Higgins v. McDonald

Cope, J. delivered the opinion of the Court Field, C. J. and Baldwin, J. concurring. This is an action upon a note and mortgage for S3,000, executed by the defendants to Lewis Sloss & Co., and assigned to the plaintiff after maturity. The defendant McDonald avers, in his answer, that the consideration for this note and mortgage was received by the other defendants, and that he executed the same for their benefit and accommodation. He further avers that the assignment to the plaintiff was a fraud upon his rights, and that the consideration for the assignment was paid, either in whole or in part, with money advanced by the other defendants for that purpose. He also avers ■ that he deposited with Sloss & Co., as additional security, certain notes or “ scrip ” issued by the Camp Far West Water and Mining Company, and that, prior to the assignment to the plaintiff, Sloss & Co. converted these notes to their use, and refuse to account for them in any manner whatever. The question is as to the validity of these defenses. [291] If the averment relative to the consideration for the assignment be true, the amount advanced by the codefendants of McDonald should be entered as a credit upon the note and mortgage, and the recovery limited to the amount actually paid by the plaintiff. If the defendant paid the whole, such payment satisfied and discharged the debt, and the plaintiff cannot recover. The equities of the parties might be different, if, as between the defendants, McDonald were liable for any portion of the indebtedness. So far as the notes held by Sloss & Co. as additional security are concerned, there is no doubt that the rights of McDonald are the same that they would be in an action prosecuted by Sloss & Co.; nor is there any doubt that in such an action Sloss & Co. could be compelled to account for the value of these notes. The plaintiff is chargeable with notice of all the equities existing between the original parties, and he took the assignment subject to these equities. It would be an act of gross injustice to compel McDonald to pay this debt, and to turn him over to his action against Sloss & Co. to recover the value of the securities. He is entitled to this value as a credit upon the debt for which the securities were pledged. Judgment reversed, and cause remanded for a new trial.