Lord v. Favorite

Walker, J. It will not be contested, that a person taking a note, after its maturity, receives it subject to all equities existing between former parties to the instrument, whether they are or not apparent on the nqte. It is dishonored by not being taken up at its maturity. It comes to him tainted with suspicion, and he is put upon inquiry as to the rights of the former holders, and the real and not the apparent liability of the makers. He takes it precisely as it was held by those from whom he acquires his title. The maxim, caveat emptor, applies in such a case. If the offer of the makers in this case, then, gave them a defense to the note, all persons subsequently receiving it, took it subject to the same right. If the proposition of the makers to discharge the note after its maturity, with the certificate of deposit, which they held on the payees, and before they parted with the note, constituted a satisfaction, the liability of the makers has not been revived. It will be conceded, that if the payees had instituted this suit, the makers could have availed .themselves of this defense. Or had they sued for the use of the present holder, that the defense would have been available. It was held by this court, in the case of Copps v. Graham, 14 Ill. 198, that a payment made by the maker, on a note transferred after its maturity, although not indorsed, might be set up against a subsequent holder, although without notice at the time of his purchase. Again, in the case of Wright v. Taylor, 3 Gilm. 195, it was held, that where a note was transferred to the bank by the payee, and afterwards taken up by him at its maturity, with paper of the bank worth but twenty-six cents on the dollar, the maker thereby acquired the right to discharge the note in the same kind of funds. The court say, that had the bank assigned the note to a stranger, its assignee would have succeeded to its rights, subject to every equity existing between it and the maker. In the first of these cases, there was no indorsement by the makers on the note, to put the purchaser on inquiry through whose hands it had passed, to enable him by inquiry to ascertain the equities existing between the maker and those who had owned it, and yet he was bound by the payment to a previous holder. In the latter case, the maker’s right to pay the note in the depreciated paper of the bank, attached when it became the purchaser, and after its maturity, the right could not be defeated by assignment. In both cases, the holders took the instrument, precisely as it was held at maturity, subject to the same legal or equitable defenses. In what consists a difference in principle, between those cases and the one under consideration? We are able to perceive none, and think they must control this. It was urged, that the case of Root v. Irwin, 18 Ill. 147, announces a different rule. In that case, Irwin, the maker, held a note on hiewby, at the time he became a purchaser of Irwin’s note. The court say, it does not appear the maker ever knew that ISTewby was the holder, during the time it was held by him, or previous to the time when he had notice that it was transferred to Eoot. It is also said, that the plea does not disclose the fact, that the maker held the note against the intermediate indorsee, whilst it was in his hands. In this case, it does appear that the makers knew that the payees held the note, whilst they had the claim against the payee. And it appears, that after the maturity of the note, they held the certificate, and offered to set it off after the note became due. The judgment of the court below is reversed, and the cause remanded. Judgment reversed.