Robinson v. Lyman

Church, J. The principle is certainly well established, and not to be denied, that the indorsee of a negotiable promissory note, indorsed after due, is considered as receiving dishonour-ed paper, and takes it subject to all the infirmities and equities, and, some cases say, defences, to which it was liable in the hands of the payee. But will the proper application of this principle justify the claim of the defendant, in the present case, is the question? 2 Stark. Ev. 292. Chitty on Bills 126. and cases referred to. Bishop v. Dexter, 2 Con. Rep. 419. Nevins v. Townsend, 6 Con. Rep. 5. There was no infirmity, no illegality nor legal nor equitable defence existing against the note in question, while it remained in the hands of Moore, the payee, growing out of the existence of the note due to Patten Sp Russell. There was no agreement between the original parties to the note before its transfer, that the defendants should pay to Patten Sp Russell their note, and have an application thereof upon the note in question. Indeed, there was no connexion, either in fact or by agreement of parties, between the note in dispute and the debt due to Patten Sp Russell. If payments had been made, either partially or in full; if there had been a failure of, or a fraud in, the consideratieBmf the note, or any illegality therein, or if there had been any agreement between the parties, affecting the note, before it was transferred to the plaintiff ; these, or other matters which might be suggested, would have created such infirmity, defence or equity, as would have attached to the note in the hands of the plaintiff. But without some infirmity in the note itself; or some matter which would [35] have constituted either an entire or partial defence to it; or without some equity arising out of the note transaction, or attaching to the note ; the indorsee must be considered as holding it free from any claim of mere set-off., on the part of the defendant. This principle is recognized and established, by the court of King’s Bench, in the late case of Burrough v. Moss &. al. 10 Barn. & Cres. 558. (21 Serg. & Lowb. 128.) in which the court say: “ The indorsee of an over-due bill or note is liable to such equities only as attach on the bill or note itself, and not to claims arising out of collateral matters.” And Bayley, J., in the same case, says : “ The cases have not yet gone the length of establishing, that such a set-off not arising out of the bill or note transaction, can be made available against an indorsee, even when the bill or note is over-due, at the time of indorsement.” The same principle seems to have been admitted, by the supreme court of Massachusetts, in the case of Holland v. Makepeace, 8 Mass. Rep. 418. wherein Sedgwick, J., in delivering the opinion of the court, remarks : “ When it is said, that the assignment of a negotiable security over-due shall not deprive a defendant of any considerations, which might have been favourable to him, if the action had been brought by the original holder, it is meant, that such facts as would show, that the security, at the time of the assignment, had become invalid in the hands of the original holder, should equally avail the defendant against the as-signee.” Nevins v. Townsend, 6 Conn. Rep. 5. Johnson v. Bridge, 6 Cowen 693. Bridge v. Johnson, in err. 5 Wend. 342. It is true, however, that in the state of New- York, and perhaps in some other states, a different practice has formerly prevailed ; though it is believed, that a different doctrine has never been deliberately established. A careful examination of the cases alluded to, in the state of New- York, will show, that the question now under consideration was not, in those cases, discussed at the bar ; and it may be, therefore, respectfully presumed, that it was not distinctly adjudged, by the court. Hendricks v. Judah, 1 Johns. Rep. 319. O’Callighan v. Sawyer, 5 Johns. Rep. 118. Bank of Niagara v. McCracken, 18 Johns. Rep. 493. Ford v. Stuart, 19 Johns. Rep. 342. In these cases, the principle seems to be assumed, that as between the original parties, a set-off is a defence to the note [36] itselfi and therefore, must be permitted to be made after the transfer ; but on the contrary, the set-off admits the validity of the note, recognizes it as a subsisting debt, and asks only that the plaintiff shall receive in payment debts due from himself, instead of cash. The judge at the trial, therefore, was justified in refusing to charge the jury, that the sum paid by the defendant to Patten if Russell, at the time and under the circumstances before mentioned, could be allowed as a set-off against the note in suit in the hands of the plaintiff, an innocent indorsee. And for the same reasons, a set-off of the sum of 119 dollars, 50 cents, mentioned in a schedule to Moore’s receipt as being due on the 25th of June, 1829, was properly disallowed. But the judge further instructed the jury, with respect to the two sums of 290 dollars, 58 cents, each, that if they should find the value of the defendant’s share in said co-partnership stock was ascertained, and that there was an agreement between the defendant and Moore, that the amount thereof should be applied to said note, at the times mentioned in the indenture between them, and which, it is agreed, was long before the indorsement of the note to the plaintiff, that it was their duty to make such application. In this direction also, the judge was justified, by the principles now recognized. That agreement was made when the note remained in the hands of the original holder; it was not in conflict with the rights of any one else ; it had reference to the note, and to the manner and means of its payment; and it was, in truth, an equity between the parties, which “ attached on the note itself.” The plaintiff, on the trial, for the purpose of shewing, that the note in controversy was indorsed to him at an earlier period than the defendant supposed, claimed, that the legal presumption was, that it was transferred immediately after Moore indorsed upon it the payment of 142 dollars, 27 cents, which was on the 10th day of April, 1828. This fact furnished no other evidence on the subject, than that the note had not then been assigned to the plaintiff. It certainly could furnish none as to what time thereafter it was so assigned ; for neither the payment of that sum, nor its application upon the note, had any connexion with the subsequent act of transfer ; and no legal presumption of the nature claimed, could arise from it. [37] I am of opinion, that the judge was correct, in every position assumed by him; and do not advise a new trial. The other Judges were of the same opinion. PETERS, J., however, remarked, that he had thought the law otherwise, until he saw the case of Burrough v. Moss & al. 10 Barn. & Cres. 558. New trial not to be granted.