Merrill v. Randall

Walker, J. The errors assigned, question the correctness of the decision of the court, in sustaining a demurrer, to the several special pleas filed by defendant below. The second is pleaded as a plea of failure of consideration. This plea avers that the maker purchased of Whittemore & Co. a printing establishment, and all the demands due the firm, and that he was to pay all their liabilities. That one Murphy, their book-keeper, claimed to have a debt against the firm, equal in amount to the notes sued on, when in fact, Whittemore & Co. did not owe him one cent; and that defendant was ignorant of their liabilities, and believing them to be indebted to Murphy, to that amount, gave the notes sued on, in liquidation of such supposed indebtedness. That, at Murphy’s request, the notes were made payable to one Gilman Merrill, and that Murphy obtained the indorsement of the notes bys Gilman Merrill, the payee, to Leroy D. Randall, the plaintiff, and that no consideration ever passed from defendant, to Gilman Merrill, nor between him and Murphy, nor between Gilman Merrill and plaintiff, relative to the giving, indorsing, and assigning the several notes, or either of them. That plaintiff, when suit was instituted, had no beneficial interest in the notes, or either of them, nor did he ever have any interest in them, but is, and always has been a nominal plaintiff and holder, of them, to aid Murphy in his fraudulent purposes. That the notes are, and ever have been, the sole and exclusive property of Murphy, and that the notes were severally assigned to plaintiff, long after they and each of them became due, and that plaintiff had full notice, and • knowledge of all the facts connected with the giving of these notes. Had these notes been payable to Murphy, and had he instituted suit for their collection, and had thé same state of facts, as to their execution, appeared in defense, as are set up in this plea, it is manifest that a recovery could not have been had. If it is true that Whittemore & Co. owed Murphy nothing, and he falsely claimed that they were indebted to him, 'and the plaintiff in error relied on, and believed his statements, and gave these notes, it most clearly would constitute a defense. The plaintiff in error had bound himself to Whittemore & Co. to pay all their indebtedness on account of the printing establishment, and not knowing what it was, or to whom it was owing, relying upon the false representations of Murphy, he gives the notes, to liquidate what he was led to suppose was indebtedness which he was liable to pay and satisfy. This supposed liability- of Whittemore & Co. to Murphy, the plea alleges was the only consideration for which they were given, and if no such indebtedness existed, and the notes had been payable to Murphy and sued by him, it would in such an action have constituted a total failure, or want of consideration. Then has the form which is alleged to have been adopted, changed the rights of the parties. It is alleged that there was no consideration paid by Gilman Merrill to Murphy, for which the notes were given. And if this be true, and it is admitted by the demurrer, he took as a volunteer and has acquired no better or different right than Murphy had. If the suit had been instituted in his name, the maker certainly could have shown that no consideration had been received from the payee; and the plea here positively avers that he paid no consideration for these notes. He then held these notes subject to this defense, and it is no answer to say he was not. a participant in the transaction, for he held notes for which he gave no consideration, nor was any received by the maker, or any one else, to support their execution. The plea also alleges that he was aiding and assisting Murphy to fraudulently obtain this money of plaintiff in error, and for that purpose he assigned and transferred without any consideration, thesq notes to the defendant in error. Then if no consideration passed from him for these notes, and they were only made payable to him to prevent the defense that no consideration passed from Murphy to the plaintiff in error, he could not have had any claim to recover either in law or in justice. The plea also avers, that the notes were assigned to the plaintiff long after they were severally due, with full knowledge and notice, of all the facts, by the assignee, and without his having paid any consideration for their assignment. If then he took these notes by assignment, after their maturity, he took them subject to any and all defenses that might be made by the maker. And if he also had notice of the fact that they were obtained without consideration, or that it had failed, and if he paid nothing for them, we do not perceive, that he can be heard to say that the maker should not be permitted to set up his defense as against him. The plea also avers that defendant in error always held the notes for the use of Murphy, and was only a nominal plaintiff, without any real interest. It is well settled, that when the plaintiff on the record, is only the trustee for another, the defendant may avail himself of any defense going to the consideration, which he might set up against the beneficial owner of the instrument, had the action been brought in his name. McHenry v. Ridgley, 2 Scam. R. 309. And the plea avers that until Gilman Merrill parted with the notes, he held them as the trustee of Murphy, and so does the defendant in error, and the defense set up in the plea would have been available in an action by Gilman Merrill, and is for the same reason equally so to this action. The demurrer to this plea should therefore have been overruled. While the fifth plea is not very artificially drawn, we think it substantially amounts to a plea of payment. It avers that Murphy undertook to collect money due plaintiff in error, and when collected apply it in payment and discharge of these notes, and that the parties to the notes agreed to this arrangement, and that a sufficient amount had been collected to pay them before this suit was instituted. This certainly constitutes a good and valid payment. It was not necessary that the several sums received should have been indorsed upon the notes, to constitute it a payment. The payment consisted in the receipt of the money under the agreement, and the plea avers that it was so received. If it is true that the parties to the note made the arrangement, no reason is perceived why they should not be bound by it. The holder, at the time of making such an agreement, was a party to the note; and if it is true that he entered into the agreement, Murphy thereby became his agent to receive payment in that manner, and he should be bound by the payment thus made to his agent. The plea alleges that the money when collected was by agreement to be applied as a payment, and if so it was not a matter of set-off. We therefore think the demurrer should have been overruled to this plea. The demurrer was properly sustained, however, to the third and fourth pleas. The judgment of the court below is reversed, and the cause is remanded for further proceedings. Judgment reversed.