Edgar v. Kline

Bell, J. The note sued on not being negotiable, there can be no question that Rickerts and Stewart took it subject to every equity existing at the timé of the transfer, between the original parties to it; and, therefore, the admitted failure of the consideration upon which it was given, to say nothing of the falsehood and fraud practised by Edgar upon Kline, affects it fatally in the hands of the equitable assignees, unless, indeed, they were induced to purchase it by Kline’s declaration, that it was a valid instrument and would be paid at maturity. Such a representation, acted upon Iona fide by the transferrees, would preclude the defendant from any inquiry into the adequacy of the consideration, or the fairness of the original transaction, for it amounts to a relinquishment of any objection he might otherwise have made on these grounds, and it matters not whether the representation proceeded from ignorance, carelessness, or design. Carnes v. Fields, 2 Yeates, 543; Weaver v. McCorkle, 14 Serg. & Rawle, 304; Chamberlain v. Gorham, 20 Johns. 144. Assuming there was proof of this on the trial below, though the fact seems to have been disputed, its effect was to raise in favour of the assignees a counter equity superior to that residing in the maker of the note, upon the principle that it would be unjust to visit them with a loss occurring because of the negligence or folly of the obligor, there being no default in the assignees; McMullen v. Wenner, 16 Serg. & Rawle, 21. But'as the ground [332] of this equity is the loss that would otherwise fall upon an innocent party, it is incumbent on him who would have advantage of it, to show he paid or gave value for the chose in action he seeks to recover, for, without this, no loss to him can happen. Where this has. not been done he is a bare donee, with no other rights than those which appertained to the original1 holder of the security assigned, and, of course, open to every defence which might have been made available- against him. The rule is the same, and for the same reason, in the case 'of negotiable paper procured by fraud or negotiated after maturity, and so not within the protection afforded by the peculiar policy of lex mercatoria. It was, therefore, incumbent on the real plaintiffs in this case, to show how they eapie by the note in question, and what value they paid for it, more especially as they were called on to do so, and having failed in this particular, the court below was right in instructing the jury the defendant was entitled to their verdict: the facts which the evidence had a tendency to prove being undisputed. Judgment affirmed.