Grant v. Kidwell

Napt on, Judge, delivered the opinion of the court. There is no doubt that a bona fide endorsee of a negotiable note can not be affected by any dealings between the original parties of which he had no notice. Therefore, where a negotiable note is endorsed before it is due, a payment made to the endorser before his endorsement will not be an extin-guishment of the debt so far as the endorsee is concerned, unless he has notice of the payment at the time he gets the title to the note. (Story on Bills, § 417; Chitty on Bills, Ch. 6 ; Prior v. Jacocks, 1 John. Cas. 169.) Of course this principle will apply a fortiori to payments made after the endorsement. Grant’s liability, as security for Yates, the payee and endorser of the note, was a sufficient consideration to support his title as evidence. (Story on Bills, § 183.) But a consideration may be entirely sufficient to support the transfer at the time, and yet there may be a subsequent failure of it in whole or in part. If Yates had paid off the note on [458] which Grant became his security, the consideration for the endorsement would have failed; and if it had been only partially paid, the payment would have been to that extent an extinguishment of the claim upon Kidwell. The plaintiff Grant is a bona fide purchaser for a valuable consideration as far as it goes, but as he took the note now sued on to secure himself against a liability incurred for the endorser, Yates, whenever that liability is extinguished, he is no longer a purchaser for value. As the note sued on in this case was for $1,054.94, and the note upon which the plaintiff was security was only $699.44, we do not see why the defendant should be compelled to pay the surplus, for which there was no consideration whatever. Indemnity is the only basis of the transfer, and when that is accomplished the plaintiff stands as a purchaser without consideration. The judgment is reversed and the cause remanded. The other judges concur.