The Twelfth Ward Bank of the City of New York, Appellant, v. Arthur J. H. Brooks, Respondent, Impleaded with Henry P. Robinson and Samuel Quincy

The Twelfth Ward Bank of the City of New York, Appellant, v. Arthur J. H. Brooks, Respondent, Impleaded with Henry P. Robinson and Samuel Quincy. Bills and notes — a payment thereof by an indorser is not, in an action brought by his indoi'see, a defense which may be interposed, by a prior indorser. In an action upon a promissory note made by the defendant Robinson to the order of .the defendant Brooks, and indorsed by Brooks to the defendant Quincy, and then by.Quincy to the plaintiff, the defendant Brooks interposed ' an answer which for a third defense alleged that the plaintiff was not the real party in interest; but that before the commencement off the action the note was paid in full by the defendant Quincy to the plaintiff; that at the time of the commencement oí the action Quincy was and still is the owner and holder of the note, and that the action was brought for his benefit. Meld, that the defense was demurrable; That under the provisions of section 203 of the Negotiable Instruments Law (Laws of 1897, chap. 612) the payment of the note by Quincy did not constitute a defense to the defendant Brooks, unless he could show that the payment was made for him; That the other allegations of the third defense were mere conclusions of law, which did not raise an issue. Laughlin, J., dissented. Appeal by the plaintiff, The Twelfth Ward Bank of the City of New York, from so much of an interlocutory judgment of the Supreme Court in favor of the defendant Brooks, entered in the office of the clerk of the county of New York on the 14th day of December, 1900, upon the decision of . the court, rendered after a trial at the New York Special Term, as overrules the demurrer of the plaintiff to the third defense contained in the amended answer of the defendant Brooks. Joseph E. Bullen, for the appellant. Alexander Thain, for the respondent. [MAJORITY — Hatch, J.:] Hatch, J.: The defendant and respondent Brooks is indorser upon a promissory note which passed into the hands of one Quincy, who in turn indorsed the same to the plaintiff. An action having been brought on the note by the plaintiff, the. defendant Brooks interposed an answer containing three separate defences. To each of these the plaintiff demurred on the ground that they were severally insufficient in law. Upon the hearing of the demurrers the court sustained the same as to the first and second defenses, but overruled it as to the third. The complaint contains the usual allegations of the making of the note, its due indorsement and delivery to the plaintiff, its presentation for payment, protest for non-payment and notice thereof ; that the plaintiff is now the lawful owner and holder of the note, and that no part thereof has been paid, and that the defendants are indebted to the plaintiff thereon. The answer of the defendant Brooks does not deny any allegation of the complaint, except so much thereof as avers that the plaintiff is the lawful owner and holder of the note, as to' which it is averred that at the commencement of the action the defendant Quincy was and still is such owner and holder. The second defense is, that before the commencement of the action the defendant Quincy paid to the ¡Dlaintiff the amount due upon the said note, and for a third defense it is averred that the plaintiff is not the real party in interest ; that the action is not brought for the benefit of the plaintiff, but that before the. commencement of the action said note was paid in full by the defendant Quincy to the plaintiff, and at the time of the commencement of the action the said Quincy was and still is the owner and holder thereof, and that the action is brought for the benefit of said Quincy. It will be observed that aside from the allegation of payment, the third defense consists wholly of conclusions of law, viz., that the plaintiff is not the real party in interest; that the action is not brought for the benefit of the plaintiff; that the defendant Quincy was and is the owner and holder of the note; and that the action is brought for the benefit of said Quincy. The noté was made by the defendant Robinson to the order of the defendant Brooks and indorsed by Brooks and then by Quincy. Quincy is, therefore, only secondarily liable, and is, moreover, an indorser subsequent to Brooks and entitled on paying the note to look to Brooks as well as to the maker for payment. The answer contains no defense to the cause of action averred in the complaint. It is provided by the Negotiable Instruments Law (Laws of 1897, chap. 612) that where the instrument is paid by a. party secondarily liable thereon, it is not •discharged (§ 202), and in other sections of the act it is provided how and when such instruments are discharged. The effect of this law is that payment by a subsequent indorser is no defense. So far as the appellant Brooks is concerned, he owed the whole amount of the note exactly as before, and, although, as between Quincy and the plaintiff, if the former has in fact paid the note the latter will hold the proceeds, if collected by this action, as trustee for the benefit of Quincy, since it cannot require that the debt be paid twice, yet such . fact furnishes no defense to the appellant unless he can show that such payment was made for him, which is not pretended here. (Madison Square Bank v.. Pierce, 137 N. Y. 444.) . Aside from the averment of payment, as already intimated, the other averments of this third defense are mere legal conclusions, and that such averments do not constitute a defense has been repeatedly-held. By not denying the defendant admits that the title to the note was transferred to the plaintiff, and without setting up facts to avoid the effect of such án admission and to show the transfer of the note from the plaintiff to the defendant Quincy, he cannot raise an issue of fact by the affirmative statement of conclusions of law. The facts must be alleged from which such conclusions of law could have been drawn. (Conselyea v. Swift, 103 N. Y. 604; Saunders v. Chamberlain, 13 Hun, 568.) The interlocutory judgment should be reversed, with costs, and the demurrer to the third separate defense sustained, with costs,, with leave to the defendant to answer over within twenty days upon payment of costs in this court and in the court below. Yan Brunt, P. J., Patterson and McLaughlin, JJ., concurred ; Laughlin, J., dissented. [DISSENT — Laughlin, J. (dissenting) :'] Laughlin, J. (dissenting) :' I dissent on the ground that Quincy, having paid the note, became subrogated to the rights of the plaintiff, and that he is now the real party in interest and may maintain an action thereon against the respondent Brooks, who was a prior indorser. Judgment reversed, with costs, and demurrer to third defense sustained, with leave to defendant to answer over on payment of costs in this court and court below.