]

National Exhibition Co. v. Crane,

tained, there is nothing which he represents to which a lien could attach. He claims, however, that, as the stipulation given by Crane was collusively obtained for the purpose of depriving him of his costs, he, as an officer of the court, is entitled to be protected, in order that a successful fraud and cheat may not be worked upon him; and in this respect we do not think his appeal is in vain. In Coughlin v. N. Y. C. & H. Railroad Co. 71 N. Y. 443, the court, in speaking upon the subject of the power of the court to protect an attorney's right to costs in cases of a collusive settlement, said:

"It is impossible to ascertain precisely when this practice commenced, or how it originated, or upon what principle it was based. It was not upon the principle of a lien, because an attorney has no lien upon the cause of action,, before judgment, for his costs; nor was it upon the principle that his services had procured the money paid to his client upon the settlement, because that could not be known, and in fact no money may have been paid upon the settlement. So far as I can perceive, it was based upon no principle. It was a mere arbitrary exercise of power by the courts; not arbitrary in the sense that it was unjust or improper, but in the sense that it was not based upon any right or principle recognized in the cases. ties being in court, and a suit commenced and pending, for the purpose of protecting attorneys, who were their officers, and subject to their control, the courts invented this practice, and assumed this extraordinary power to defeat attempts to cheat the attorneys out of their costs. The attorney's fees were fixed and definite sums, easily determined by taxation, and this power was exercised to secure them their fees.”

The par

The court in that case was speaking of the claim of the plaintiff's attorney respecting his lien upon the cause of action, but the language, so far as it affects the right and the power of the court, applies, whether the attorney who invokes the protection of the court represents the plaintiff with a cause of action or the defendant with none. The principle involved, if it may be called a principle, respecting the power of the court to protect an attorney from being cheated, by fraud and collusion, out of his costs, or of his opportunity to recover costs, in a particular case, is the same, as the power is exercised to protect an officer of the court as such, and for no other reason. It is evident,

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if power exists to protect the attorney as an officer of the court, it may protect him in an inchoate right as well as in one which has ripened into a right presently enforceable. The underlying basis for the exercise of the power is the fraudulent act by which the attorney is deprived of a substantial right; and while for the most part the power has been exercised in connection with a cause of action or claim represented by the attorney for the plaintiff, or by the attorney for the defendant when he has set up an affirmative right to recover of the plaintiff, yet the right which authorizes the exercise of the power, inasmuch as it does not depend upon the existence of a cause of action, or of an affirmative claim, is to be enforced in all proper cases where an officer of the court, by reason of a particular act, has been or may be deprived of a right which in ordinary course he might enforce.

That such right may be protected has been repeatedly recognized, not alone in the case from which we have quoted, but in others. Randall v. Van Wagenen, 115 N. Y. 527, 528; 22 N. E. 361; Walsh v. Flatbush, N. S. & C. Railroad Co. 11 Hun, 190. In Wormer v. Canovan, 7 Lans. 36, the right of the special term to impose, as a condition of the discontinuance of the action, the payment of the costs of the defendant's attorney, was upheld. In that case the defendant had become insolvent, and the plaintiff obtained from him a consent to a discontinuance without costs. The defendant's attorney gave notice of his claim for the costs of the action, but the plaintiff, in disregard of such notice, procured an order of discontinuance, which, upon application to the court, was modified by requiring the payment of the defendant's costs as a condition of the order; and upon appeal such order was sustained, the court laying down the rule that it was possessed of the power to protect the attorney in his right to costs. It is quite true that the authorities cited in that case to support the ruling of the court (Power v. Kent, 1 Cow. 172, and Talcott v. Bronson, 4 Paige, 501) failed in support of the doctrine for which they were cited. In the first there was the right to enter an interlocutory judgment upon a demurrer to the complaint, which established the right to costs;

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