Meltzer v. Doll, 91 N.Y. 365 (1883)

An accommodation note is enforceable if supported by valid consideration, such as an agreement to forbear from prosecuting a debt against a third party.

Summary

This case addresses the enforceability of a promissory note where the defense of lack of consideration is raised. Meltzer Bros. sued Nicholas Doll’s estate to collect on a note. The estate argued the note was merely for accommodation and lacked consideration. The plaintiffs contended that the note was given in exchange for their agreement to suspend legal action against a third party, Merkle. The New York Court of Appeals affirmed the judgment for the plaintiffs, holding that forbearance from pursuing a claim against a third party constitutes valid consideration for a note, and the jury’s finding in favor of the plaintiffs on conflicting evidence was supported.

Facts

Meltzer Bros. held a note against George Merkle. Merkle was undergoing involuntary bankruptcy proceedings. Meltzer Bros. claimed that Nicholas Doll gave them a promissory note in exchange for their agreement to temporarily halt prosecution of their claim against Merkle. After both John and Gottfried Meltzer died, Gottfried’s executor continued the suit against Nicholas Doll’s estate, seeking to enforce the note.

Procedural History

The case was initially brought in a lower court, where a jury found in favor of the plaintiffs (Meltzer’s estate). The defendant (Doll’s estate) appealed, arguing that the note lacked consideration and that the court erred in admitting certain evidence. The New York Court of Appeals affirmed the lower court’s judgment, finding no reversible error.

Issue(s)

Whether an agreement to forbear from prosecuting a claim against a third party constitutes valid consideration for a promissory note.

Holding

Yes, because forbearance from pursuing a legal claim, even against a third party, is recognized as sufficient consideration to support a promise, including the promise embodied in a promissory note.

Court’s Reasoning

The court reasoned that valid consideration existed if the note was given in exchange for Meltzer Bros.’ agreement to forbear prosecution of their claim against Merkle. The court emphasized that it was the jury’s role to weigh the conflicting evidence and determine whether the note was an accommodation note or was supported by consideration. The court noted that evidence was presented showing Doll potentially had an interest in Merkle’s financial well-being, thus providing a motive for Doll to provide the note to induce Meltzer Bros. not to pursue action against Merkle. The court further stated that, “It was competent for the plaintiff to show an intent or motive on the part of the witness in testifying as he did on the trial which might affect his credibility before the jury.” The court also addressed the admissibility of the bill of sale and chattel mortgage, finding they were relevant to demonstrate Doll’s potential interest in Merkle’s financial stability. The court also addressed the defendant’s argument that the plaintiffs proving a debt in bankruptcy before the three months expired negated any consideration; the court found this argument without merit because the deposition in bankruptcy stated that the debt was owed to one member of the firm individually, not to the firm as a whole, and it could be presumed that the individual had lawfully obtained ownership of the debt. Furthermore, “the ex-parte proof in bankruptcy is not such an adjudication as to the existence of a fact as to legally preclude the person making it from afterward explaining or contradicting the statement therein contained, especially as against one who was not in a legal sense a party to that proceeding.” Because there was no estoppel, the court affirmed the judgment for the plaintiffs.