Pierce v. Kibbee

The opinion of the court was delivered by Dunton, J. The mortgage and note in suit were given as substitutes for a certain other mortgage and notes, given for the agreed price of certain notes called “ lightning-rod notes,” purchased by Crapo and Goss of Noyes and Jenkins, and also to suppress a criminal prosecution for forgery against Crapo and Goss, pending in Massachusetts. The consideration for the original notes being in part illegal, it cannot be questioned but that the notes themselves where invalid while in the hands of the original payees. See Streit & Co. v. Sanborn, 47 Vt. 702; Hinesburgh v. Sumner, 9 Vt. 23; Bowen v. Buck, 28 Vt. 308; Smith v. Pinney, 32 Vt. 282; Converse v. Foster, Ib. 828. Contracts made in the composition of felony are void, and courts will neither aid in enforcing them, nor in the recovery of money paid in the performance of them. Says Ames, J., in Atwood v. Fisk, 101 Mass. 364: “ The meaning of the familiar-maxim, ‘ In pari delicto potior est conditio defendentis,’ is simply that the law leaves the parties exactly where they stood; not that it prefers the defendant to the plaintiff, but that it will not recognize a right of action founded on the illegal contract in favor of either party against the other. They must settle their own questions, in such cases, without the aid of the courts.” Also Laing v. McCall, 50 Vt. 657. It has been held by repeated decisions that a note given as a substitute for, or in renewal of, a note that was illegal, is also [562] invalid between the original parties. Preston v. Jackson, 2 Stark. 237; Hay v. Ayling, 16 Q. B. 423; Holden v. Cosgrove, 12 Gray, 216; Chenery v. Barker, 12 Gray, 345; 1 Daniel Negotiable Instruments, 163. Therefore, were this suit in favor of Noyes and Jenkins, there would be no question but that the petition should be dismissed. Do Downer and Kenney, the complainants in interest, stand in the situation of bona-fide holders of the note in suit for a valuable consideration before it became due without notice of its illegality as between the original parties thereto? We think not. The evidence strongly tends to show' that they knew of its infirmity and attempted to evade the effect of it. They admit that they had heard of the criminal prosecution in Massachusetts against Crapo and Goss, and feared it might be claimed that' the original notes and mortgage first offered them, were given to settle the same, and therefore were advised by counsel before purchasing, to require a new note and mortgage to be executed to Boyden, who was the attorney of Noyes and Jenkins to negotiate a sale of said original notes and mortgage. They also had the mortgage in suit assigned by Boy-den to Downer, and by the latter to. Howe, and by Howe to Pierce, one of the complainants, taking the notes of Howe and Pierce as the apparent or pretended consideration for such assignments, with the understanding that nothing was to be paid upon them except what should be collected-upon the note in suit, which also had been pui'chased at a discount. But if Downer and Kenney did not have, actual knowledge of the illegality of the original notes and mortgage to Noyes and Jenkins, it was because they did not want to know it; for the facts and circumstances disclosed by the evidence, to say the least, were sufficient to have put them on inquiry. This is equivalent to notice of such facts as they might be presumed to have learned upon reasonable inquiry, and is therefore sufficient to charge them with the consequences of actual knowledge of the illegality of said original notes and mortgage. See Roth v. Colvin, 32 Vt. 125; Gould v. Stevens, 43 Vt. 125; McDaniels v. Flower Brook Manufacturing Co. 22 Vt. 684; Sandford v. Norton, 14 Vt. 234. [563] It being admitted law that a party taking a note with knowledge of its infirmity, takes it subject to all defences and equities to which it was liable in the hands of the original payee, therefore the complainants are in no better condition to enforce by suit the collection of said substituted note than Noyes and Jenkins. In equity a mortgage is regarded as a mere security for a debt . or obligation ; and all defences except the Statute of Limitations that can be made to the debt or obligation, can also be made to the mortgage. Vinton v. King, 4 Allen, 562. The agreements subsequently executed by the defendant and others, being without consideration, do not affect her liability upon the note and mortgage in suit. The decree of the Court of Chancery dismissing the petition with costs, is affirmed, and the cause remanded.