Court Opinion

ID: 7998225
Source: CourtListenerOpinion
Date Created: 2022-09-09 01:46:30.968379+00
Date Added: 2024-06-11T16:35:37.449598
License: Public Domain

Chancellor.
The question presented in this case by the pleadings and proof for decision, is, can a maker of a promissory note, who assures one about to deal for it, when called on by the intended purchaser, to ascertain if there is any objection to the validity of the note, that it will be paid at maturity, set up any defence that might exist between himself and the original payee ?
I incline to the opinion that he cannot. As between the assignee of the note and the maker, a new consideration has arisen in favor of him to whom the assurance is made. I will illustrate my meaning by a supposed case. A. verbally assumes to pay to B. a debt due by C. to B., in consideration that C. would give A. a horse; here the consideration moving between A. and B. is the horse, that C. has undertaken to give A. ; a consideration with which B. has nothing personally to do, and yet which influences and controls the payment by A. So in the case before me ; the makers of the notes agree with the assignee, that, in consideration of the agreement by the assignee and their creditor, they will pay the amount of their note to the assignee. The consideration of the note, as between the payee and the makers, is one thing; but the consideration, as between the assignee and the makers, a wholly different thing. It is true, the literal contract of the maker is not that which I have just detailed; but the legal effect of their contract is no other. By operation of law, the indorsement of the note is a contract between the maker and the assignee to pay the note, according to its tenor and effect; not that any actual consideration has passed between the assignee and maker, but the law transfers the original consideration to the new contract, made by the assignment. This is a contract *586which the law makes in every case of indorsement; and but for our statute upon the subject, the maker of the note would be absolutely, in every such case, bound to pay its amount to an innocent assignee, without regard to the situation or condition of the original consideration. In this case, however, superadded to the original consideration, which exists in every case of indorsement, is the new consideration, arising by direct and not implied contract between the indorser and the maker. The maker has said to the indorsee, you may freely part with your property to the payee ; I will pay you its value punctually. Suppose, in this case, no note had intervened and been in existence ; and the maker of the note had said to Pierce, when about to trade with Davis, I owe Davis so much; you can let Davis have your property; I will pay you the amount you ask; and upon that promise, Pierce had parted with his property to Davis, and sued Hamer, in an action of assumpsit, for the value thereof; could Hamer plead, that he owed Davis nothing? or that the consideration of the contract by which he then expected to owe Davis, had failed, and he now owed him nothing? Clearly not; and yet, I apprehend, the fact, that the amount of Hamer’s real or supposed indebtedness to Davis had assumed the shape of a promissory note, and was payable at a fixed and stated day, would not alter the character of the consideration between him and Pierce, or in any degree affect the nature of his obligation.
It has, I am aware, been held in Pennsylvania, that where the maker of a note has a good defence against the original obligee, and acknowledges his liability to the assignee, after the assignment has been made, he is, nevertheless, not bound by the acknowledgment; and the reason is obvious, because it did not enter into the consideration of the assignment to the new assignee, it formed no inducement with him to take the note, for it was made after he became the holder of it, and so far as it was evidence of any agreement at all on the part of the maker, it was a mere nudum pactum, without consideration, and of course not at all obligatory. But in the same State, it has been held, that if an innocent assignee is induced to take an assignment, by reason of a promise on the part of the obligor to pay the note, the taker is concluded from setting up any defence to it. See 2 Yeates’s Rep. 464 ; 14 Serg. and Rawle, 304. *587I have not been able to see the book last referred to, but the principle is thus broadly stated in Wharton’s Digest, without any such qualification as that insisted on by the complainants in this case. In Virginia, where, if I recollect right, they have a similar statute to our own, it was held, in 2 Randolph, 247, that an indorsee, who purchases a negotiable note, without notice of any equity between the maker and indorsee, is not affected by such equity; especially, where the maker, before the assignment, gave assurances to the indorsee, that the note would be fully paid.
But independent of any express adjudication on the subject, I think the unconditional liability of the complainants to the defendants, upon the1 note, can be sustained upon general principles. Where a party represents a particular fact, upon the faith of which he induces another to deal, he is bound to make that representation good, and it is immaterial whether the party making it knew it to be true .or false. The rule is extended so far, that if a party innocently misrepresents a fact by mistake, it is equally conclusive, for it operates equally as a surprise and imposition. 1 Story’s Eq. 202, 203. Even ignorance of a party’s rights will not excuse him, if he misleads the purchaser by his own misrepresentations, though innocently. The maxim is justly applied to him, that, where one of two innocent persons must suffer, he shall suffer, who, by his own acts, occasioned the confidence and the loss. 1 Story’s Eq. 377; 3 Peere Will. 74 (Cox’s note) ; Com. Dig. Ch. 4 W. 28; 6 Ves. 173; ib. 182, 183, 184 ; 1 Vernon, Rep. 136. It is a settled maxim of chancery jurisprudence, that where the equity of the parties is equal, the law must prevail, and a court of chancery will not interfere. 1 Story’s Eq. 75. The equities of parties is said to be equal, where both are equally innocent, and have been equally diligent, ib. 75. Test this case by the application of these principles, and it must be at once apparent, that the maker of the note cannot, without doing violence to them all, escape from his liability to the assignee. He represented to the assignee, that he might trade for the notes with safety; such, at least, is the fair inference from his express promise to the assignees to pay them the notes at maturity, in view of the assignee’s intention to trade for them. He has, then, represented that the notes were good valid and binding notes, and *588he must make them so. But for his assurance, the assignee would not have taken them, and no injury would have followed; but the loss being occasioned by his acts, he must be the sufferer. '
It is unnecessary to investigate the case further; the complainants cannot escape the effect of their own conduct. To permit it, would be to enable them to commit a wrong, and then profit by it. One or the other of the parties must lose the amount of the note. I think, upon any and all the grounds I have stated, the complainants must bear the loss. The injunction must, accordingly, be dissolved.