Palmer v. Minar

LEARNED, P. J.: There was no evidence of any failure of consideration, for the defendant was not allowed to prove the facts which might have shown this. The nonsuit was simply on the ground that the note was void in its inception. Section 3 of the Pennsylvania statute enacts that whenever any promissory note shall be given, the consideration of which shall consist, etc., “ the words ‘ given for a patent right ’ shall be prominently and legibly written or printed on the face of such note or instrument above the signature thereto, and such note or instrument in the hands of any purchaser or holder shall be subject to the same defenses as in the hands of the original owner or holder.” These words, “ such note or instrument,” in the place where they are last used, must mean a note. or instrument bearing the words “ given for a patent right.” They do not include a note given for the consideration of a sale of a patent, which does not bear these words. On this ground the learned justice excluded, in the present case, the evidence of failure of consideration and the like. This must be the correct construction. For if notes, not bearing these words, were open to such defense in the hands of bona fide holders, the requirement of the statute that these words should be written on the note would be needless. The fourth section of the same act declares that it is a misdemeanor punishable by fine and imprisonment, for any person knowing the consideration of such note or instrument to consist of such right to use a patent, to “take, sell or transfer” any note, etc., not having on it the words above mentioned. Nothing is said in this section of the making of such a note. The taking of this note by the plaintiff and the transfer to him do not appear to have taken place in Pennsylvania, and are therefore not affected by this act. The only question is as to the effect on the plaintiff’s rights of the taking this note in Pennsylvania by Phelps, in whose hands it had its inception. It is not necessary to dispute the proposition that in the hands of Phelps this note would have been void. (Swords v. Owen, 43 How., 176, and cases there cited ; and Conderman v. Hicks, 3 Lans., 108.) Put all those cases were decided between the original [347] parties, or between those wbo stood in no better position than the original parties. But in the hands of a bona fide holder, without notice, illegality of consideration is not necessarily a defense. (Grimes v. Hillenbrand, 11 S. C. N. Y., 354; Hill v. Northrup, 4 N. Y. S. C. [T. & C.], 120 ; Vallett v. Parker, 6 Wend., 615 ; Safford v. Wyckoff, 4 Hill, 442.) And this statute does not declare the note void, nor does it even declare the giving of the note to be a misdemeanor. The defendant, however, insists that these cases do not apply; because he says that the plaintiff knew what the consideration was. Now, if the invalidity of the note depended on the laws of this State, then one who here took the note, knowing the facts which made the note illegal, would, of course, be chargeable with knowledge of the illegality. But, in the present case, the alleged invalidity depends on the statute of Pennsylvania. The existence of such statute is a matter of fact, not a matter of law, as to persons living, and entering into contracts, here. The plaintiff proved affirmatively that he did not know of this statute. The bona fides, then, in the purchase of the note is not taken away by his mere knowledge that the note was given for a patent right. And it must be further noticed that in this case there is not even any illegality of consideration. It is only the tahmg of the note which is to be in violation of a statute. And, in addition to the plaintiff’s want of knowledge of the Pennsylvania statute, it does not appear that he knew the fact that the taking of the note by Phelps was within that State. Beyond the limits of that State such taking would not be a misdemeanor. There should be a new trial, costs to abide the event. Present — LearNed, P. J., BoaedmaN and BooKes, JJ. New trial granted, costs to abide event.