Downey v. Tharp

The opinion of the court was delivered, January 3d 1870, by Sharswood, J. — There are no facts in this case which distinguish it from Blair v. Mathiott, 10 Wright 262, in which it was held that an obligor in a bond cannot defalcate against the assignee of an assignee, a claim which he holds against the first assignee. The learned counsel of the plaintiff in error do not question this decision, but admit that it rests upon a safe and sound interpretation of the law of defalcation. But they contend that what they set up is neither a set-off nor defalcation, but an equitable defence. It is not easy to understand how an equitable defence, such as failure of consideration, necessarily arises out of transactions not between the original parties. Had the action here been brought by Denman, the first assignee, his note, held by the defendant, would have been admissible only as a counter claim or set-off. Its consideration was in no way connected with that of the note sued on. The circumstance that the note was overdue when it was passed to Sayers was not enough to put him on inquiry of the makers as to matters of set-off with the intermedi [324] ate assignee, any more than in the case of a negotiable note overdue as to matters of set-off between the original parties: Hughes v. Large, 2 Barr 103. He took the risk of equities and set-off between the makers and payee, and is not to be involved in the accounts of all the successive holders through whose hands it may have passed, with the original makers. Judgment affirmed.