Lancaster County National Bank v. Garber

Citations

• 178 Pa. 91
• 39 W.N.C. 55
• 35 A. 848
• 1896 Pa. LEXIS 1136

Syllabus

<p>Promissory notes — Bona fide holder without notice of fraud — Suspicious circumstances.</p> <p>The maker or indorser of a negotiable note cannot defend against a bona fide holder without notice, on the ground that there was fraud in the procurement or use of the note; and the mere fact that the note was acquired under suspicious circumstances will not invalidate it in the hands of the holder unless the circumstances are such that bad faith on his part can be reasonably inferred. The test of liability is not whether the note was taken under circumstances which would give rise to suspicion, but whether it was taken in good faith.</p> <p>A bank discounted an accommodation note for the second indorser thereon. The .first indorser subsequently notified the bank that the note had been altered, and he denied liability upon it. It was protested at maturity, and the second indorser subsequently renewed and lifted it with another similar note, with the same maker and indorser, with the word “Renewal ” written across its face. After the maturity of the second note the bank brought suit upon it against the first indorser, who alleged as a defense the alteration and misuse of the first note, and also that the note in suit had been given to renew another note of the maker, at another bank, at which it was made payable.</p> <p>The court charged that it was the duty of the bank to make inquiry before discounting the second note, and that, having failed to do so, it was not an innocent holder for value without notice, and that if the jury should find that the first note was forged, there could be no recovery on the second, which was a renewal thereof. Held, to be error, as the question for the jury was whether the bank had taken the second note in good faith.</p>