In re QUALITY SHOP. TRADERS' NAT. BANK v. WILLSON, 205 F. 266

SANBORN, District Judge (after stating the facts as above). The District Court took the view that the claim should be disallowed, whether the note be considered merchandise paper or accommodation paper. If merchandise paper, it was invalid, because without consideration and not negotiable, under sections 9073 and 9076, R. S. Indiana, and Rominger v. Keyes, 73 Ind. 375. If accommodation paper, it was likewise invalid as ultra vires. Park Hotel Co. v. Fourth National Bank, 86 Fed; 742, 30 C. C. A. 409, and Merchants’ Bank v. Baird, 160 Fed. 642, 90 C. C. A. 338, 17 L. R. A. (N. S.) 526.

That the note was not intended to be accommodation paper is most certainly shown by the finding of the referee, as well as the record. As stated by the referee, Meyer and Simon “requested the note for an off amount, so it would not have the appearance of being accommodation paper.” Strauss supposed it was intended to reimburse the payees in part for the purchase price paid by them for the other stock, and with that impression signed it. Therefore it is undeniable that the paper was not designed as a loan of credit, which is the universal test of the character of the paper.

Accommodation paper means commercial paper made, accepted, or indorsed for the benefit of another, without consideration. It is made for the purpose of_ a loan of credit to the person accommodated. 1 Words and Phrases, 74. Within this definition it is entirely clear that the note in question cannot have been given for accommodation or intended as a loan of credit. Treating the note, therefore, as merchandise paper, the only further question is whether it was negotiable.

This depends on two considerations: First, whether it is to be regarded as an Indiana contract, and so nonnegotiable on its face; and, second, whether it may be brought within the rule of Tilden v. Blair, 21 Wall. 241, 22 L. Ed. 632, to the effect that paper transmitted from one state to another for the purpose of discount there, and actually there put out, is governed by the law of the latter state.

Being both made payable and executed in Indiana, the note is presumptively an Indiana contract, because it is deemed t¿ have reference particularly to the law of the place of performance in the construction of the obligation assumed. Jenkins, C. J., in Phipps v. Harding, 70 Fed. 468, 17 C. C. A. 203, 30 L. R. A. 513; Supervisors v. Galbraith, 99 U. S. 214, 25 L. Ed. 410.

Since, then, the note in,question was made to be governed by the law of Indiana, and is by that law made nonnegotiable, the second question is whether there is anything in the case to show that it was transmitted to the payees for negotiation in New York. Not only is the record silent on this point, so far as express evidence or conclusion is concerned, but there is some inference to the contrary. Strauss was asked to send on a note, which he supposed was on full consideration. Before signing it, he consulted an attorney, whose advice further confirmed his belief. Eater on he demanded the return of the note.

Supposing the note was to be given for the purchased stock of goods, it would be quite immaterial to him whether it should be negotiated, since the obligation to pay would not be thereby enlarged or in any manner affected. It is reasonable to infer, therefore, that Mr. Strauss did not consider this apparently unimportant question, or have any intention or conception respecting it. Flence the rule referred to that commercial paper-transmitted for negotiation is governed by the law of the place of negotiation has no application. The judgment of the District Court should be affirmed.