Davis v. McCready

By the Court. Ingraham, First J. The bill in suit was passed to the plaintiffs for a valuable consideration, before maturity. They knew the consideration of the bill, but the referee has found that they took it without knowledge of any failure of the consideration as between the original parties. Two questions arise in the case: 1st. Whether a party who takes a note before maturity, for value, with notice of the consideration, and without notice of any failure of it, is chargeable with notice, so as to permit the defendants to avail themselves of such failure. 2d. Whether a partial failure of consideration can be available to the defendants, against such holder, in an action upon the note. It is also urged, that the referee has found on the first point against the evidence. As to this objection, the question w’as one of fact, within the control of the referee. There was some evidence upon which he might have found that the plaintiffs had such knowledge, and there was other testimony which justified the finding in the case. Under such circumstances we do not interfere. For the purposes of this case, then, we must consider the plaintiffs as taking the bill without knowledge of any violation of the contract by Baker. All the authorities referred to by the appellant, in support of his view of the case, were either between the original par [569] ties or where the holder of the note was not a holder for value. In such cases the defendant may set up the defence which he proposes to do in this case, if he has given the proper notice of the defence intended. In Rumsey v. Leek, 5 Wend. 20, the defence of want of consideration was admitted, in an action brought by a holder of a note, who held it for a valuable consideration, upon the ground that he knew of the defence when he took the note. This I understand to be the distinction which governs these cases, The inquiry is not, whether the party taking the bill knew that the same was given by the maker in connection with a covenant he had entered into to do something else for the maker, but whether he knew, at the time of taking the bill, that there was a defence then existing to the payment of it. No such fact is proven in this case. The only evidence is, that one of the plaintiffs knew that the consideration of the bill was for the sale of a vessel, which the vendors had agreed to repair so as to make her seaworthy. 1 have no hesitation in saying that this is not enough to admit as a defence to the bill, either in whole or in part, that upon that contract the vendors failed to make the vessel seaworthy. Upon this contract of sale I do not see how the defendants can in any event sustain their defence. The covenant to repair was an independent covenant, for the breach of which, undoubtedly, the vendors would have been held responsible, and for which, if they had brought an action upon the bill, the defendants might have recouped damages, and had the same allowed them. But this defence arose after the bill was given. It did not form a defence at the time of its execution. No damages could be recouped against the plaintiffs; and as they had paid value for the bill, without knowledge of the existence of any defence thereto, at the time it .was passed to the payees, the plaintiffs are entitled to recover. Judgment affirmed.