I would reverse the orders appealed from and deny plaintiff’s motion for summary judgment without prejudice to renewal of the motion on completion of disclosure proceedings.
This action is brought to recover the amount of two promissory notes, made by the defendant Cal-Tech Systems, Inc. and indorsed by the defendant Ezrine, each in the amount of $25,000, each dated May 31, 1962 and bearing interest at 6%, with one payable on October 30 and the other on November 30, 1962.
The notes were the last two of a series of notes, numbered 1 to 6, made payable to the order of one Robert A. Martin, and indorsed and negotiated by him to the Tracon Corporation. Approximately three months after date of the issuance of the notes, namely, on August 29, 1962, Tracon negotiated and delivered these two notes, numbers 5 and 6, to the plaintiff.
The plaintiff, a Switzerland corporation, claims to be the holder in due course of these two notes. The defendants, the maker and an indorser of the notes, by their answers and affidavits in opposition to the motion for summary judgment, set forth facts tending to establish prima facie that the notes were fraudulently diverted and proceeds fraudulently used by Martin and that Tracon participated in or took with knowledge of the fraud. Thus, inasmuch as plaintiff claims to hold the notes by reason of negotiation from prior holders who had defective titles, the burden rested upon it to prove that it “ acquired the title as a holder in due course ” (Negotiable Instruments Law, § 98). The plaintiff was bound to come forward and show affirmatively that it acquired the notes without notice of their questionable validity.
The applicable rule was laid down by the Court of Appeals in Canajoharie Nat. Bank v. Diefendorf (123 N. Y. 191, 202), as follows: ‘1 The fact that they took the paper before maturity, and paid the full value thereof, in the absence of other facts, undoubtedly affords a presumption of the good faith of the transaction. But where it further appears that such property has been fraudulently or illegally obtained from its owner or maker, and under such circumstances that the person putting it in circulation could not maintain an action thereon, it is incumbent upon the holder in order to succeed to go farther and show the circumstances under which it came into his possession, and that he has acted in good faith in the transaction.”
See, also, New York Bankers, Inc. v. Duncan (257 N. Y. 160, 165); American Exchange Nat. Bank v. New York Belting *363& Packing Co. (148 N. Y. 698, 703); Greenblatt v. Miller (255 App. Div. 18, 20).
So, under the circumstances here, the plaintiff, moving for summary judgment, was bound to make a frank and full disclosure of the details surrounding its acquisition of the notes. All of the facts and circumstances with reference to the negotiation of the notes were relevant; and thereupon the question would be, what do they collectively show. (See State Bank of Binghamton v. Bache, 162 Misc. 128.) With the facts and circumstances before it, then it would be for the court to say whether or not there existed a bona fide issue as to the validity of plaintiff’s alleged status as a holder in due course,
Certainly, if the court is to be expected to conscientiously pass upon the question which will be decisive in this case, it is entitled to have a full presentation of all relevant details bearing upon plaintiff’s alleged duty of inquiry and good faith. Notwithstanding its burden, the plaintiff, either inadvertently or deliberately, has failed to come forward with a full and proper showing of the circumstances surrounding its purchase of the notes, For instance, the following matters are unexplained:
First. The plaintiff, in its moving affidavit, merely averred that, during a period of two and one-half years prior to its taking of the notes, it had done $350,000 worth of business with Tracon and its president, Hirsch, but we are not told the nature of the business nor how the accounts between the parties stood at the time the plaintiff acquired the notes.
Second. It appears from the testimony of Hirsch, given on an examination before trial in a consolidated action, that Tracon and Hirsch were in a “ continuing business relationship with plaintiff ”; that they had “ borrowed ” from plaintiff; that they had moneys "on deposit” with plaintiff; and that, on the date plaintiff discounted the notes, Tracon and Hirsch ‘ ‘ had loans outstanding ’ ’ with plaintiff, with a possible small balance standing with plaintiff, In view of this testimony of Hirsch, there may be real significance in plaintiff’s failure to disclose the status of its accounts with Tracon and Hirsch as of the time of the taking of these particular notes. It may be that, by reason of credits due plaintiff or securities held by it, it would be protected if the notes went bad. If this were so, the plaintiff would not be a holder in due course. (See Citizens’ State Bank v. Cowles, 180 N. Y. 346; Mizell v. Hicks, 8 N. Y. S. 2d 158,162.)
*364Third. The plaintiff claims it paid $49,100 for these notes of $50,000 face value. The plaintiff claims to establish the fact of its payments in said last-mentioned amount by incompetent evidence, to wit, letters and cables which are hearsay. Why did not plaintiff present a photo static copy of its books or ledger pages showing the accounts with Tracon and Hirsch?
Fourth. Here, at the time of negotiation to plaintiff, the notes were indorsed in blank and held by Tracon. Why did the plaintiff insist on the personal indorsement of Hirsch (the president of Tracon) if plaintiff’s accounts with Tracon were in satisfactory condition and if the plaintiff had faith in commercial paper which it took from Tracon?
