Rice v. Raitt

"Woods, J. The plaintiffs are holders of sundry notes of the defendant, which were transferred to them by George W. Nice.. Of these, two had been made payable to Allen & Co., and had, before they came to the hands of the plaintiffs, been paid in part; so that there remained due upon them the sum of $472.32. The notes, moreover, had been dishonored long before they had been received by the plaintiffs, and were of course subject to any equitable defence which might have been set up against them in the hands of any previous holder of them after their dishonor. The other note was for $1,000, and payable to George W. Nice, but indorsed and delivered to the plaintiffs before it became due; and, had it been taken in the ordinary course of business, would not have been, in the hands of the plaintifij subject to equities, existing at the time of its transfer, between the maker and the payee. But all these notes were delivered to the plaintiffs as collateral security. Whatever might have been received on them was, by the terms on which the plaintiffs from the first héld them, for the use of the party who placed the notes in their hands, and to be applied to the payment of a debt which was not diminished by the transfer of the notes, but which existed as well after as before that trans [119] action. Though, in form the notes were the notes of the plaintiffs, and by their possession of them, as indorsees, they alone were entitled to receive the money due on them, they could receive it only as trustees for the indorser, with the privilege of applying the money to pay his debt to them, so far as it might be needed for that purpose. It has therefore been decided, that negotiable paper so held, is to bo regarded as the property of the indorser, so far as to admit of the set-off of a debt due from him to the maker at the time of the indorsement of the paper. Williams v. Little, 11 N. H. Rep. 66. Now, at the time that George "W. Rice delivered the three notes mentioned in the case to the plaintiffs, the defendant was not owing him the sums of money expressed in their tenor, but had just claims against him ; so that if he himself had brought the action he could have recovered no more than the sum of $119.72. The plaintiffs, though suing in their own names, in fact sue for the benefit of George W. Rice, as has been shown. Their interest in the suit is owing to the incidental advantage they derive from establishing a fund from which their own indemnity may be obtained. But they have not become the owners of the note, and are not entitled in law to the rights of those who become the holders, in the ordinary sense, of negotiable paper taken for value. The plaintiffs are entitled, therefore, to judgment for the sum of $119.72, according to the report. Conditional judgment for $119.72.