Summary
In Colonial Discount Co., Inc., v. Rumens (249 App. Div. 736, affd. 274 N.Y. 612) plaintiff took the note with knowledge from the accompanying instrument that the basic contract had been breached, and it was not, therefore, a holder in due course.
Summary of this case from Petroleum Accept. Corp. v. Queen Anne Laundry ServOpinion
December 4, 1936.
Present — Lazansky, P.J., Hagarty, Carswell, Davis and Adel, JJ.
Order granting defendant's motion for summary judgment in an action to recover on a promissory note, and the judgment entered thereon, unanimously affirmed, with ten dollars costs and disbursements. The plaintiff is a finance company claiming to be a holder before maturity for value. The note was given in connection with the sale of an automobile; and simultaneously therewith the defendant executed a chattel mortgage. Both of these instruments were executed in blank; and subsequently an employee of the automobile dealer filled in the chattel mortgage, describing therein an automobile which previously had been sold and delivered to another person. The note and chattel mortgage were then purchased by plaintiff. Arrangements had been made between the defendant, the automobile dealer and another finance company for the financing of the car defendant received; and defendant paid in full. The defendant claims that the assignment to plaintiff occurred after a breach of the contract; and, therefore, the plaintiff's status is that of an assignee, and the note is subject to all defenses which defendant had against the assignor at the time of the assignment. The note and the chattel mortgage must be construed and treated as one instrument. ( Ewing v. Wightman, 167 N.Y. 107, 112, 113; National Bank of Watervliet v. Martin, 203 App. Div. 390; affd., 235 N.Y. 611; Federal Credit Bureau, Inc., v. Zelkor Dining Car Corp., 238 App. Div. 379; Heiman v. Murphy, 143 Misc. 81.) Both the chattel mortgage and note had an invalid inception, and there was defect of title of which the plaintiff had knowledge by the contents of the instruments in its possession. Under the circumstances disclosed in the record, in purchasing the note and the chattel mortgage, the plaintiff took them subject to existing infirmities and to any defenses or equities existing in favor of the defendant against the assignor.