Fifth. The plaintiff, a foreign bank, demanded a flat discount of $900 net on the taking of the notes. By virtue thereof, and if the notes were paid on their maturity in two or three months, as would be expected in the case of good commercial paper, the plaintiff would earn better than a 20% return (annual basis) on its money, that is, with the plaintiff collecting, in addition to the discount, the 6% interest from date of notes to maturity. We can take judicial notice that the discount rate demanded and received here was grossly higher than the prevailing rates in the New York market; and, in this connection, observe that a “ discount taken may be so great as to impeach the good faith of the purchaser ”. (Second Nat. Bank v. Weston, 172 N. Y. 250, 257. See, also, Bank of Monongahela Valley v. Weston, 172 N. Y. 259, 267, 268; Vosburgh v. Diefendorf, 119 N. Y. 357, 365.)
Sixth. It appeared on the face of the notes that they were the fifth and sixth numbered notes in a series and that a default in any earlier maturing note would give the holder of these particular notes the option to declare all of them due and in default. Plaintiff does not say one way or another whether it inquired about the status of the earlier maturing notes.
Seventh. Sapir, the attorney for Tracon, in his affidavit, says he “ personally participated ” in the negotiation of the notes to plaintiff. But neither he nor any representative of the plaintiff states what was said or written between Sapir and the plaintiff.
Eighth. Plaintiff’s vice-president, in his moving affidavit, states that the plaintiff bank “ credited Tracon’s account with $49,100 ”. Of course, the “mere discounting of a note by a bank and the placing of the amount of the discount to the credit of the holder does not constitute a taking of the note for value.” *365(See Franklin Washington Trust Co. v. Jaeger, 282 App. Div. 1067, citing cases. See, also, Citizens’ State Bank v. Cowles, 180 N. Y. 346, supra.) The plaintiff, after crediting Tracon’s account with the amount above mentioned, on September 7, says it cabled $45,000 to the Netherlands Trading Society to be placed to Tracon’s credit; that on September 13, 1962, it transmitted $3,000 to the Chemical Bank New York Trust Company to Tracon’s credit; and. that on November 2, 1962, it transferred a balance of $1,096.90 to plaintiff’s credit with the Netherlands Trading Society. Thus, the plaintiff, in its moving affidavits, was bound at the very least' to positively deny any notice of infirmities as of the time of the advances (cf. Seymour v. McKinstry, 106 N. Y. 230, 240), but the plaintiff does not even say whether or not, pending its receipt of the notes and the remission of the funds, it had, in fact, made any investigation or acquired any information with respect to the validity of these notes. Particularly, it is to be noted that the advance of $1,096.90 was made .two days after the maturity of one of the two notes, the said note then being in default. Certainly, as to this amount, the plaintiff is not a holder for value before maturity. (See Citizens’ State Bank v. Cowles, supra.)
When all the circumstances surrounding plaintiff’s acquisition of the two notes are revealed, it may very well be that they were such as to “ create suspicion concerning [its] good faith and [its] lack of notice or knowledge of the infirmity in the title of the person from whom [it] is alleged to have purchased. The inferences and the probabilities, as well as the credibility of the witnesses [would then be] matters for the consideration of a jury in determining the questions of fact.” (Neinken v. Brill, 251 App. Div. 730, citing cases).
A motion for summary judgment may not be utilized as a means for shifting the burden of proof. (See Lonsky v. Bank of United States, 220 App. Div. 194.) So, neither the plaintiff nor the majority is on firm ground in taking a position that plaintiff should succeed on this motion because the defendants have merely established suspicious circumstances in the discounting of the notes with the plaintiff. Where, as here, suspicion is in the case because of the failure of the plaintiff to come forward and disclose much relevant detail exclusively within the knowledge of its employees and others standing in hostility to the defendants’ rights, then, the plaintiff has not sustained the burden placed upon it by section 98 of the Negotiable Instruments Law and the case law. The fact is that, *366on the record here, the plaintiff’s evidence “ is not so barren of suspicions features as to command the conclusion that it has proved itself to be a holder in good faith.” (See New York Bankers, Inc. v. Duncan, 257 N. Y. 160, 166, supra). In any event, at this stage of the action where the plaintiff has been less than frank and the defendants have not had the opportunity of examination and cross-examination of plaintiff’s witnesses, the awarding of an accelerated judgment to plaintiff is contrary to precedent and the interests of justice. (See, further, Karpas v. Bandler, 218 App. Div. 418.)
The defendants’ right to defend upon the merits is not to be defeated upon the ground of laches, nor on the theory that the court as a matter of discretion had the right to deny the motion to renew and reargue. Coneededly, the plaintiff’s motion for summary judgment, when originally made, was brought on without giving the defendants reasonable opportunity for disclosure proceedings. On the papers before the court, plaintiff’s motion then made was not properly supported and should have been denied; and we have an appeal here from the order thereon. The fact that the corporate defendant (the maker of the note) sometime later moved to renew and reargue the matters at Special Term, without proceeding for an examination before trial, is immaterial. It had no right to proceed for an examination before trial when summary judgment had been granted against it; and, in any event, on the motion for renewal and reargument, the summary judgment should have been vacated.
Bqteie, P, J., and McNally, J,, concur with Breitel, J.; Eager, J., dissents and votes to reverse in opinion, in which Rabie, J., concurs.
Orders and judgment affirmed, with costs to the respondent.