Buchanan v. Mechanics' Loan & Savings Institution

Citations

• 84 Md. 430
• 35 A. 1099
• 1896 Md. LEXIS 120

Syllabus

<p>Bills and Notes—Partnership Note Payable to One Partner—Rights ■of Bona Fide Endorsee— Taking Note for Pre-existing Debt— Transfer of Note as Collateral Security—Distribution of Partnership Assets.</p> <p>When a promissory note is drawn by a partnership payable to one of the partners, and is by him endorsed for his own debt to a third person, who takes the same bona fide, before maturity, such endorsee has all the rights of a creditor against the firm, and upon its insolvency is entitled to share equally with partnership creditors in the distribution of the assets.</p> <p>A person to whom a negotiable promissory note is transferred before maturity in payment of a pre-existing debt is a bona fide holder for value.</p> <p>A promissory note drawn by a firm to the order of one of the partners was endorsed by him before maturity to a party as collateral security for such partner’s individual debt. The firm subsequently became 'insolvent. Held, that the holder of the note was entitled to share in the distribution of the partnership assets equally with partnership creditors to the amount of his claim, the note so held as collateral being taken as the basis of the calculation of the amount of the dividend to be allowed.</p> <p>In this case the nature or form of the note so transferred affords no sufficient ground for imputing bad faith to the endorsee, and there is no evidence of any actual fraud on his part.</p>